Corporation Tax Act 2009

Lease premiums: taking account of reductions under section 37(2) or (3) of ICTA

40 (1) This paragraph applies if—

(a) in calculating the amount of an ICTA pre-commencement receipt, there is a reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest for the purposes of that section, and

(b) as a result of paragraph 39(1) and (2) or section 227(4)(c) or (d) (lease taxed under ITTOIA 2005) the amount chargeable on the superior interest is the taxed receipt for the purposes of Chapter 4 of Part 4.

(2) References to a reduction under section 37(2) or (3) of ICTA in an ICTA pre-commencement receipt by reference to the amount chargeable on the superior interest are to the difference between—

(a) the amount of the ICTA pre-commencement receipt before the operation of section 37(2) or (3) of ICTA, and

(b) the amount of the receipt after the operation of that subsection,

so far as attributable to the amount chargeable on the superior interest for the purposes of section 37 of ICTA.

(3) In sections 230(5)(a) (meaning of “unused amount”) and 235(3)(a) (limit on reductions and deductions) references to reductions under section 288 of ITTOIA 2005 by reference to the taxed receipt include references to reductions under section 37(2) or (3) of ICTA in ICTA pre-commencement receipts by reference to the amount chargeable on the superior interest.

(4) Sections 232 to 234 apply as follows—

(a) the ICTA pre-commencement receipt is treated as if it were a lease premium receipt for the purposes of sections 233 and 234,

(b) references in those sections to the reduction under section 228 by reference to the taxed receipt are, in relation to the ICTA pre-commencement receipt, to the reduction under section 37(2) or (3) of ICTA by reference to the amount chargeable on the superior interest, and

(c) for the purposes of those sections the receipt period of the ICTA pre-commencement receipt is—

(i) in the case of an ICTA pre-commencement receipt as a result of section 34 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease, and

(ii) in the case of an ICTA pre-commencement receipt as a result of section 35 of ICTA, the period treated in calculating the amount of the receipt as being the duration of the lease remaining at the date of the assignment.