Income Tax (Trading and Other Income) Act 2005 section 303

Lease premiums: rules for determining effective duration of lease

Section 303 (as modified by Schedule 2 paragraphs 70–71) sets out the rules for determining the effective duration of a lease for the purposes of the lease premium provisions, with different rules applying depending on when the lease was granted.

• For leases granted between 13 June 1969 and 24 August 1971, the effective duration is limited by the landlord's earliest break option, and circumstances at the date of grant are used to assess whether the lease is unlikely to run its full term.
• For leases granted before 13 June 1969, either party's break option limits the effective duration, and if the lease has already ended, the actual period from commencement to termination is taken as the effective duration.
• In all cases the rules assume that the parties act at arm's length, regardless of any actual relationship between them, and in Scotland the word "term" means "period" when referring to lease duration.
• These modified rules do not apply where the effective duration is being determined for the purposes of section 281 (sums payable for variation or waiver of lease terms).

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