Section 96: Reverse premiums
374.This is the first of a group of five sections based on section 54 of, and Schedule 6 to, FA 1999. This legislation was introduced following the decision of the Privy Council in Commissioner of Inland Revenue v Wattie and another (1998), 72 TC 639(5). An inducement (a “reverse premium”) paid to a tenant to take a lease of land is taxed as income in the hands of the tenant. The corresponding rules for income tax are in sections 99 to 103 of ITTOIA.
375.Subsection (2) introduces the term “the recipient”, which is used throughout this group of sections.
376.Subsection (3) identifies the transaction which gives rise to a reverse premium.
377.Subsection (4) refers to an interest in land being “granted”. This distinguishes such a transaction from one in which an interest is assigned. The general rule is that a charge to tax on a reverse premium arises on the grant of an interest in land but not on its assignment. But assignment can give rise to a charge if the assignor is connected with the grantor.
378.The meaning of “reverse premium” in this section is applied for the purpose of section 250 by subsection (6) of that section.
379.Schedule 2 to this Act rewrites the transitional provision in section 54(2) of FA 1999. These sections do not apply to pre-1999 reverse premiums.
[1998] STC 1160