What does section 282 of the Income Tax (Trading and Other Income) Act 2005 do?

Section 282 taxes profits arising when a tenant assigns a lease that was originally granted at below market value. The profit represents a disguised premium and is brought into charge to income tax as property income, counteracting a potential tax avoidance arrangement involving lease premiums under United Kingdom law.

When does section 282 not apply to lease assignments?

Section 282 does not apply to leases granted before 6th April 1963 or to leases granted under contracts entered into before 4th April 1963. This transitional exclusion under Schedule 2, paragraph 66 ensures that pre-existing leases are not caught by the assignment-for-profit charge regardless of when the assignment occurs.

Why are there two different dates in the transitional exclusion for section 282?

The two dates — 6th April 1963 for the grant of the lease and 4th April 1963 for the contract — reflect the precise commencement date of the original legislation that section 282 replicates. This distinction ensures both executed leases and contractual commitments made before the legislation took effect receive transitional protection.

Does section 282 have practical relevance today?

In practice, very few leases originally granted before April 1963 are likely still in existence and subject to assignment. However, the transitional rule remains on the statute book. Long leases such as 999-year terms granted before the relevant dates could theoretically still benefit from the exclusion if assigned for profit.

Income Tax (Trading and Other Income) Act 2005 section 282

Lease premiums: assignments for profit of lease granted at undervalue

Section 282, which deals with the tax treatment of profits made when assigning a lease that was originally granted at an undervalue, is disapplied for certain leases granted before specific dates in 1963.

Section 282 taxes profits arising when someone assigns a lease that was originally granted to them at below market value
This provision does not apply to any lease that was granted before 6th April 1963
It also does not apply to any lease granted under a contract entered into before 4th April 1963
These transitional rules ensure that leases already in existence before the original legislation took effect are not caught by the assignment-for-profit charge

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