Income Tax (Trading and Other Income) Act 2005 section 101

Tax treatment of reverse premiums

Section 101 establishes how reverse premiums are treated for income tax purposes, classifying them as revenue receipts and determining whether they fall within trading profits or property business income.

• A reverse premium is always treated as a revenue receipt, not a capital item, for income tax purposes
• Where the recipient enters into the property transaction for the purposes of a trade they carry on or intend to carry on, the reverse premium is brought into account as a trading receipt
• Where the recipient is not a trader, the reverse premium is taxed as a property business receipt under section 311
• For arm's length transactions, normal accountancy timing rules apply; for non-arm's length transactions, a separate statutory timing rule is provided by section 102