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Corporation Tax Bill


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

418

 

842     

Payments made for later periods

(1)   

This section applies for the purposes of sections 839 to 841.

(2)   

For the purposes of this section the relevant year (in relation to a payment) is

the year which begins with the date it is made.

(3)   

If a payment is made for a period all of which is after the relevant year, it must

5

be treated as made for the relevant year.

(4)   

If a payment is made for a period part of which is after the relevant year, it must

be treated as if a corresponding part of it was made for the relevant year (and

no part for a later period).

Interpretation etc

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843     

Exclusion of service charges etc

(1)   

This section applies for the purposes of sections 838 and 839.

(2)   

A payment must be excluded so far as it is in respect of any of the following—

(a)   

services,

(b)   

the use of relevant assets, and

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(c)   

rates usually borne by the tenant.

(3)   

The amount excluded must be just and reasonable.

(4)   

If a lease or agreement contains provisions fixing the payments or parts of

payments which are in respect of services or the use of assets, those provisions

are not conclusive.

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(5)   

A relevant asset is any description of property or rights other than land or an

interest in land.

844     

Commercial rent: comparison with rent under a lease

(1)   

Subsection (3) applies—

(a)   

for the purpose of making a comparison under rule 4 of section 838(3)

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if section 838 has effect because of section 835(1), and

(b)   

for the purpose of making a comparison under section 839(3) if section

839 has effect because of section 835(2).

(2)   

In this section “the actual lease” means the lease mentioned in section 835(1)(b)

or (2)(b).

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(3)   

The commercial rent is the rent which might be expected to be paid under a

lease, of the land in respect of which the payment mentioned in section

835(1)(b) or (2)(b) is made, which—

(a)   

was negotiated in the open market when the actual lease was created,

(b)   

is of the same duration as the actual lease,

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(c)   

is subject to the terms and conditions of the actual lease as respects

liability for maintenance and repairs, and

(d)   

provides for rent payable at uniform intervals and at an appropriate

rate.

(4)   

Rent is payable at an appropriate rate if—

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

419

 

(a)   

it is payable at a uniform rate, or

(b)   

in a case where the rent payable under the actual lease is rent at a

progressive rate (and such that the amount of rent payable for a year is

never less than the amount payable for a previous year), it progresses

by gradations proportionate to those provided by the actual lease.

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845     

Commercial rent: comparison with payments other than rent

(1)   

Subsection (2) applies—

(a)   

for the purpose of making a comparison under rule 4 of section 838(3)

if section 838 has effect because of section 836(1), and

(b)   

for the purpose of making a comparison under section 839(3) if section

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839 has effect because of section 836(2).

(2)   

The commercial rent is the rent which might be expected to be paid under a

lease, of the land in respect of which the payment mentioned in section

836(1)(b) or (2)(b) is made, which—

(a)   

was negotiated in the open market when the rentcharge or other

15

transaction mentioned in section 836(1)(b) or (2)(b) was effected,

(b)   

is a tenant’s repairing lease, and

(c)   

is of an appropriate duration.

(3)   

A tenant’s repairing lease is a lease where the lessee is under an obligation to

maintain and repair the whole (or substantially the whole) of the premises

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comprised in the lease.

(4)   

To see whether a lease is of an appropriate duration, take the period over

which payments are to be made under the rentcharge or other transaction,

and—

(a)   

if that period is 200 years or more (or the obligation to make the

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payments is perpetual) an appropriate duration is 200 years, or

(b)   

if that period is less than 200 years, an appropriate duration is the same

duration as that period.

846     

Lease and rent

(1)   

This section applies for the purposes of this Chapter.

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(2)   

A reference to a lease includes a reference to any of the following—

(a)   

an underlease, sublease, tenancy or licence, and

(b)   

an agreement for a lease, underlease, sublease, tenancy or licence, and

(c)   

in the case of land outside the United Kingdom, an interest

corresponding to a lease (as defined here).

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(3)   

A reference to rent includes a reference to any payment under a lease.

(4)   

A reference to rent under a lease includes a reference to expenses which the

tenant under the lease is treated as incurring in respect of the land subject to

the lease under any of—

(a)   

sections 63 to 67 of CTA 2009 (land occupied for trade purposes), and

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(b)   

sections 232 to 234 of that Act (taxed leases).

(5)   

Expenses within subsection (4) must be treated as having been paid as soon as

they were incurred.

 
 

Corporation Tax Bill
Part 19 — Sale and lease-back etc
Chapter 2 — New lease of land after assignment or surrender

420

 

847     

Associated persons

(1)   

This section applies for the purposes of this Chapter.

(2)   

The following persons are associated with one another—

(a)   

the transferor in an affected transaction and the transferor in another

affected transaction, if the two persons are acting in concert or if the two

5

transactions are in any way reciprocal, and

(b)   

any person who is an associate of either of those associated transferors.

(3)   

Two or more bodies corporate are associated with one another if they

participate in, or are incorporated for the purposes of, a scheme—

(a)   

for the reconstruction of any body or bodies corporate, or

10

(b)   

for the amalgamation of any two or more bodies corporate.

(4)   

Persons are associated with one another if they are associates as defined in

section 882 (relatives, settlements, persons controlling bodies, joint owners

etc).

(5)   

In subsection (2) “affected transaction” means a transaction within—

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(a)   

section 835(1) or (2) or 836(1) or (2), or

(b)   

section 681AA(1) or (2) or 681AB(1) or (2) of ITA 2007.

