665 Foreign currency securities: unrealised interest payable in foreign currency
(1) This section applies if unrealised interest is payable in a currency other than sterling (“a foreign currency”).
(2) For the purposes of section 631(1) (amount of accrued income profits where settlement day outside interest period) the amount of the unrealised interest is taken to be its sterling equivalent on the settlement day.
(3) For the purposes of sections 660 (transfers with unrealised interest: interest in default) and 661 (successive transfers with unrealised interest in default), the value on any day of the right to receive unrealised interest is the sterling equivalent on that day of that value in the foreign currency.
(4) For the purposes of those sections unrealised interest received in a foreign currency is taken to be the sterling equivalent on the day of receipt of the amount received.
(5) For the purposes of this section, the sterling equivalent of an amount or value in a foreign currency is to be calculated by reference to the London closing rate of exchange for the day concerned.
666 Certain transfers by or to nominees or trustees treated as made by or to others
(1) Transfers of securities by or to a person as nominee for another person (“A”) are treated for the purposes of this Chapter as transfers by or to A.
(2) Transfers of securities by or to a person (“T”) as trustee for another person (“B”) are treated for the purposes of this Chapter as transfers by or to B if B is absolutely entitled as against T.
(3) For the purposes of subsection (2) where T is the transferor, B is absolutely entitled as against T if immediately before the transfer B has the exclusive right to direct how the securities are to be dealt with.
(4) For the purposes of subsection (2) where T is the transferee, B is absolutely entitled as against T if immediately after the transfer B has that exclusive right.
(5) For the purposes of subsections (3) and (4), a right to direct how securities are to be dealt with is treated as an exclusive right despite being subject to satisfying any outstanding charge, lien or other right of the trustee to resort to the securities for payment of duty, taxes, costs or other outgoings.
(6) Subsection (1) applies to a transfer of securities by or to a person as nominee for two or more persons as it applies to a transfer of securities by or to a person as nominee for one person, taking the references to A as references to the two or more persons.
(7) This section applies to a transfer of securities by or to a person as trustee for two or more persons as it applies to a transfer of securities as trustee for one person, taking—
(a) the references to B as references to the two or more persons, and
(b) the references to B being absolutely entitled as references to the two or more persons being jointly absolutely entitled.
(8) The fact that a person is an infant or otherwise lacks legal capacity is to be disregarded in determining for the purposes of this section whether the person is absolutely entitled as against T.
667 Trustees' accrued income profits treated as settlement income
(1) If the trustees of a settlement are treated as making qualifying accrued income profits, those profits are to be taken to be income arising under the settlement for the purposes of Chapter 5 of Part 5 of ITTOIA 2005 (settlements: amounts treated as income of settlor).
(2) Subsection (3) applies if the trustees of a settlement—
(a) are non-UK resident ... throughout a tax year in which an interest period or part of an interest period falls, and
(b) would have been treated as making an amount or an additional amount of qualifying accrued income profits in the interest period if the trustees had been UK resident ... during a part of each such tax year.
(3) The amount or additional amount of qualifying accrued income profits that the trustees would have been treated as making is to be taken to be income arising under the settlement for the purposes of Chapter 5 of Part 5 of ITTOIA 2005.
(4) In this section—
(a) “qualifying accrued income profits” means accrued income profits which are treated as made—
(i) under section 628(5), or
(ii) under section 630(2) in respect of a transfer of variable rate securities, and
(b) in any case where there are no trustees of a settlement, references to such trustees are to any persons entitled to securities comprised in the settlement.
(5) In the case of qualifying accrued income profits within subsection (4)(a)(ii)—
(a) the reference in subsection (2)(a) to an interest period is to the period—
(i) beginning with the day after the last day of the only or last interest period of the securities, and
(ii) ending with the settlement day, and
(b) the reference in subsection (2)(b) to making qualifying accrued income profits in the interest period is to be read as making them in the tax year in which settlement day falls.
668 Relief for unremittable transfer proceeds: general
(1) This section applies if—
(a) a person is liable for income tax on accrued income profits,
(b) the profits are calculated by reference to payments treated as made to the person in an interest period,
(c) the payments are so treated as a result of the person making transfers of foreign securities of a particular kind, and
(d) the proceeds of the transfers are unremittable in the tax year.
