SCHEDULE 2Transitionals and savings
Part 6Trading income
Tenants under taxed leases
18
(1)
This paragraph relates to the operation of sections 62 to 67 where, in respect of a lease—
(a)
there is a receipt of a Schedule A business or an overseas property business (within the meaning of section 65A(4) or 70A(4) of ICTA) as a result of section 34 or 35 of ICTA (treatment of premiums etc as rent and assignments for profit of lease granted at an undervalue) for a tax year before the tax year 2005-06 or an accounting period ending before 1 April 2009, or
(b)
there would be such a receipt, but for the operation of section 37(2) or (3) of ICTA (reductions in certain receipts under section 34 or 35 of ICTA).
In this paragraph and paragraphs 19 and 20 a receipt falling within paragraph (a) or (b) is referred to as an “ICTA pre-commencement receipt”.
(2)
For the purposes of sections 62 to 67—
(a)
the lease is treated as a taxed lease, and
(b)
the ICTA pre-commencement receipt is treated as a taxed receipt.
(3)
For the purposes of those sections, the “receipt period” of a taxed receipt which is an ICTA pre-commencement receipt is—
(a)
in the case of an ICTA pre-commencement receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and
(b)
in the case of an ICTA pre-commencement receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.
(4)
For the purposes of sections 62 to 67 the “unreduced amount” of a taxed receipt which is an ICTA pre-commencement receipt is the amount of the ICTA pre-commencement receipt as a result of section 34 or 35 of ICTA, before the operation of section 37(2) or (3) of ICTA.
(5)
Sub-paragraph (6) applies to a taxed receipt which is an ICTA pre-commencement receipt arising as a result of section 34(2) of ICTA (obligation on tenant to carry out work under lease).
(6)
If the obligation to carry out work included the carrying out of work which gave or will give rise to expenditure for which an allowance has been, or may be, made under the enactments relating to capital allowances, the unreduced amount of the taxed receipt is calculated as if the obligation had not included the carrying out of that work.
19
(1)
This paragraph provides for the application of section 63 as a result of section 65 if—
(a)
a lease is a taxed lease as a result of paragraph 18,
(b)
another lease is granted out of the taxed lease,
(c)
in calculating the amount of an ICTA pre-commencement receipt in respect of the other lease, there is a reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest for the purposes of that section, and
(d)
as a result of paragraph 18 the amount chargeable on the superior interest is the taxed receipt for the purposes of section 63.
(2)
Sections 63 to 67 apply as follows—
(a)
the ICTA pre-commencement receipt is treated as if it were a lease premium receipt for the purposes of sections 66 and 67,
(b)
references in those sections to the reduction under section 228 by reference to the taxed receipt are, in relation to the ICTA pre-commencement receipt, to the reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest, and
(c)
for the purposes of those sections the receipt period of the ICTA pre-commencement receipt is—
(i)
in the case of an ICTA pre-commencement receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and
(ii)
in the case of an ICTA pre-commencement receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.
(3)
References in this paragraph and paragraph 20 to a reduction under section 37(2) or (3) of ICTA in an ICTA pre-commencement receipt by reference to the amount chargeable on the superior interest are to the difference between—
(a)
the amount of the ICTA pre-commencement receipt before the operation of section 37(2) or (3) of ICTA, and
(b)
the amount of the receipt after the operation of that subsection,
so far as attributable to the amount chargeable on the superior interest for the purposes of section 37 of ICTA.
20
(1)
This paragraph provides for the application of section 63 as a result of section 65 if—
(a)
the taxed lease referred to in those sections is a taxed lease as a result of section 227(4)(c) or (d) (lease taxed under ITTOIA 2005),
(b)
another lease is granted out of the taxed lease, and
(c)
in calculating the amount of an ICTA pre-commencement receipt in respect of the other lease, there is a reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest for the purposes of that section.
(2)
Sections 63 to 67 apply as follows—
(a)
the ICTA pre-commencement receipt is treated as if it were a lease premium receipt for the purposes of sections 66 and 67,
(b)
references in those sections to the reduction under section 228 by reference to the taxed receipt are, in relation to the ICTA pre-commencement receipt, to the reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest, and
(c)
for the purposes of those sections the receipt period of the ICTA pre-commencement receipt is—
(i)
in the case of an ICTA pre-commencement receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and
(ii)
in the case of an ICTA pre-commencement receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.