Income Tax (Trading and Other Income) Act 2005 section 278

Amount treated as lease premium where work required

Section 278 deals with situations where a lease obliges the tenant to carry out work on the premises, and explains how this obligation may be treated as an additional lease premium for tax purposes.

• Where a lease requires the tenant to carry out work on the premises, this obligation is treated as creating an additional premium payable to the landlord, on top of any actual premium
• The deemed premium is calculated as the increase in the value of the landlord's interest in the property attributable to the tenant's obligation to carry out the work
• Any obligation relating to "excepted work" is disregarded when calculating the deemed premium
• Work is "excepted" if the cost of carrying it out would have been a deductible expense of the landlord's property business, had the landlord rather than the tenant been required to do it