(2) If the person makes a claim for relief under this section—
(a) the profits are reduced by the amount of the payments treated as made to the person, or
(b) if that amount exceeds the profits, the profits are reduced to nil.
(3) But see section 670 (withdrawal of relief).
(4) In this section and section 669 “foreign securities” means securities which are situated outside the United Kingdom.
(5) For the purposes of this section and sections 669 and 670, proceeds of transfers of foreign securities are unremittable in relation to a person if the person is prevented from transferring them to the United Kingdom because of—
(a) the laws of the territory where the securities are situated,
(b) executive action of its government, or
(c) the impossibility of obtaining there currency that could be transferred to the United Kingdom.
(6) For the purposes of this section the place where securities are situated is to be determined in accordance with sections 275(1) and (2)(b) and 275C of TCGA 1992.
(7) Any claim under this section must be made not more than 4 years after the end of the tax year for which the profits would be chargeable to tax if no claim were made.
(8) A person's personal representatives may make any claim under this section which the person might have made.
669 Relief for unremittable transfer proceeds: section 630 profits
(1) This section applies if—
(a) a person is liable for income tax on accrued income profits within section 630(2) (making accrued income profits: settlement day outside interest period),
(b) the person is so liable as a result of making transfers of foreign securities of a particular kind, and
(c) the proceeds of the transfers are unremittable in the tax year.
(2) If the person makes a claim for relief under this section the profits are reduced to nil.
(3) But see section 670 (withdrawal of relief).
(4) Any claim under this section must be made not more than 4 years after the end of the tax year for which the profits would be chargeable to tax if no claim were made.
(5) A person's personal representatives may make any claim under this section which the person might have made.
(1) This section applies if—
(a) a claim under section 668(2) or 669(2) has been made in relation to profits, and
(b) the proceeds of the transfers cease to be unremittable.
(2) The claimant is treated as making accrued income profits of an amount equal to the reduction under that section.
(3) If the claimant has died, the claimant's personal representatives are so treated.
(1) This section applies if—
(a) accrued income profits are made by an individual as a result of a transfer of foreign securities, and
(b) section 809B, 809D or 809E (remittance basis) applies to the individual for the tax year in which the profits are made.
(2) Treat the accrued income profits as relevant foreign income of the individual.
(3) For the purposes of Chapter A1 of Part 14 (remittance basis)—
(a) if the individual is the transferor—
(i) treat any consideration for the transfer as deriving from the accrued income profits, and
(ii) if on the transfer the individual does not receive consideration of an amount equal to (or exceeding) the market value of the securities, treat the securities as deriving from the accrued income profits, and
(b) if the individual is the transferee, treat the securities as deriving from the accrued income profits.
(4) For the purposes of this section securities are “foreign” if income from them would be relevant foreign income.
(1) In this Chapter “interest” includes dividends and any other return (however described).
(2) But it does not include a return consisting of the difference between the amount payable on a security's redemption and its issue price.
(1) In this Chapter “interest payment day”, in relation to securities of any kind, means a day on which interest on those securities is payable.
(2) If a particular payment of interest may be made on one of a number of days, the first of them is the interest payment day.
(1) The general rule is that for the purposes of this Chapter—
(a) the first interest period of securities of any kind begins with the day after that on which those securities are first issued and ends with the first interest payment day or, if it is earlier, the expiry of 12 months, and
(b) any other interest period of those securities begins with the day after the last day of their previous interest period and ends with the next interest payment day or, if it is earlier, the expiry of 12 months.
(2) Subsection (1) is subject to subsections (3) and (4).
(3) The last interest period of securities of any kind ends with the last interest payment day for those securities, unless subsection (4) applies.
(4) An interest period of securities of any kind in which either of the events specified in subsection (5) occurs is treated as ending on the day on which it would have ended apart from that event.
(5) The events are—
(a) a conversion of those securities, and
(b) if those securities are gilt-edged securities, the exchange of those securities for strips of those securities.
(6) In this section “strip” has the meaning given by section 444 of ITTOIA 2005.
(7) See also section 667(5) (construction of reference to “interest period” in section 667(2)).
(1) For the purposes of this Chapter the settlement day for a transfer of securities in accordance with the rules of a recognised market is—
(a) the day on which the transferee agrees to settle, or
(b) if the transferee may settle on one of a number of days, the day on which settlement actually occurs.
(2) The settlement day for a transfer of securities which is not in accordance with such rules is determined in accordance with subsection (3), (4) or (6) (and see also section 649(6): settlement day where new securities issued with extra return).
