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Corporation Tax Bill


Corporation Tax Bill
Part 4 — Property income
Chapter 4 — Profits of property businesses: lease premiums etc

102

 

228     

The additional calculation rule

(1)   

The rule in this section applies if the conditions mentioned in section 227(2) are

met.

(2)   

The additional calculation rule is that the amount given by the formula in

section 217, 219, 220, 221 or 222 must be reduced by the amount calculated in

5

accordance with this section in order to give the amount of the receipt under

calculation.

(3)   

The amount of the reduction is—

(a)   

if there is one taxed receipt which has an unused amount, the basic

relieving amount by reference to that receipt, and

10

(b)   

if there is more than one taxed receipt which has an unused amount, the

total of the basic relieving amounts by reference to each receipt,

   

adjusted, if necessary, in the light of section 229(5) (reduction not to exceed

amount being reduced).

(4)   

The basic relieving amount by reference to a taxed receipt is given by the

15

formula—equation: over[cross[char[A],times[char[L],char[R],char[P]]],times[char[T],char[R],char[P]]]

   

where—

A is the unreduced amount of the taxed receipt (which is, generally, the

amount given by the formula in section 217, 219, 220, 221 or 222, or in

section 277, 279, 280, 281 or 282 of ITTOIA 2005, but see section 230(2)

20

to (4) of this Act),

LRP is the receipt period of the receipt under calculation, and

TRP is the receipt period of the taxed receipt.

(5)   

But the basic relieving amount is different if section 229(2) or (4) applies

(certain special cases).

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(6)   

For the purposes of this Chapter, the “receipt period” of a receipt is—

(a)   

in the case of a receipt under section 217 or 220, the effective duration

of the lease,

(b)   

in the case of a receipt under section 219, the period in relation to which

the sum payable instead of rent is payable,

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(c)   

in the case of a receipt under section 221, the period for which the

variation or waiver has effect,

(d)   

in the case of a receipt under section 222, the effective duration of the

lease remaining at the date of the assignment, and

(e)   

in the case of a receipt under Chapter 4 of Part 3 of ITTOIA 2005 (profits

35

of property businesses: lease premiums etc), its receipt period within

the meaning of that Chapter (see section 288(6) of that Act).

229     

The additional calculation rule: special cases

(1)   

This section explains how section 228 operates in some special cases.

(2)   

If—

40

(a)   

the receipt under calculation is under any of sections 217 to 221, and

 
 

Corporation Tax Bill
Part 4 — Property income
Chapter 4 — Profits of property businesses: lease premiums etc

103

 

(b)   

the lease does not extend to the whole of the premises subject to the

taxed lease,

   

the basic relieving amount by reference to a taxed receipt is calculated by

multiplying the amount given by the formula in subsection (4) of section 228

by the fraction of those premises which is subject to the lease.

5

(3)   

This fraction is calculated on a just and reasonable basis.

(4)   

If the basic relieving amount given by section 228(4) or subsection (2) above by

reference to a taxed receipt would otherwise exceed the unused amount of the taxed

receipt, the basic relieving amount is the unused amount.

(5)   

If the amount of the reduction under section 228 would otherwise exceed the

10

amount given, in respect of the receipt under calculation, by the formula in

section 217, 219, 220, 221 or 222, the amount of the reduction is equal to the

amount given by the formula.

230     

Meaning of “unused amount” and “unreduced amount”

(1)   

For the purposes of this Chapter, a taxed receipt has an “unused amount” if the

15

unreduced amount exceeds the total of the reductions and deductions referred to in

subsection (5).

(2)   

In this Chapter the “unreduced amount” of a taxed receipt is the amount given,

in respect of the taxed receipt, by the formula in—

(a)   

section 217, 219, 220, 221 or 222 above, or

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(b)   

section 277, 279, 280, 281 or 282 of ITTOIA 2005 (income tax provisions

corresponding to those listed in paragraph (a)).

(3)   

Subsection (4) applies—

(a)   

to a taxed receipt under section 217 (lease premiums) as a result of

section 218 (amount treated as lease premium where work required),

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and

(b)   

to a taxed receipt under section 277 of ITTOIA 2005 (lease premiums)

as a result of section 278 of that Act (amount treated as lease premium

where work required).

(4)   

If the obligation to carry out work included the carrying out of work which

30

gives, or will give, rise to qualifying expenditure under CAA 2001, the

unreduced amount of the taxed receipt is calculated as if the obligation had not

included the carrying out of that work.

(5)   

The reductions and deductions mentioned in subsection (1) are

(a)   

the reductions under section 228 above or section 288 of ITTOIA 2005 (the

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additional calculation rule) by reference to the taxed receipt,

(b)   

the deductions made in calculating the profits of a trade, profession or vocation

for expenses under section 63 above or section 61 of ITTOIA 2005 (tenant

under taxed lease who uses land in connection with trade treated as incurring

expenses) by reference to the taxed receipt, and

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(c)   

the deductions made in calculating the profits of a property business for

expenses under section 232 below or section 292 of ITTOIA 2005 (tenant

under taxed lease who uses premises for purposes of property business treated

as incurring expenses) by reference to the taxed receipt.

