Corporation Tax Act 2009 section 217

Lease premiums

Section 217 sets out how a premium received in connection with the grant of a short-term lease is taxed as a receipt of a property business.

• When a premium is paid under a short-term lease (50 years or less), the company receiving it is treated as having a property business receipt
• The taxable amount is calculated using the formula: Premium × (50 − Y) ÷ 50, where Y is the number of complete 12-month periods in the lease after the first
• The receipt is brought into account for the accounting period in which the lease is granted, within either a UK or overseas property business depending on the location of the land
• The taxable amount may be further reduced if the additional calculation rule in section 228 applies