Corporation Tax Act 2009

221 Sums payable for variation or waiver of terms of lease

(1) This section applies if—

(a) a sum becomes payable by the tenant (otherwise than by way of rent) as consideration for the variation or waiver of a term of a lease,

(b) the sum is due to the landlord or a company which is connected with the landlord, and

(c) the period for which the variation or waiver has effect is 50 years or less.

(2) The company to which the sum is due is treated as—

(a) entering into a transaction mentioned in section 205 (if the land to which the lease relates is in the United Kingdom) or section 206 (if that land is outside the United Kingdom), and

(b) receiving the amount calculated under subsections (4) and (5) as a result of that transaction.

(3) That amount is brought into account as a receipt in calculating the profits of the property business which consists of or includes that transaction for the accounting period in which the contract providing for the variation or waiver is entered into.

(4) The amount of the receipt is given by the formula—

S × 50 - Y50

where—

• S is the sum payable as consideration for the variation or waiver, and

• Y is the number of complete periods of 12 months (other than the first) comprised in the period for which the variation or waiver has effect.

(5) But, if the rule in section 228 (the additional calculation rule) applies, the amount given by the formula in subsection (4) is reduced by the amount calculated in accordance with section 228.

(6) In determining for the purposes of this Chapter the duration of the period for which the variation or waiver has effect, any part of the period that falls after the expiry of the effective duration of the lease is excluded.