Income Tax (Trading and Other Income) Act 2005 section 282

Assignments for profit of lease granted at undervalue

Section 282 deals with the tax charge that arises when a person assigns a short-term lease at a profit, where that lease was originally granted to them at less than its full market value.

• The section applies where a short-term lease was granted at an undervalue and the person who holds it then assigns it at a profit.
• The assignor is treated as carrying on a property business and receiving a taxable amount, calculated by reference to the lesser of the profit on assignment and the original undervalue (reduced by any profits on earlier assignments of the same lease).
• The taxable amount is reduced using a formula that tapers the charge over the effective duration of the lease, and may be further reduced if the additional calculation rule in section 288 applies.
• The deemed receipt is brought into account for the tax year in which the consideration for the assignment becomes payable.

---