Corporation Tax Act 2009 section 40

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

Section 40 provides transitional rules for how reductions previously made under the old ICTA rules for lease premiums involving superior interests are carried forward and recognised under the current CTA 2009 regime.

• Where an old ICTA pre-commencement lease premium receipt was reduced because a tax charge had already arisen on a superior lease interest, that reduction is preserved and translated into the equivalent concept under the current rules (the "taxed receipt" under Chapter 4 of Part 4 of CTA 2009).
• The amount of the old reduction is defined as the difference between the premium receipt before and after the ICTA reduction was applied, to the extent that the difference relates to the amount charged on the superior interest.
• References in the current rules to reductions by reference to the taxed receipt — specifically those in section 230(5)(a) (meaning of "unused amount") and section 235(3)(a) (limit on reductions and deductions) — are extended to include corresponding reductions that were made under the old ICTA provisions.
• The expense relief rules in sections 232 to 234 of CTA 2009 apply to old ICTA pre-commencement receipts as if they were lease premium receipts under the current regime, with the relevant receipt period being the duration of the lease (or the remaining duration at the date of assignment, as appropriate).