|
| |
|
Limit on effect of additional calculation rule and deductions |
| |
295 | Limit on reductions and deductions |
| |
| |
(a) | the reductions under section 288 by reference to a taxed receipt, and |
| |
(b) | the deductions allowed in calculating the profits of a property business for |
| 5 |
expenses under section 292 (tenant under taxed lease who uses premises for |
| |
purposes of property business treated as incurring expenses) by reference to the |
| |
| |
| must not exceed the amount referred to in subsection (2). |
| |
(2) | The amount mentioned in subsection (1) is the difference between— |
| 10 |
(a) | the unreduced amount of the taxed receipt, and |
| |
(b) | the deductions allowed in calculating the profits of a trade, profession or |
| |
vocation for expenses under section 61 (tenant under taxed lease who uses land |
| |
in connection with trade treated as incurring expenses) by reference to the |
| |
| 15 |
| |
296 | Corporation tax receipts treated as taxed receipts |
| |
(1) | This section applies if 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 70A(4) of ICTA) as a result of |
| 20 |
section 34 or 35 of ICTA (treatment of premiums etc. as rent and |
| |
assignments for profit of lease granted at an undervalue) for an |
| |
accounting period ending after 5th April 2005, 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 |
| 25 |
| |
| In this Chapter such a receipt is referred to as a “corporation tax receipt”. |
| |
(2) | For the purposes of this Chapter— |
| |
(a) | the lease is treated as a taxed lease, and |
| |
(b) | the corporation tax receipt is treated as a taxed receipt. |
| 30 |
(3) | For the purposes of this Chapter, the “receipt period” of a taxed receipt which |
| |
is a corporation tax receipt is— |
| |
(a) | in the case of a corporation tax 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 |
| 35 |
(b) | in the case of a corporation tax 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 this Chapter the “unreduced amount” of a taxed receipt |
| |
which is a corporation tax receipt is the amount of the corporation tax receipt |
| 40 |
as a result of section 34 or 35 of ICTA, before the operation of section 37(2) or |
| |
| |
|
| |
|
| |
|
(5) | Subsection (6) applies to a taxed receipt which is a corporation tax receipt |
| |
arising as a result of section 34(2) of ICTA (obligation on tenant to carry out |
| |
| |
(6) | If the obligation to carry out work includes the carrying out of work which |
| |
gives, or will give, rise to qualifying expenditure under CAA 2001, the |
| 5 |
unreduced amount of the taxed receipt is calculated as if the obligation had not |
| |
included the carrying out of that work. |
| |
297 | Taking account of reductions in corporation tax receipts |
| |
(1) | This section applies if— |
| |
(a) | in calculating the amount of a corporation tax receipt, there is a |
| 10 |
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 |
| |
(b) | the amount chargeable on the superior interest is the taxed receipt for |
| |
the purposes of this Chapter. |
| |
(2) | For the purposes of this Chapter references to a reduction under section 37(2) |
| 15 |
or (3) of ICTA in a corporation tax receipt by reference to the amount |
| |
chargeable on the superior interest are to the difference between— |
| |
(a) | the amount of the corporation tax 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, |
| 20 |
| so far as attributable to the amount chargeable on the superior interest for the |
| |
purposes of section 37 of ICTA. |
| |
(3) | In sections 290(5)(a) (meaning of “unused amount”) and 295(1)(a) (limit on |
| |
reductions and deductions) references to reductions under section 288 by |
| |
reference to the taxed receipt include references to reductions under section |
| 25 |
37(2) or (3) of ICTA in corporation tax receipts by reference to the amount |
| |
chargeable on the superior interest. |
| |
(4) | Sections 292 to 294 apply as follows— |
| |
(a) | the corporation tax receipt is treated as if it were a lease premium |
| |
receipt for the purposes of sections 293 and 294, |
| 30 |
(b) | references in those sections to the reduction under section 288 by |
| |
reference to the taxed receipt are, in relation to the corporation tax |
| |
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 corporation |
