House of Commons portcullis
House of Commons
Session 2009 - 10
Internet Publications
Other Bills before Parliament

Corporation Tax Bill


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

421

 

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—

15

(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

20

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.

30

(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.

35

(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

422

 

(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—

5

(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—

10

(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

20

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

25

(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.

30

(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—

(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

35

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.

40

 
 

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

423

 

(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.

5

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.

15

(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

20

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

25

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

30

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.

35

(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.

 
 

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

424

 

855     

Position where rent reduces

(1)   

If the rent for a relevant period exceeds the rent for the following comparable

period, the term of the new lease must be treated as ending on the date when

the relevant period ends.

(2)   

For the purposes of this section—

5

(a)   

a relevant period is a rental period of the new lease ending before its

fifteenth anniversary,

(b)   

the following comparable period (in relation to a relevant period) is the

rental period which is of the same duration as the relevant period and

which begins on the day following the end of the relevant period,

10

(c)   

the rent for a period is the total rent payable under the new lease in

respect of the period,

(d)   

a rental period is a period in respect of which a payment of rent is to be

made, and

(e)   

the fifteenth anniversary of the new lease is the fifteenth anniversary of

15

the date on which its term begins.

(3)   

For the purposes of this section—

(a)   

all rental periods of a quarter must be treated as being of the same

duration, and

(b)   

all rental periods of a month must be treated as being of the same

20

duration.

856     

Position where lease may be ended

(1)   

This section applies if under the new lease the lessor, or L or a person linked to

L, has power to end the lease before the end of the term for which it was

granted.

25

(2)   

The term of the lease must be treated as ending on the earliest date with effect

from which the lessor, or L or a person linked to L, could end the lease by

exercising the power.

857     

Position where lease may be varied

(1)   

This section applies if under the new lease L, or a person linked to L, has power

30

to vary, in a manner beneficial to L or a person linked to L, obligations under

the lease that are obligations of L or a person linked to L.

(2)   

The term of the lease must be treated as ending on the earliest date with effect

from which L, or a person linked to L, could vary the obligations by exercising

the power.

35

858     

Lease treated as ending: rentcharge

(1)   

Subsection (2) applies if a rentcharge payable by L, or a person linked to L, is

secured on all or part of the property subject to the new lease.

(2)   

For the purposes of sections 855 to 857 the rent payable under the new lease

must be treated as equal to the sum of the rentcharge and the rent payable

40

under the lease.

 
 

 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 2010
Revised 28 January 2010