(3) If—
(a) the consideration for the transfer is money alone, and
(b) the transferee agrees to pay the whole of it on or before the first interest payment day after an agreement for the transfer is made,
the settlement day is the day on which the transferee agrees to make the payment or, if payment may be made on one of a number of days, or on a number of different days, the latest of them.
(4) If—
(a) there is no consideration for the transfer, or
(b) the transfer is a transfer because of a provision specified in subsection (5),
the settlement day is the day on which the securities are transferred.
(5) The provisions are—
section 620(1)(b) or (c) (conversion, or redemption of variable rate securities),
section 648(1) or (3) (exchanges relating to strips of gilt-edged securities),
section 650 (trading stock appropriations etc),
section 651 (owner becoming entitled to securities as trustee), and
section 652 (securities ceasing to be held on charitable trusts).
(6) If neither subsection (3) nor (4) applies, the settlement day is such day as an officer of Revenue and Customs decides.
(7) On any appeal that is notified to the tribunal, the jurisdiction of the tribunal includes jurisdiction to affirm or replace such a decision.
(1) For the purposes of this Chapter, a person holds securities—
(a) at a particular time if the person is entitled to them at that time, and
(b) on a particular day if the person is entitled to them throughout that day or becomes and does not cease to be entitled to them on that day.
(2) A person acquires securities when the person becomes entitled to them.
(3) If a Scottish partnership carries on a trade or business—
(a) any partnership dealings are treated as dealings by the partners and not by the partnership as such, and
(b) the partners are treated as being entitled to securities held by the partnership.
(1) If the interest on securities is expressed to be payable by reference to a given value, for the purposes of this Chapter their nominal value is that value.
(2) In any other case, the nominal value of securities for those purposes is their price when they were issued.
(3) See section 677 if the nominal value of the securities is expressed in a currency other than sterling.
(1) If the nominal value of securities is expressed in a currency other than sterling (“a foreign currency”), for the purposes of this Chapter their nominal value on any day is taken to be the sterling equivalent on that day of that value.
(2) For the purposes of this section, the sterling equivalent of a value in a foreign currency is to be calculated by reference to the London closing rate of exchange for the day concerned.
678 Exemptions relating to interest on securities: preliminary
(1) This Chapter confers exemptions relating to interest on securities.
(2) Expressions used in this Chapter and in Chapter 2 have the same meaning as in that Chapter.
(3) Accordingly, for the meanings of the following expressions see the sections indicated—
“interest” see section 671,
“interest payment day” see section 672,
“interest period” see section 673,
“makes accrued income losses” see section 628(6),
“securities” see section 619,
“transfer with unrealised interest” see section 625(1),
“transferee” see section 621,
“transfer” see section 620, and
“unrealised interest” see section 625(2).
(4) Section 666 (certain transfers by or to nominees or trustees treated as made by or to others) applies for the purposes of this Chapter as it applies for the purposes of Chapter 2.
679 Interest on securities involving accrued income losses: general
(1) This section applies if—
(a) a person is liable for income tax on interest on securities of any kind which is due at the end of an interest period of the securities,
(b) in that period accrued income losses are made as a result of transfers of those securities, and
(c) the period ends with an interest payment day.
(2) No liability to income tax arises in respect of the interest to the extent that it does not exceed the losses.
(3) If, apart from this subsection, a person would be entitled to the exemption under this section in more than one tax year, the person is so entitled only in the tax year in which the interest period ends.
(4) For cases where the interest period does not end with an interest payment day, see section 637 (accrued income losses treated as payments in next interest period).
680 Interest on securities involving accrued income losses: foreign trustees
(1) This section applies if—
(a) the trustees of a settlement are non-UK resident ... throughout a tax year in which an interest period or part of an interest period of securities falls,
(b) the trustees' income is or includes interest from those securities,
(c) the interest falls due at the end of that interest period, and
(d) had the trustees been UK resident ... during a part of each such tax year the interest would have been wholly or partly exempt from income tax under section 679.
(2) No liability to income tax arises as a result of Chapter 5 of Part 5 of ITTOIA 2005 (settlements: amounts treated as income of settlor) in respect of so much of the interest as would have been exempt from income tax under section 679.
(3) For cases where the interest period does not end with an interest payment day, see section 637 (accrued income losses treated as payments in next interest period).