| 35 |
| |
(i) | in the case of a corporation tax 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 a corporation tax receipt as a result of section 35 of |
| 40 |
ICTA, the period treated in calculating the amount of the receipt |
| |
as being the duration of the lease remaining at the date of the |
| |
| |
298 | Taking account of deductions for rent as a result of section 37(4) or 87(2) of |
| |
| 45 |
(1) | Subsection (2) applies if— |
| |
|
| |
|
| |
|
(a) | in calculating the profits of a trade, profession or vocation for an |
| |
accounting period ending after 5th April 2005, a company is treated as |
| |
paying rent under section 87(2) of ICTA by reference to the amount |
| |
chargeable for the purposes of that section, and |
| |
(b) | the amount chargeable is the taxed receipt for the purposes of this |
| 5 |
| |
(2) | References in sections 290(5)(b) and 295(2)(b) to the deductions allowed for |
| |
expenses under section 61 by reference to the taxed receipt include references |
| |
to the deductions allowed in calculating the profits of the trade, profession or |
| |
vocation for the rent that the company is treated as paying under section 87(2) |
| 10 |
of ICTA by reference to the amount chargeable. |
| |
(3) | Subsection (4) applies if— |
| |
(a) | in calculating the profits of a Schedule A business or an overseas |
| |
property business (within the meaning of section 70A(4) of ICTA) for |
| |
an accounting period ending after 5th April 2005, a company is treated |
| 15 |
as paying rent as a result of section 37(4) of ICTA by reference to the |
| |
amount chargeable on the superior interest for the purposes of that |
| |
| |
(b) | the amount chargeable on the superior interest is the taxed receipt for |
| |
the purposes of this Chapter. |
| 20 |
(4) | References in sections 290(5)(c) and 295(1)(b) to the deductions allowed for |
| |
expenses under section 292 by reference to the taxed receipt include references |
| |
to the deductions allowed in calculating the profits of the Schedule A business |
| |
or overseas property business (within the meaning of section 70A(4) of ICTA) |
| |
for the rent that the company is treated as paying as a result of section 37(4) of |
| 25 |
ICTA by reference to the amount chargeable on the superior interest. |
| |
Certain administrative provisions |
| |
299 | Payment of tax by instalments |
| |
(1) | This section applies if— |
| |
(a) | there is a receipt under section 277 (lease premiums) in respect of a |
| 30 |
premium which is payable by instalments, or |
| |
(b) | there is a receipt under any of sections 279 to 281 (sums payable instead |
| |
of rent, for surrender of lease or for variation or waiver of term of lease) |
| |
in respect of a sum which is payable by instalments. |
| |
(2) | The person who is liable to pay tax by reference to the receipt may choose to |
| 35 |
pay the tax by such instalments as the Inland Revenue may allow. |
| |
(3) | The period over which the instalments of tax must be paid— |
| |
(a) | must be 8 years or less, and |
| |
(b) | must end before, or at the same time as, the time when the last of the |
| |
instalments mentioned in subsection (1)(a) or (b) is payable. |
| 40 |
300 | Statement of accuracy for purposes of section 282 |
| |
(1) | This section applies if any of the persons mentioned in subsection (3) provides |
| |
the Inland Revenue with a statement showing— |
| |
(a) | whether or not there is, or may be, a receipt under section 282 |
| |
(assignments for profit of lease granted at undervalue), and |
| 45 |
|
| |
|
| |
|
(b) | the amount of any receipt. |
| |
(2) | The Inland Revenue must certify the accuracy of the statement, if satisfied as to |
| |
| |
(3) | The persons referred to in subsection (1) are— |
| |
(a) | the landlord who granted the lease, |
| 5 |
(b) | a person who assigned it, or |
| |
(c) | a person to whom it was assigned. |
| |
301 | Claim for repayment of tax payable by virtue of section 284 |
| |
(1) | This section applies if— |
| |
(a) | there is a receipt under section 284 (sales with right to reconveyance), |
| 10 |
| |
(b) | the date on which the estate or interest would fall to be reconveyed was |
| |
not fixed under the terms of the sale. |
| |
(2) | If the seller makes a claim, the seller must be repaid the amount by which A |
| |
| 15 |
