Income Tax (Trading and Other Income) Act 2005 section 68

Lease premiums: taking account of reductions in pre-commencement receipts

Section 68 deals with how reductions in lease premium receipts arising under the old tax rules (ICTA) are carried forward and recognised under the current ITTOIA 2005 rules, ensuring continuity of relief where a chain of leases involves a superior interest.

• Where a pre-commencement lease premium receipt was reduced under old ICTA rules by reference to a charge on a superior interest, and that charge is now treated as a "taxed receipt" under ITTOIA 2005, the old reduction continues to be recognised under the new legislation.
• The reduction is measured as the difference between the original pre-commencement receipt and the receipt after the ICTA reduction, to the extent that difference is attributable to the charge on the superior interest.
• For the purposes of calculating the "unused amount" and the limit on reductions and deductions under sections 290 and 295, pre-commencement reductions under ICTA are treated as if they were reductions under section 288 of ITTOIA 2005.
• The pre-commencement receipt is treated as a lease premium receipt for applying sections 292 to 294, with the receipt period being the duration of the lease (or remaining lease duration at assignment) as calculated under the original ICTA provisions.