Income Tax (Trading and Other Income) Act 2005 section 279

Sums payable instead of rent

Section 279 deals with the tax treatment of lump sums paid by a tenant in place of all or part of the rent under a lease, where the relevant period is 50 years or less.

• Where a tenant pays a lump sum instead of rent for a period of 50 years or less, the person to whom the sum is due is treated as carrying on a property business and must bring a taxable receipt into account
• The taxable amount is calculated using the formula S × (50 − Y) ÷ 50, where S is the sum paid instead of rent and Y is the number of complete 12-month periods (excluding the first) within the period the payment covers
• The taxable receipt is recognised in the tax year in which the sum instead of rent becomes payable, and may be reduced if the additional calculation rule in section 288 applies
• If the period for which the sum is paid extends beyond the effective duration of the lease, any portion falling after the lease expires is excluded when measuring that period