(6)   

For the purposes of this Chapter references to a reduction under section 228

45

above or section 288 of ITTOIA 2005 by reference to a taxed receipt are to a

 
 

Corporation Tax Bill
Part 4 — Property income
Chapter 4 — Profits of property businesses: lease premiums etc

104

 

reduction under the section concerned so far as attributable to the taxed

receipt.

Deductions in relation to certain receipts

231     

Deductions for expenses under section 232

(1)   

Section 232 (tenants under taxed leases treated as incurring expenses) applies

5

in calculating the profits of a property business carried on by the tenant under

a taxed lease for the purpose of making deductions for the expenses of the

property business.

(2)   

A deduction is allowed for an expense under section 232 for a qualifying day

on which the whole or part of the premises subject to the taxed lease is—

10

(a)   

occupied by the tenant for the purpose of carrying on the property

business, or

(b)   

sublet.

(3)   

But any deduction for an expense under section 232 is subject to the application

of any provision of Chapter 4 of Part 3 (as applied to property businesses by

15

section 210).

(4)   

The amount of the deduction for an expense under section 232 for a qualifying day by

reference to a taxed receipt may be reduced in order to comply with section 235 (limit

on reductions and deductions).

(5)   

For the meaning of expressions used in this section, see in particular—

20

section 227(4) (“taxed lease”), and

section 227(4) (“taxed receipt”).

232     

Tenants under taxed leases treated as incurring expenses

(1)   

The tenant under a taxed lease is treated as incurring an expense of a revenue

nature in respect of the premises subject to the taxed lease for each qualifying

25

day.

(2)   

If there is more than one taxed receipt, this section applies separately in

relation to each of them.

(3)   

A day is a “qualifying day”, in relation to a taxed receipt, if it falls within the

receipt period of the taxed receipt.

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(4)   

The amount of the expense for the qualifying day by reference to the taxed

receipt is given by the formula—equation: over[char[A],times[char[T],char[R],char[P]]]

   

where—

A is the unreduced amount of the taxed receipt, and

TRP is the number of days in the receipt period of the taxed receipt.

35

(5)   

This section is subject to sections 233 and 234 (restrictions on expenses where

the additional calculation rule is relevant).

(6)   

For the meaning of expressions used in this section, see in particular—

 
 

Corporation Tax Bill
Part 4 — Property income
Chapter 4 — Profits of property businesses: lease premiums etc

105

 

section 228(6) (“receipt period”), and

section 230(2) to (4) (“unreduced amount”).

233     

Restrictions on section 232 expenses: the additional calculation rule

(1)   

This section applies if—

(a)   

in calculating the amount of a receipt under this Chapter there is a

5

reduction under section 228 (the additional calculation rule) by

reference to a taxed receipt, or

(b)   

in calculating the amount of a receipt under Chapter 4 of Part 3 of

ITTOIA 2005 (profits of a property business: lease premiums etc) there

is a reduction under section 288 of that Act (the additional calculation

10

rule) by reference to a taxed receipt.

   

The receipt that is so reduced is referred to in this section as the “lease premium

receipt”.

(2)   

Subsections (3) to (5) provide for the application of section 232 for a qualifying

day that falls within the receipt period of the lease premium receipt.

15

(3)   

The tenant under the taxed lease is treated as incurring an expense under

section 232 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

20

section 232 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

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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—equation: over[char[A],times[char[T],char[R],char[P]]]

where—

A is the unreduced amount of the taxed receipt (see section 230(2) to

30

(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—equation: over[times[char[A],char[R]],times[char[R],char[R],char[P]]]

where—

35

AR is the reduction under section 228 above or section 288 of ITTOIA

2005 by reference to the taxed receipt (see section 230(6)), and

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

receipt.

 
 

Corporation Tax Bill
Part 4 — Property income
Chapter 4 — Profits of property businesses: lease premiums etc

106

 

(7)   

Section 234 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.

234     

Restrictions on section 232 expenses: lease of part of premises

(1)   

This section applies if—

5

(a)   

a lease has been granted out of the taxed lease,

(b)   

the lease does not extend to the whole of the premises subject to the

taxed lease, and

(c)   

the condition in subsection (2) is met.

(2)   

The condition is that—

10

(a)   

in calculating the amount of a receipt under any of sections 217 to 221

(receipts in respect of lease premiums or sums payable instead of rent,

for surrender of lease or for variation or waiver of terms of lease) in

respect of the lease, there is a reduction under section 228 by reference

to a taxed receipt, or

15

(b)   

in calculating the amount of a receipt under any of sections 277 to 281

of ITTOIA 2005 (receipts in respect of lease premiums or sums payable

instead of rent, for surrender of lease or for variation or waiver of terms

of lease) in respect of the lease, there is a reduction under section 288 of

that Act (the additional calculation rule) by reference to a taxed receipt.

20

   

The receipt that is so reduced is referred to in this section as the “lease premium

receipt”.

