Corporation Tax Act 2009 section 225

Sale and leaseback transactions

Section 225 deals with situations where a company sells property and then leases it back, treating part of the excess sale price as a taxable property business receipt.

• When a company sells an estate or interest in land on terms that provide for a lease back to the seller (or a connected person) within 50 years, and the sale price exceeds the lease premium plus the value of the reversion, 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 premium and reversion value, and Y is the number of complete 12-month periods (excluding the first) between the sale and the earliest date the lease could be granted.
• The resulting amount is taxed as a property business receipt in the accounting period in which the sale takes place, whether the property is in the United Kingdom or overseas.
• The section does not apply where the lease is actually granted and begins to run within one month of the sale.