Corporation Tax Act 2009 section 224

Sales with right to reconveyance

Section 224 deals with the tax treatment where a property is sold with terms requiring or allowing it to be bought back by the seller (or a connected person) at a lower price within 50 years, treating part of the price difference as a taxable property business receipt.

• Where land is sold with a right or obligation to reconvey it to the seller or a connected person within 50 years, and the sale price exceeds the reconveyance price, a taxable receipt arises
• The taxable amount is calculated using the formula E × (50 − Y) / 50, where E is the excess of the sale price over the reconveyance price, and Y is the number of complete 12-month periods (excluding the first) between the sale and the earliest reconveyance date
• This deemed receipt is brought into account as income of the seller's property business in the accounting period in which the sale takes place
• The seller is treated as carrying on a UK property business (for UK land) or an overseas property business (for non-UK land) in respect of the transaction