Part 4

Property income
Chapter 4

Profits of property businesses: lease premiums etc

Other amounts treated as receipts

Sale and leaseback transactions
225
1
This section applies if—
a
an estate or interest in land is sold subject to terms which provide for the grant of a lease directly or indirectly out of the estate or interest to the seller or a person connected with the seller,
b
the period beginning with the sale and ending with the earliest date on which under the terms of the sale the lease would fall to be granted is 50 years or less, and
c
the price at which the estate or interest is sold exceeds the total of—
i
the amount of any premium for the lease, and
ii
the value on the date of the sale of the right to receive a conveyance of the reversion immediately after the lease begins to run.
2
This section does not apply if the lease is granted and begins to run within one month after the sale.
3
The seller is treated as—
a
entering into a transaction mentioned in section 205 (if the land is in the United Kingdom) or section 206 (if the land is outside the United Kingdom), and
b
receiving the amount calculated under subsection (5) as a result of that transaction.
4
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 estate or interest is sold.
5
The amount of the receipt is given by the formula—
E × 50 - Y50
where—
E is the amount by which the price at which the estate or interest is sold exceeds the total of—
- (a) the amount of any premium for the lease, and
- (b) the value on the date of the sale of the right to receive a conveyance of the reversion immediately after the lease begins to run, and
Y is the number of complete periods of 12 months (other than the first) comprised in the period beginning with the sale and ending with the earliest date on which under the terms of the sale the lease would fall to be granted.
6
See section 226 for some provisions which are supplementary to this section.
Pt. 4 Ch. 4 applied by 2010 c. 8, s. 436(8) (as inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 1 (with Sch. 5 paras. 27, 32-34))