Corporation Tax Act 2009 section 220

Sums payable for surrender of lease

Section 220 deals with the tax treatment of sums payable by a tenant as consideration for the surrender of a short-term lease, treating part of the payment as a taxable property business receipt.

• When a tenant pays a sum to surrender a short-term lease, the company receiving that sum is treated as carrying on a property business transaction and receiving a taxable amount
• The taxable receipt is calculated using the formula S × (50 − Y) / 50, where S is the surrender payment and Y is the number of complete 12-month periods (excluding the first) in the effective duration of the lease
• The resulting amount is brought into account as a receipt of the property business for the accounting period in which the surrender sum becomes payable
• The taxable amount may be reduced where the additional calculation rule applies, which provides relief in certain circumstances to avoid double counting