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Corporation Tax Bill


Corporation Tax Bill
Part 19 — Sale and lease-back etc
Chapter 1 — Payments connected with transferred land

414

 

Application of the Chapter

835     

Transferor or associate becomes liable for payment of rent

(1)   

Section 838 has effect if—

(a)   

land, or an estate or interest in land, is transferred,

(b)   

the transferor, or a company associated with the transferor, becomes

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liable to make a payment of rent under a lease of the land or part of it,

and

(c)   

a deduction by way of relevant corporation tax relief (see section 837)

is allowed for the payment.

(2)   

Section 839 has effect if—

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(a)   

land, or an estate or interest in land, is transferred,

(b)   

the transferor, or a company associated with the transferor, becomes

liable to make a payment of rent under a lease of the land or part of it,

and

(c)   

a deduction under section 76 of ICTA (expenses of insurance

15

companies) is allowed for the payment.

(3)   

The reference in subsection (1)(a) or (2)(a) to a transfer of an estate or interest

in land includes a reference to any of the following—

(a)   

the granting of a lease or another transaction involving the creation of

a new estate or interest in the land,

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(b)   

the transfer of the lessee’s interest under a lease by surrender or

forfeiture of the lease, and

(c)   

a transaction or series of transactions affecting land or an estate or

interest in land, such that some person is the owner or one of the

owners before and after the transaction or transactions but another

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person becomes or ceases to be one of the owners.

(4)   

In relation to a transaction or series of transactions mentioned in subsection

(3)(c), a person is to be regarded as a transferor for the purposes of this Chapter

if the person—

(a)   

is an owner before the transaction or transactions, and

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(b)   

is not the sole owner afterwards.

(5)   

The liability mentioned in subsection (1)(b) or (2)(b) is one resulting from—

(a)   

a lease of the land or part of it granted (at the time of the transfer or

later) by the transferee to the transferor, or

(b)   

another transaction or series of transactions affecting the land or an

35

estate or interest in it.

(6)   

The liability mentioned in subsection (1)(b) or (2)(b) is one arising at the time

of the transfer or later.

(7)   

The reference in subsection (1)(a) or (2)(a) to a transfer does not include a

transfer on or before 14 April 1964.

40

836     

Transferor or associate becomes liable for payment other than rent

(1)   

Section 838 has effect if—

(a)   

land, or an estate or interest in land, is transferred,

 
 

Corporation Tax Bill
Part 19 — Sale and lease-back etc
Chapter 1 — Payments connected with transferred land

415

 

(b)   

the transferor, or a company associated with the transferor, becomes

liable to make a payment which is not rent under a lease but is

otherwise connected with the land or part of it (whether it is a payment

under a rentcharge or under some other transaction), and

(c)   

a deduction by way of relevant corporation tax relief (see section 837)

5

is allowed for the payment.

(2)   

Section 839 has effect if—

(a)   

land, or an estate or interest in land, is transferred,

(b)   

the transferor, or a company associated with the transferor, becomes

liable to make a payment which is not rent under a lease but is

10

otherwise connected with the land or part of it (whether it is a payment

under a rentcharge or under some other transaction), and

(c)   

a deduction under section 76 of ICTA (expenses of insurance

companies) is allowed for the payment.

(3)   

The reference in subsection (1)(a) or (2)(a) to a transfer of an estate or interest

15

in land includes a reference to any of the following—

(a)   

the granting of a lease or another transaction involving the creation of

a new estate or interest in the land,

(b)   

the transfer of the lessee’s interest under a lease by surrender or

forfeiture of the lease, and

20

(c)   

a transaction or series of transactions affecting land or an estate or

interest in land, such that some person is the owner or one of the

owners before and after the transaction or transactions but another

person becomes or ceases to be one of the owners.

(4)   

In relation to a transaction or series of transactions mentioned in subsection

25

(3)(c), a person is to be regarded as a transferor for the purposes of this Chapter

if the person—

(a)   

is an owner before the transaction or transactions, and

(b)   

is not the sole owner afterwards.

(5)   

The liability mentioned in subsection (1)(b) or (2)(b) is one resulting from a

30

transaction or series of transactions affecting the land or an estate or interest in

it.

(6)   

The liability mentioned in subsection (1)(b) or (2)(b) is one arising at the time

of the transfer or later.

(7)   

The reference in subsection (1)(a) or (2)(a) to a transfer does not include a

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transfer on or before 14 April 1964.

