Corporation Tax Bill

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

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—

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).
25
(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,
30
(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
20
(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),
25
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
35
(the 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
40
(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.
45

Corporation Tax Bill
Part 4 — Property income
Chapter 4 — Profits of property businesses: lease premiums etc
104

(6)
For the purposes of this Chapter references to a reduction under section 228
above or section 288 of ITTOIA 2005 by reference to a taxed receipt are to a
reduction under the section concerned so far as attributable to the taxed
receipt.
Deductions in relation to certain receipts
5
231
Deductions for expenses under section 232
(1)
Section 232 (tenants under taxed leases treated as incurring expenses) applies
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.
10
(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—
(a)
occupied by the tenant for the purpose of carrying on the property
business, or
(b)
sublet.
15
(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
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
20
section 235 (limit on reductions and deductions).
(5)
For the meaning of expressions used in this section, see in particular—
section 227(4) (“taxed lease”), and
section 227(4) (“taxed receipt”).
232
Tenants under taxed leases treated as incurring expenses
25
(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
day.
(2)
If there is more than one taxed receipt, this section applies separately in
relation to each of them.
30
(3)
A day is a “qualifying day”, in relation to a taxed receipt, if it falls within the
receipt period of the taxed receipt.
(4)
The amount of the expense for the qualifying day by reference to the taxed
receipt is given by the formula—

where—
35
A is the unreduced amount of the taxed receipt, and
TRP is the number of days in the receipt period of the taxed receipt.
(5)
This section is subject to sections 233 and 234 (restrictions on expenses where
the additional calculation rule is relevant).

Corporation Tax Bill
Part 4 — Property income
Chapter 4 — Profits of property businesses: lease premiums etc
105

(6)
For the meaning of expressions used in this section, see in particular—
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—
5
(a)
in calculating the amount of a receipt under this Chapter there is a
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
10
is a reduction under section 288 of that Act (the additional calculation
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
15
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 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.
20
(4)
If the condition in subsection (3) is met, the amount of the expense under
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
25
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—
30
where—
A is the unreduced amount of the taxed receipt (see section 230(2) to
(4)), and
TRP is the number of days in the receipt period of the taxed receipt, and

35
the “daily reduction” of a lease premium receipt is given by the formula—
where—
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

Corporation Tax Bill
Part 4 — Property income
Chapter 4 — Profits of property businesses: lease premiums etc
106

RRP is the number of days in the receipt period of the lease premium
receipt.
(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.
5
234
Restrictions on section 232 expenses: lease of part of premises
(1)
This section applies if—
(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
10
(c)
the condition in subsection (2) is met.
(2)
The condition is that—
(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
15
respect of the lease, there is a reduction under section 228 by reference
to a taxed receipt, or
(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
20
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.

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
25
period of the lease premium receipt.
(4)
Sections 232 and 233 apply separately in relation to the part of the premises
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
30
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 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
35
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
taxed receipt by the fraction of the premises constituted by the part.
(7)
This fraction is calculated on a just and reasonable basis.
40
Limit on effect of additional calculation rule and deductions
235
Limit on reductions and deductions
(1)
The total of—

Corporation Tax Bill
Part 4 — Property income
Chapter 4 — Profits of property businesses: lease premiums etc
107

(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 purposes of property business treated as incurring
expenses) by reference to the taxed receipt,
5

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
(b)
the total of the amounts mentioned in subsection (3).
(3)
Those amounts are—
10
(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 expenses under section 292 of ITTOIA 2005 (tenant under taxed
lease who uses premises for purposes of property business treated as
15
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 under taxed lease who uses land in connection with trade
treated as incurring expenses) by reference to the taxed receipt.
20
Certain administrative provisions
236
Payment of tax by instalments
(1)
This section applies if—
(a)
there is a receipt under section 217 (lease premiums) in respect of a
premium which is payable by instalments, or
25
(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.
(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
30
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.
35
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—
(a)
whether or not there is, or may be, a receipt under section 222
(assignments for profit of lease granted at undervalue), and
40
(b)
the amount of any receipt.
(2)
The officer must certify the accuracy of the statement, if satisfied as to its
accuracy.

Corporation Tax Bill
Part 4 — Property income
Chapter 4 — Profits of property businesses: lease premiums etc
108

(3)
The persons referred to in subsection (1) are—
(a)
the landlord who granted the lease,
(b)
a company which assigned it, or
(c)
a person to whom it was assigned.
238
Claim for repayment of tax payable by virtue of section 224
5
(1)
This section applies if—
(a)
there is a receipt under section 224 (sales with right to reconveyance),
and
(b)
the date on which the estate or interest would fall to be reconveyed was
not fixed under the terms of the sale.
10
(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
section 224, and
B is the amount of tax that would have been so payable if the date on
15
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
interest was reconveyed.
239
Claim for repayment of tax payable by virtue of section 225
20
(1)
This section applies if—
(a)
there is a receipt under section 225 (sale and leaseback transactions),
and
(b)
the date for the grant of the lease was not fixed under the terms of the
sale.
25
(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
section 225, and
B is the amount of tax that would have been so payable if the date on
30
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
granted.
Determinations affecting liability of more than one person
35
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
account as a receipt under this Chapter in calculating the liability to tax
of a person (“the first taxpayer”), and
40
(b)
the determination may affect the liability to corporation tax, income tax
or capital gains tax of other persons.