Income Tax (Trading and Other Income) Act 2005 section 306

Provisions about premiums

Section 306 sets out the rules for determining whether a payment made in connection with the granting of a tenancy is treated as a premium for the purposes of the lease premiums rules.

• Any sum paid on or in connection with granting a tenancy is presumed to be a premium unless it is rent or there is evidence of other sufficient consideration for the payment.
• The term "sum" is broadly defined to include the value of any consideration, not just cash payments.
• Where a lease is effectively replaced or linked to another lease under the duration rules in section 303, the premium paid for one lease may be treated as if it were required under the other.
• The burden falls on the taxpayer to demonstrate that a payment was made for a reason other than as a premium if they wish to displace the presumption.