Income Tax (Trading and Other Income) Act 2005 section 289

The additional calculation rule: special cases

Section 289 modifies the lease premium relief calculation under section 288 for special cases, particularly where a sub-lease covers only part of the premises subject to the original taxed lease.

• Where a sub-lease covers only part of the premises subject to the taxed lease, the basic relieving amount must be reduced proportionately by multiplying it by the fraction of the premises actually covered by the sub-lease, calculated on a just and reasonable basis.
• This partial-premises rule applies to receipts arising under sections 277 to 281 (lease premiums, sums payable instead of rent, sums for surrender, and sums for variation or waiver of lease terms), but not to section 282 (assignments for profit of leases granted at undervalue), because an assignment must always relate to the whole of the leased premises.
• The basic relieving amount cannot exceed the unused amount of the taxed receipt — this prevents the total relief claimed against a particular taxed receipt from exceeding the original taxed amount.
• The total reduction under section 288 cannot exceed the amount that was originally brought into charge on the receipt under calculation — ensuring that relief does not create a negative taxable amount.

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