Income Tax (Trading and Other Income) Act 2005

293 Restrictions on section 292 expenses: the additional calculation rule

(1) This section applies if, in calculating the amount of a receipt (“the lease premium receipt”), there is a reduction under section 288 (the additional calculation rule) by reference to the taxed receipt.

(2) Subsections (3) to (5) provide for the application of section 292 for a qualifying day that falls within the receipt period of the lease premium receipt.

(3) The tenant under the taxed lease is treated as incurring an expense under section 292 for the qualifying day by reference to the taxed receipt only if the daily amount of the taxed receipt exceeds the daily reduction of the lease premium receipt.

(4) If the condition in subsection (3) is met, the amount of the expense under section 292 for the qualifying day by reference to the taxed receipt is equal to that excess.

(5) If the qualifying day falls within the receipt periods of more than one lease premium receipt, the reference in subsection (3) to the daily reduction of the lease premium receipt is to be read as a reference to the total of the daily reductions of each of the lease premium receipts whose receipt period includes the qualifying day.

(6) In this section—

• the “daily amount” of the taxed receipt is given by the formula—

  

  where—

  • A is the unreduced amount of the taxed receipt (see section 290(2) to (4)), and

  • TRP is the number of days in the receipt period of the taxed receipt, and

• the “daily reduction” of a lease premium receipt is given by the formula—

  

  where—

  • AR is the reduction under section 288 by reference to the taxed receipt (see section 290(6)), and

  • RRP is the number of days in the receipt period of the lease premium receipt.

(7) Section 294 explains how this section operates if the lease premium receipt is in respect of a lease that has been granted out of the taxed lease and does not extend to the whole of the premises subject to the taxed lease.