Income Tax Act 2007 section 681BA

New lease after assignment or surrender

Section 681BA sets out the five conditions (A to E) that must all be met for the anti-avoidance rules in this Chapter to apply, targeting situations where a lessee assigns or surrenders an original lease and then obtains a new, shorter lease over the same land.

• The lessee ("L") must hold an original lease of 50 years or less and be claiming income tax relief on the rent paid under that lease (Conditions A)
• L must assign the original lease to another person or surrender it to the landlord, where the proceeds would otherwise be taxed only as capital (Condition B)
• A new lease of 15 years or less, covering all or part of the same land, must be granted or assigned to L or a person linked to L (Conditions C and D)
• Neither L nor a linked person must have had a legally or equitably enforceable right to the new lease before 22 June 1971 (Condition E); if only this condition fails, separate transitional rules in Schedule 2 to CTA 2010 and Schedule 9 to TIOPA 2010 apply instead

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