Corporation Tax Act 2009 section 222

Assignments for profit of lease granted at undervalue

Section 222 deals with the tax treatment where a company makes a profit by assigning a short-term lease that was originally granted to it at below market value.

• Where a short-term lease was granted at an undervalue and is then assigned at a profit, the assigning company is treated as receiving a property business receipt
• The deemed receipt is the lower of the assignment profit or the undervalue (less any profits from earlier assignments of the same lease), reduced by the formula P × (50 − Y) / 50 to reflect the remaining duration of the lease
• The receipt is brought into account in the accounting period in which the consideration for the assignment becomes payable
• The amount may be further reduced if the additional calculation rule applies