A is the amount of tax paid by the seller which was payable by virtue of |
| |
| |
B is the amount of tax that would have been so payable if the date on |
| |
which the estate or interest was reconveyed had been taken as the date |
| |
fixed by the terms of the sale. |
| 20 |
(3) | The claim must be made within 6 years after the day on which the estate or |
| |
| |
302 | Claim for repayment of tax payable by virtue of section 285 |
| |
(1) | This section applies if— |
| |
(a) | there is a receipt under section 285 (sale and leaseback transactions), |
| 25 |
| |
(b) | the date for the grant of the lease was not fixed under the terms of the |
| |
| |
(2) | If the seller makes a claim, the seller must be repaid the amount by which A |
| |
| 30 |
A is the amount of tax paid by the seller which was payable by virtue of |
| |
| |
B is the amount of tax that would have been so payable if the date on |
| |
which the lease was granted had been taken as the date fixed by the |
| |
| 35 |
(3) | The claim must be made within 6 years after the day on which the lease was |
| |
| |
Effective duration of lease |
| |
303 | Rules for determining effective duration of lease |
| |
(1) | The following rules apply for determining the effective duration of a lease for |
| 40 |
the purposes of this Chapter. |
| |
|
| |
|
| |
|
Rule 1: A lease is not to be treated as having been granted for a term longer |
| |
than one ending on a date before the end of the term for which the lease |
| |
| |
(a) | the terms of the lease or any other circumstances make it |
| |
unlikely that the lease will continue beyond that date, and |
| 5 |
(b) | the premium was not substantially greater than it would have |
| |
been had the term been one ending on that date. |
| |
| |
Rule 2: If the terms of the lease include provision for the extension of the |
| |
lease beyond a given date by notice given by the tenant, account may |
| 10 |
be taken of any circumstances making it likely that the lease will be so |
| |
| |
| |
Rule 3: If the tenant or a person connected with the tenant is, or may |
| |
become, entitled to a further lease or the grant of a further lease |
| 15 |
| |
(a) | of the same premises, or |
| |
(b) | of premises including the whole or part of the same premises, |
| |
the term of the lease may be treated as continuing until the end of the |
| |
term of the further lease. |
| 20 |
(2) | The rules are to be applied in accordance with section 304. |
| |
(3) | In this section and section 304, in relation to Scotland, “term”, where referring |
| |
to the duration of a lease, means period. |
| |
304 | Applying the rules in section 303 |
| |
(1) | The rules in section 303 apply by reference to the facts known or |
| 25 |
| |
(a) | at the time of the grant of the lease, or |
| |
(b) | if the determination is for the purposes of section 281 (sums payable for |
| |
variation or waiver of term of lease), at the time when the contract for |
| |
the variation or waiver is entered into. |
| 30 |
(2) | In applying those rules, it is assumed that all parties concerned, whatever their |
| |
relationship, act as if they were at arm’s length. |
| |
(3) | Subsection (5) applies if— |
| |
(a) | special benefits were conferred by the lease or in connection with its |
| |
| 35 |
(b) | payments were made which one would not expect to be made by |
| |
parties acting at arm’s length unless such benefits had been conferred. |
| |
(4) | But subsection (5) does not apply if it can be shown that the special benefits |
| |
were not conferred nor the payments made for the purpose of securing a tax |
| |
advantage in the application of this Chapter or sections 34 to 39 of ICTA |
| 40 |
(premiums, leases at undervalue etc.). |
| |
(5) | In applying rule 1 in section 303, it is assumed that the special benefits would |
| |
not have been conferred nor the payments made if the lease had been granted |
| |
for a term ending on the date mentioned in that rule. |
| |
(6) | In this section “special benefits” means benefits other than— |
| 45 |
(a) | vacant possession and beneficial occupation of the premises, or |
| |
|
| |
|
| |
|
(b) | the right to receive rent at a reasonable commercial rate in respect of the |
| |
| |
305 | Information about effective duration of lease |
| |
(1) | This section applies if the Inland Revenue have reason to believe that a person |
