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(1) | This section applies for the purposes of this Chapter. |
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(2) | The following persons are associated with one another— |
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(a) | the transferor in an affected transaction and the transferor in another |
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affected transaction, if the two persons are acting in concert or if the two |
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transactions are in any way reciprocal, and |
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(b) | any person who is an associate of either of those associated transferors. |
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(3) | Two or more bodies corporate are associated with one another if they |
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participate in, or are incorporated for the purposes of, a scheme— |
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(a) | for the reconstruction of any body or bodies corporate, or |
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(b) | for the amalgamation of any two or more bodies corporate. |
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(4) | Persons are associated with one another if they are associates as defined in |
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section 882 (relatives, settlements, persons controlling bodies, joint owners |
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(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 |
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(b) | section 681AA(1) or (2) or 681AB(1) or (2) of ITA 2007. |
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In the case of land outside the United Kingdom, expressions in this Chapter |
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relating to interests in land and their disposition must be taken to relate to |
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corresponding interests and dispositions. |
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New lease of land after assignment or surrender |
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(1) | This Chapter provides that in certain circumstances where a lease of land is |
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assigned or surrendered and another lease is granted or assigned— |
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(a) | consideration received for the assignment or surrender of the first lease |
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is taxed as a trade receipt or charged to corporation tax on income, and |
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(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 |
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treated as surrendered and another lease is treated as granted. |
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Application of the Chapter |
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850 | New lease after assignment or surrender |
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(1) | This Chapter has effect if each of conditions A to E is met. |
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(a) | a company (“L”) is a lessee of land under a lease which has 50 years or |
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less to run (“the original lease”), and |
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(b) | L is entitled in respect of the rent under the original lease to a deduction |
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by way of relevant corporation tax relief. |
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(a) | L assigns the original lease to another person or surrenders it to L’s |
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(b) | the consideration for the assignment or surrender would not (apart |
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from this Chapter) be taxable except as capital in L’s hands. |
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(a) | another lease (“the new lease”) is granted, or assigned, to L or a person |
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(b) | the new lease is for a term of 15 years or less. |
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(5) | Condition D is that the new lease— |
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(a) | is of all or part of the land which was the subject of the original lease, or |
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(b) | includes all or part of the land which was the subject of the original |
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(6) | Condition E is that neither L nor a person linked to L had, before 22 June 1971, |
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a right enforceable at law or in equity to the grant of the new lease. |
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(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. |
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Taxation of consideration |
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851 | Taxation of consideration |
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(1) | An appropriate amount must be found under subsection (3) or (4) of— |
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(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). |
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(2) | For the purposes of the Corporation Tax Acts the appropriate amount must be |
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treated in accordance with subsections (6) to (8) and not as a capital receipt. |
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(3) | If the term of the new lease is one year or less, the appropriate amount of the |
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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 |
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the consideration or instalment is the proportion of it found by the formula—
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(5) | In subsection (4) N is the term of the new lease expressed in years (taking part |
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of a year as an appropriate proportion of a year). |
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(6) | The way the appropriate amount must be treated depends on whether the |
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following conditions are met— |
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(a) | the consideration is received by L in the course of a trade, and |
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(b) | the rent payable by L, or a person linked to L, under the new lease is |
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allowable as a deduction in calculating profits or losses of a trade, |
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profession or vocation for tax purposes. |
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(7) | If the conditions are met the appropriate amount must be treated as a receipt |
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of the trade mentioned in subsection (6)(a). |
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(8) | If the conditions are not met the appropriate amount must be treated as an |
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amount chargeable to corporation tax under the charge to corporation tax on |
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852 | Position where new lease does not include all original property |
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(1) | This section applies for the purposes of section 851 if the property which is the |
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subject of the new lease does not include all the property which was the subject |
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(2) | The consideration received by L must be treated as reduced to the portion of it |
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found under subsection (3). |
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(3) | The portion is that which is reasonably attributable to such part of the original |
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(a) | consists of the property which is the subject of the new lease, or |
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(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 |
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Relief for rent under new lease |
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853 | Relief for rent under new lease |
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(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. |
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(2) | This section also applies if— |
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(a) | Chapter 2 of Part 12A of ITA 2007 (provision for income tax |
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corresponding to this Chapter) has effect, and |
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(b) | the rent under the new lease is payable by a company within the charge |
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(3) | Any provision of CTA 2009 or ICTA providing for deductions or allowances by |
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way of corporation tax relief in respect of payments of rent applies in relation |
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to the rent under the new lease. |
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(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. |
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New lease treated as ending |
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854 | New lease treated as ending |
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(1) | Sections 855 to 857 treat the new lease as ending in certain circumstances for |
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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 |
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ending on different dates, it must be treated as ending on the earlier or earliest |
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855 | Position where rent reduces |
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(1) | If the rent for a relevant period exceeds the rent for the following comparable |
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period, the term of the new lease must be treated as ending on the date when |
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the relevant period ends. |
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(2) | For the purposes of this section— |
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(a) | a relevant period is a rental period of the new lease ending before its |
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(b) | the following comparable period (in relation to a relevant period) is the |
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rental period which is of the same duration as the relevant period and |
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which begins on the day following the end of the relevant period, |
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(c) | the rent for a period is the total rent payable under the new lease in |
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(d) | a rental period is a period in respect of which a payment of rent is to be |
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(e) | the fifteenth anniversary of the new lease is the fifteenth anniversary of |
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the date on which its term begins. |
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(3) | For the purposes of this section— |
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(a) | all rental periods of a quarter must be treated as being of the same |
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(b) | all rental periods of a month must be treated as being of the same |
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856 | Position where lease may be ended |
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(1) | This section applies if under the new lease the lessor, or L or a person linked to |
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L, has power to end the lease before the end of the term for which it was |
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(2) | The term of the lease must be treated as ending on the earliest date with effect |
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from which the lessor, or L or a person linked to L, could end the lease by |
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857 | Position where lease may be varied |
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(1) | This section applies if under the new lease L, or a person linked to L, has power |
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to vary, in a manner beneficial to L or a person linked to L, obligations under |
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the lease that are obligations of L or a person linked to L. |
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(2) | The term of the lease must be treated as ending on the earliest date with effect |
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from which L, or a person linked to L, could vary the obligations by exercising |
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858 | Lease treated as ending: rentcharge |
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(1) | Subsection (2) applies if a rentcharge payable by L, or a person linked to L, is |
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secured on all or part of the property subject to the new lease. |
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(2) | For the purposes of sections 855 to 857 the rent payable under the new lease |
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must be treated as equal to the sum of the rentcharge and the rent payable |
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