837     

Relevant corporation tax relief

For the purposes of this Chapter each of the following is a deduction by way of

relevant corporation tax relief—

(a)   

a deduction in calculating profits or losses of a trade for corporation tax

40

purposes,

(b)   

a deduction in calculating the profits of a UK property business for

corporation tax purposes,

(c)   

a deduction in calculating any loss for which relief is given under

section 91 (losses from miscellaneous transactions), or in calculating

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profits or gains chargeable to corporation tax under or by virtue of any

provision to which section 1173 (miscellaneous charges) applies, and

 
 

Corporation Tax Bill
Part 19 — Sale and lease-back etc
Chapter 1 — Payments connected with transferred land

416

 

(d)   

a deduction under section 1219 of CTA 2009 (expenses of management

of a company’s investment business).

Relief (other than for certain insurance company expenses): restriction and carrying forward

838     

Relevant corporation tax relief: deduction not to exceed commercial rent

(1)   

The rules in subsection (3) apply to the calculation of the deduction by way of

5

relevant corporation tax relief allowed in an accounting period—

(a)   

for the non-excluded element of the payment within section 835(1) or

836(1), or

(b)   

if there are two or more such payments, for the non-excluded elements

of those payments.

10

(2)   

For the purposes of this section the non-excluded element of a payment is the

element of the payment not excluded under section 843 (service charges etc).

(3)   

The rules are—

   

Rule 1 meaning of amount E

   

For any accounting period, amount E (which may be nil) is the expense or total

15

expenses to be brought, in accordance with generally accepted accounting

practice, into account in the period in respect of—

(a)   

the non-excluded element of the payment, or

(b)   

the non-excluded elements of the payments.

   

Rule 2 calculations

20

   

For every accounting period—

(a)   

calculate the total of amount E for the period and amount E for every

previous accounting period ending on or after the date of the transfer

mentioned in section 835(1)(a) or 836(1)(a),

(b)   

calculate the total of the deductions by way of relevant corporation tax

25

relief for every previous accounting period ending on or after the date

of that transfer, and

(c)   

subtract the total at (b) from the total at (a) to give the cumulative

unrelieved expenses for the period.

   

Rule 3 meaning of post-spread period

30

   

An accounting period is a post-spread period if for that accounting period, and

every later accounting period, there are no payments within section 835(1) or

836(1).

   

Rule 4 the deduction allowed in an accounting period

   

If an accounting period is not a post-spread period, the deduction allowed for

35

the period is equal to the cumulative unrelieved expenses for the period, but is

equal to the commercial rent for the period if that is less (see section 844 or 845).

   

Rule 5 accounting periods in which no deduction allowed

   

If an accounting period is a post-spread period, no deduction is allowed for the

period.

40

 
 

Corporation Tax Bill
Part 19 — Sale and lease-back etc
Chapter 1 — Payments connected with transferred land

417

 

Insurance company expenses: restriction and carrying forward of relief

839     

Deduction under section 76 of ICTA not to exceed commercial rent

(1)   

Subsection (3) applies to the calculation of the deduction under section 76 of

ICTA allowed for the non-excluded element of the payment within section

835(2) or 836(2).

5

(2)   

For the purposes of this section the non-excluded element of a payment is the

element of the payment not excluded under section 843 (service charges etc).

(3)   

The deduction must not exceed the commercial rent for the period for which

the payment is made (see section 844 or 845).

840     

Carrying forward parts of payments

10

(1)   

This section applies if—

(a)   

section 839 has effect, and

(b)   

conditions A and B are met.

(2)   

Condition A is that under section 839 part of a payment which would

otherwise be allowed as a deduction under section 76 of ICTA is not allowed.

15

(3)   

Condition B is that one or more later payments are made, by the transferor or

a person associated with the transferor, under—

(a)   

the lease (if section 839 has effect because of section 835(2)), or

(b)   

the rentcharge or other transaction mentioned in section 836(2)(b) (if

section 839 has effect because of section 836(2)).

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(4)   

The part of the payment mentioned in subsection (2) may be carried forward

and treated for the purposes of a deduction under section 76 of ICTA as if it

were made—

(a)   

when the next of the later payments is made, and

(b)   

for the period for which that later payment is made.

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(5)   

So far as a part of a payment carried forward under this section is not allowed

as a deduction under section 76 of ICTA, it may be carried forward again under

this section.

841     

Aggregation and apportionment of payments

(1)   

This section applies for the purposes of section 839.

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(2)   

If more than one payment is made for the same period the payments must be

taken together.

(3)   

If payments are made for periods which overlap—

(a)   

the payments must be apportioned, and

(b)   

the apportioned payments which belong to the common part of the

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overlapping periods must be taken together.

(4)   

References in subsections (2) and (3) to payments include references to parts of

payments which under section 840 are treated as if made later than they were

made.

 
 

 
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