| |
has information relevant to the determination of the effective duration of a |
| 5 |
| |
(2) | The Inland Revenue may by notice require the person to provide such |
| |
information on the matters specified in the notice as is in the person’s |
| |
| |
(3) | The information must be provided within a time specified in the notice. |
| 10 |
(4) | In relation to anything done by a solicitor on behalf of a client, the solicitor is |
| |
| |
(a) | state that the solicitor was acting on behalf of a client, and |
| |
(b) | provide the name and address of the client. |
| |
Other interpretative provisions |
| 15 |
306 | Provisions about premiums |
| |
(1) | For the purposes of this Chapter, the presumption is that a sum paid on or in |
| |
connection with the granting of a tenancy has been paid by way of premium. |
| |
(2) | This does not apply if the sum is rent. |
| |
(3) | This also does not apply so far as other sufficient consideration for the payment |
| 20 |
can be shown to have been given. |
| |
(4) | In this section “sum” includes the value of any consideration. |
| |
(5) | Where rule 3 in section 303 (rules for determining effective duration of lease) |
| |
applies, the premium, or an appropriate part of it, payable for or in connection |
| |
with either lease mentioned in that rule may be treated for the purposes of this |
| 25 |
Chapter as having been required under the other. |
| |
| |
(1) | In this Chapter “premium” includes any similar sum payable to the immediate |
| |
or a superior landlord or to a person connected with such a person. |
| |
(2) | In subsection (1) “sum” includes the value of any consideration. |
| 30 |
(3) | In the application of this Chapter to Scotland— |
| |
“premium” includes, in particular, a grassum payable to the landlord |
| |
under the lease in respect of which the grassum is payable or the |
| |
landlord under any other lease of the property, and |
| |
“reversion” means the interest of the landlord in the property subject to |
| 35 |
| |
(4) | In the application of this Chapter to Scotland— |
| |
(a) | references to a lease being granted out of a taxed lease are to the grant |
| |
of a sublease of land subject to the taxed lease, and |
| |
|
| |
|
| |
|
(b) | references to the lease so granted are to be read as references to the |
| |
| |
| |
Profits of property businesses: other rules about receipts and deductions |
| |
Furnished accommodation: receipts and deductions |
| 5 |
| |
(1) | In calculating the profits of a property business which consists of or includes a |
| |
| |
(a) | any sum payable for the use of furniture is brought into account as a |
| |
| 10 |
(b) | a deduction is allowed for expenses incurred in connection with the |
| |
| |
(2) | But subsection (1) does not apply to receipts or expenses brought into account |
| |
in calculating the profits of a trade which consists of, or involves, making |
| |
furniture available for use in premises. |
| 15 |
(3) | A furnished letting is a lease or other arrangement under which— |
| |
(a) | a sum is payable in respect of the use of premises, and |
| |
(b) | the person entitled to the use of the premises is also entitled, in |
| |
connection with that use, to the use of furniture. |
| |
| 20 |
(a) | “premises” includes a caravan and a houseboat, and |
| |
(b) | “sum” includes the value of any consideration. |
| |
| |
(1) | The rules for calculating the profits of an individual’s UK property business |
| |
are subject to Chapter 1 of Part 7 (rent-a-room relief). |
| 25 |
(2) | That Chapter provides relief on income from the use of furnished |
| |
accommodation in the individual’s only or main residence (see, in particular, |
| |
| |
Treatment of receipts on acquisition of business |
| |
310 | Acquisition of business: receipts from transferor’s UK property business |
| 30 |
(1) | This section applies if— |
| |
(a) | a person (“the transferor”) permanently ceased to carry on a UK |
| |
property business at any time, |
| |
(b) | at that time the transferor transferred to another (“the transferee”) the |
| |
right to receive sums arising from the carrying on of any business (“the |
| 35 |
transferred business”) comprised in the transferor’s UK property |
| |
| |
(c) | the transferee subsequently carries on the transferred business. |
| |
|
| |
|