Income Tax (Trading and Other Income) Act 2005 section 287

Circumstances in which additional calculation rule applies

Section 287 sets out the conditions that must be met before a tenant who is also a landlord can reduce a lease premium or similar receipt chargeable on them, where their own landlord has already been taxed on a premium or similar payment in respect of the same property.

• The additional calculation rule can reduce certain property business receipts — specifically lease premiums, sums payable instead of rent, sums for surrendering a lease, sums for varying or waiving lease terms, and profits from assigning undervalued leases.
• Condition A requires a connection to a "taxed lease" — meaning a lease on which a premium or similar sum has already been brought into account as a taxable receipt, whether for income tax or corporation tax purposes (or would have been, but for a previous application of this same reduction rule).
• Condition B requires that at least one of those earlier taxed receipts still has an "unused amount" — that is, the relief available from it has not already been fully absorbed by prior deductions or reductions.
• This rule extends relief to payments for varying or waiving lease terms, which was not available under the predecessor legislation, and introduces a structured approach to ensure that total relief given never exceeds the amount of the original taxed receipt.