Section 62: Tenants under taxed leases: introduction
247.This section provides for the following five sections to apply where a tenant, under a taxed lease, uses land for the purposes of a trade. It is based on section 87(1), (2), (8) and (9A) of ICTA. The corresponding provision for income tax is in section 60 of ITTOIA.
248.Chapter 4 of Part 4 (profits of property businesses: lease premiums etc) contains provisions (in sections 217 to 222) treating certain premiums, and other amounts, relating to a lease (“the taxed lease”) as giving rise to receipts of a property business (of amount X). Chapter 4 of Part 4 also provides that in certain cases a tenant under the taxed lease obtains relief in respect of all, or part, of X:
by reducing the amount of another property business receipt (sections 227 to 230), or
by being treated as an expense of a property business (sections 231 to 234).
249.Sections 62 to 67 provide for certain cases in which a tenant under the taxed lease obtains relief as a trading expense in respect of all, or part, of X.
250.Subsection (1) extends relief to cases in which X arose in relation to a lease of land outside the United Kingdom. See Change 11 in Annex 1. This is in accordance with the policy of treating UK and overseas property businesses in the same way as far as possible.
251.The amount which a tenant can deduct in respect of rent which it is treated as paying under section 87(2) of ICTA is qualified by:
the general rules as to deductions not allowable in computing the profits of a trade in section 74(1) of ICTA; and
rules prohibiting or restricting the deduction of specific expenditure elsewhere in ICTA.
252.In this Act, the rules restricting deductions are in Chapter 4 of this Part and section 74(1)(a) of ICTA is rewritten in that Chapter in section 54. Subsection (3) preserves the interaction of section 87(2) of ICTA and the general and specific rules restricting deductions in ICTA by providing that a deduction for an expense which a tenant is treated as incurring under section 63 is subject to the application of any provision of Chapter 4 of this Part.