(3)   

Subsections (4) to (6) apply for a qualifying day that falls within the receipt

period of the lease premium receipt.

(4)   

Sections 232 and 233 apply separately in relation to the part of the premises

25

subject to the lease and to the remainder of the premises.

(5)   

If

(a)   

more than one lease that does not extend to the whole of the premises subject to

the taxed lease has been granted out of the taxed lease, and

(b)   

the qualifying day falls within the receipt period of two or more lease premium

30

receipts that relate to different leases,

   

sections 232 and 233 apply separately in relation to each part of the premises subject to

a lease to which such a receipt relates and to the remainder of the premises.

(6)   

Where sections 232 and 233 apply in relation to a part of the premises, A

becomes the amount calculated by multiplying the unreduced amount of the

35

taxed receipt by the fraction of the premises constituted by the part.

(7)   

This fraction is calculated on a just and reasonable basis.

Limit on effect of additional calculation rule and deductions

235     

Limit on reductions and deductions

(1)   

The total of

40

(a)   

the reductions under section 228 by reference to a taxed receipt, and

(b)   

the deductions allowed in calculating the profits of a property business for

expenses under section 232 (tenant under taxed lease which uses premises for

 
 

Corporation Tax Bill
Part 4 — Property income
Chapter 4 — Profits of property businesses: lease premiums etc

107

 

purposes of property business treated as incurring expenses) by reference to the

taxed receipt,

   

must not exceed the amount referred to in subsection (2).

(2)   

The amount mentioned in subsection (1) is the difference between

(a)   

the unreduced amount of the taxed receipt, and

5

(b)   

the total of the amounts mentioned in subsection (3).

(3)   

Those amounts are

(a)   

the reductions under section 288 of ITTOIA 2005 (the additional calculation

rule) by reference to the taxed receipt,

(b)   

the deductions made in calculating the profits of a property business for

10

expenses under section 292 of ITTOIA 2005 (tenant under taxed lease who

uses premises for purposes of property business treated as incurring expenses)

by reference to the taxed receipt, and

(c)   

the deductions made in calculating the profits of a trade, profession or vocation

for expenses under section 63 above or section 61 of ITTOIA 2005 (tenant

15

under taxed lease who uses land in connection with trade treated as incurring

expenses) by reference to the taxed receipt.

Certain administrative provisions

236     

Payment of tax by instalments

(1)   

This section applies if—

20

(a)   

there is a receipt under section 217 (lease premiums) in respect of a

premium which is payable by instalments, or

(b)   

there is a receipt under any of sections 219 to 221 (sums payable instead

of rent, for surrender of lease or for variation or waiver of terms of

lease) in respect of a sum which is payable by instalments.

25

(2)   

The company which is liable to pay tax by reference to the receipt may choose

to pay the tax by such instalments as an officer of Revenue and Customs may

allow.

(3)   

The period over which the instalments of tax must be paid—

(a)   

must be 8 years or less, and

30

(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.

237     

Statement of accuracy for purposes of section 222

(1)   

This section applies if any of the persons mentioned in subsection (3) provides

an officer of Revenue and Customs with a statement showing—

35

(a)   

whether or not there is, or may be, a receipt under section 222

(assignments for profit of lease granted at undervalue), and

(b)   

the amount of any receipt.

(2)   

The officer must certify the accuracy of the statement, if satisfied as to its

accuracy.

40

(3)   

The persons referred to in subsection (1) are—

(a)   

the landlord who granted the lease,

(b)   

a company which assigned it, or

 
 

Corporation Tax Bill
Part 4 — Property income
Chapter 4 — Profits of property businesses: lease premiums etc

108

 

(c)   

a person to whom it was assigned.

238     

Claim for repayment of tax payable by virtue of section 224

(1)   

This section applies if—

(a)   

there is a receipt under section 224 (sales with right to reconveyance),

and

5

(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

exceeds B, where—

A is the amount of tax paid by the seller which was payable by virtue of

10

section 224, and

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.

(3)   

The claim must be made within 4 years after the day on which the estate or

15

interest was reconveyed.

239     

Claim for repayment of tax payable by virtue of section 225

(1)   

This section applies if—

(a)   

there is a receipt under section 225 (sale and leaseback transactions),

and

20

(b)   

the date for the grant of the lease 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

exceeds B, where—

A is the amount of tax paid by the seller which was payable by virtue of

25

section 225, and

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

terms of the sale.

(3)   

The claim must be made within 4 years after the day on which the lease was

30

granted.

Determinations affecting liability of more than one person

240     

Appeals against proposed determinations

(1)   

Subsection (2) applies if it appears to an officer of Revenue and Customs that—

(a)   

a determination is needed of an amount that is to be brought into

35

account as a receipt under this Chapter in calculating the liability to tax

of a person (“the first taxpayer”), and

(b)   

the determination may affect the liability to corporation tax, income tax

or capital gains tax of other persons.

(2)   

The officer may give notice (a “provisional notice of determination”) to the first

40

taxpayer and the other persons of—

(a)   

the determination the officer proposes to make, and

 
 

 
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