848     

Land outside the UK

In the case of land outside the United Kingdom, expressions in this Chapter

relating to interests in land and their disposition must be taken to relate to

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corresponding interests and dispositions.

Chapter 2

New lease of land after assignment or surrender

Introduction

849     

Overview of Chapter

25

(1)   

This Chapter provides that in certain circumstances where a lease of land is

assigned or surrendered and another lease is granted or assigned—

(a)   

consideration received for the assignment or surrender of the first lease

is taxed as a trade receipt or charged to corporation tax on income, and

(b)   

tax relief is allowed for rent under the other lease.

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(2)   

The Chapter provides that in certain circumstances where a lease is varied it is

treated as surrendered and another lease is treated as granted.

Application of the Chapter

850     

New lease after assignment or surrender

(1)   

This Chapter has effect if each of conditions A to E is met.

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(2)   

Condition A is that—

 
 

Corporation Tax Bill
Part 19 — Sale and lease-back etc
Chapter 2 — New lease of land after assignment or surrender

421

 

(a)   

a company (“L”) is a lessee of land under a lease which has 50 years or

less to run (“the original lease”), and

(b)   

L is entitled in respect of the rent under the original lease to a deduction

by way of relevant corporation tax relief.

(3)   

Condition B is that—

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(a)   

L assigns the original lease to another person or surrenders it to L’s

landlord, and

(b)   

the consideration for the assignment or surrender would not (apart

from this Chapter) be taxable except as capital in L’s hands.

(4)   

Condition C is that—

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(a)   

another lease (“the new lease”) is granted, or assigned, to L or a person

linked to L, and

(b)   

the new lease is for a term of 15 years or less.

(5)   

Condition D is that the new lease—

(a)   

is of all or part of the land which was the subject of the original lease, or

15

(b)   

includes all or part of the land which was the subject of the original

lease.

(6)   

Condition E is that neither L nor a person linked to L had, before 22 June 1971,

a right enforceable at law or in equity to the grant of the new lease.

(7)   

If each of conditions A to D is met but condition E is not met, see the relevant

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provisions in Schedule 2 to this Act and Schedule 9 to TIOPA 2010.

Taxation of consideration

851     

Taxation of consideration

(1)   

An appropriate amount must be found under subsection (3) or (4) of—

(a)   

the consideration received by L for the assignment or surrender, or

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(b)   

each instalment of the consideration (if it is paid in instalments).

(2)   

For the purposes of the Corporation Tax Acts the appropriate amount must be

treated in accordance with subsections (6) to (8) and not as a capital receipt.

(3)   

If the term of the new lease is one year or less, the appropriate amount of the

consideration or instalment is the whole of it.

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(4)   

If the term of the new lease is more than one year, the appropriate amount of

the consideration or instalment is the proportion of it found by the formula—equation: over[plus[num[16.0000000000000000,"16"],minus[char[N]]],num[15.0000000000000000,

"15"]]

(5)   

In subsection (4) N is the term of the new lease expressed in years (taking part

of a year as an appropriate proportion of a year).

(6)   

The way the appropriate amount must be treated depends on whether the

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following conditions are met—

(a)   

the consideration is received by L in the course of a trade, and

(b)   

the rent payable by L, or a person linked to L, under the new lease is

allowable as a deduction in calculating profits or losses of a trade,

profession or vocation for tax purposes.

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Corporation Tax Bill
Part 19 — Sale and lease-back etc
Chapter 2 — New lease of land after assignment or surrender

422

 

(7)   

If the conditions are met the appropriate amount must be treated as a receipt

of the trade mentioned in subsection (6)(a).

(8)   

If the conditions are not met the appropriate amount must be treated as an

amount chargeable to corporation tax under the charge to corporation tax on

income.

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852     

Position where new lease does not include all original property

(1)   

This section applies for the purposes of section 851 if the property which is the

subject of the new lease does not include all the property which was the subject

of the original lease.

(2)   

The consideration received by L must be treated as reduced to the portion of it

10

found under subsection (3).

(3)   

The portion is that which is reasonably attributable to such part of the original

property as—

(a)   

consists of the property which is the subject of the new lease, or

(b)   

is included in the property which is the subject of the new lease.

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(4)   

The original property is the property which was the subject of the original

lease.

Relief for rent under new lease

853     

Relief for rent under new lease

(1)   

This section applies if the rent under the new lease is payable by a company

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within the charge to corporation tax.

(2)   

This section also applies if—

(a)   

Chapter 2 of Part 12A of ITA 2007 (provision for income tax

corresponding to this Chapter) has effect, and

(b)   

the rent under the new lease is payable by a company within the charge

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to corporation tax.

(3)   

Any provision of CTA 2009 or ICTA providing for deductions or allowances by

way of corporation tax relief in respect of payments of rent applies in relation

to the rent under the new lease.

(4)   

In subsection (2), and in subsection (3) as applied by subsection (2), references

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to the new lease and rent are to be read as in Chapter 2 of Part 12A of ITA 2007.

New lease treated as ending

854     

New lease treated as ending

(1)   

Sections 855 to 857 treat the new lease as ending in certain circumstances for

the purposes of this Chapter.

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(2)   

If any of those provisions apply in a given case, and the new lease is treated as

ending on different dates, it must be treated as ending on the earlier or earliest

of them.

 
 

 
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