Income Tax (Trading and Other Income) Act 2005 section 276

Introduction

Section 276 introduces the rules on lease premiums and similar capital amounts that must be treated as taxable receipts of a property business.

• Certain capital amounts received in connection with property leases must be brought into account as income receipts when calculating property business profits, rather than being treated as capital.
• For short-term leases (those with an effective duration of 50 years or less), the rules cover lease premiums, amounts treated as premiums where the tenant is required to carry out work, sums received for surrendering a lease, and profits from assigning a lease originally granted at an undervalue.
• For any lease regardless of length, the rules also apply to sums payable instead of rent and sums payable for varying or waiving lease terms; and for any sale of an estate or interest in land, the rules cover sales with a right to reconveyance and sale and leaseback transactions.
• Tenants under certain leases may claim deductions against their own property business profits in respect of premiums that have been taxed on the landlord, though separate provisions apply where the cash basis is used.