Corporation Tax Act 2009 section 243

Rules for determining effective duration of lease

Section 243 sets out three rules for determining the effective duration of a lease when calculating taxable lease premiums, recognising that the actual economic life of a lease may differ from its stated term.

• Where a lease is unlikely to continue beyond a date earlier than its stated end, and the premium reflects that shorter period, the lease is treated as ending on that earlier date.
• Where the tenant has an option to extend the lease by notice, the likelihood of that extension being exercised may be taken into account.
• Where the tenant or a connected person is or may become entitled to a further lease of the same or overlapping premises, the effective duration is adjusted accordingly under section 244.
• For the purposes of Rule 1, "premium" includes not only a conventional premium but also amounts treated as premiums where the landlord requires the tenant to carry out work, lump sums paid in lieu of rent, sums for surrender, and sums for variation or waiver of lease terms.