681 Unrealised interest received by transferee after transfer
(1) This section applies if—
(a) securities are transferred with unrealised interest,
(b) the transferee is not an excluded transferee in relation to the transfer for the purposes of Chapter 2 (see sections 638 to 647),
(c) the transferee receives some or all of the unrealised interest, and
(d) apart from this section, the transferee would be liable to income tax on the unrealised interest.
(2) No liability to income tax arises in respect of the unrealised interest received by the transferee, unless conditions A and B are met.
(3) Condition A is that section 660 (transfers with unrealised interest: interest in default) applies on the transfer.
(4) Condition B is that the unrealised interest received by the transferee exceeds the residual value of the interest.
(5) In this section “the residual value of the interest” means—
(a) the value on the day of the transfer of the right to receive the unrealised interest, less
(b) the total amount of any of that unrealised interest received previously by the transferee.
(6) If conditions A and B are met, no liability to income tax arises in respect of the unrealised interest to the extent that it does not exceed the residual value of the interest.
(7) Section 665 (foreign currency securities: unrealised interest payable in foreign currency) applies for the purposes of this section as it applies for the purposes of sections 660 and 661.
This Chapter provides that in certain circumstances where a transfer is made regarding land, and the transferor or an associate becomes liable to make a payment connected with the land, income tax relief for the payment is restricted.
681AA Transferor or associate becomes liable for payment of rent
(1) Section 681AD has effect if—
(a) land, or an estate or interest in land, is transferred,
(b) the transferor, or a person associated with the transferor, becomes liable to make a payment of rent under a lease of the land or part of it, and
(c) a deduction by way of relevant income tax relief (see section 681AC) is allowed for the payment.
(2) Section 681AE has effect if—
(a) land, or an estate or interest in land, is transferred,
(b) the transferor, or a person associated with the transferor, becomes liable to make a payment of rent under a lease of the land or part of it, and
(c) a relevant deduction from earnings (see section 681AC) is allowed for the payment.
(3) The reference in subsection (1)(a) or (2)(a) to a transfer of an estate or interest in land includes a reference to any of the following—
(a) the granting of a lease or another transaction involving the creation of a new estate or interest in the land,
(b) the transfer of the lessee's interest under a lease by surrender or forfeiture of the lease, and
(c) a transaction or series of transactions affecting land or an estate or interest in land, such that some person is the owner or one of the owners before and after the transaction or transactions but another person becomes or ceases to be one of the owners.
(4) In relation to a transaction or series of transactions mentioned in subsection (3)(c), a person is to be regarded as a transferor for the purposes of this Chapter if the person—
(a) is an owner before the transaction or transactions, and
(b) is not the sole owner afterwards.
(5) The liability mentioned in subsection (1)(b) or (2)(b) is one resulting from—
(a) a lease, of the land or part of it, granted (at the time of the transfer or later) by the transferee to the transferor, or
(b) another transaction or series of transactions affecting the land or an estate or interest in it.
(6) The liability mentioned in subsection (1)(b) or (2)(b) is one arising at the time of the transfer or later.
(7) The reference in subsection (1)(a) or (2)(a) to a transfer does not include a transfer on or before 14 April 1964.
681AB Transferor or associate becomes liable for payment other than rent
(1) Section 681AD has effect if—
(a) land, or an estate or interest in land, is transferred,
(b) the transferor, or a person associated with the transferor, becomes liable to make a payment which is not rent under a lease but is otherwise connected with the land or part of it (whether it is a payment under a rentcharge or under some other transaction), and
(c) a deduction by way of relevant income tax relief (see section 681AC) is allowed for the payment.
(2) Section 681AE has effect if—
(a) land, or an estate or interest in land, is transferred,
(b) the transferor, or a person associated with the transferor, becomes liable to make a payment which is not rent under a lease but is otherwise connected with the land or part of it (whether it is a payment under a rentcharge or under some other transaction), and
(c) a relevant deduction from earnings (see section 681AC) is allowed for the payment.
(3) The reference in subsection (1)(a) or (2)(a) to a transfer of an estate or interest in land includes a reference to any of the following—
(a) the granting of a lease or another transaction involving the creation of a new estate or interest in the land,
(b) the transfer of the lessee's interest under a lease by surrender or forfeiture of the lease, and
(c) a transaction or series of transactions affecting land or an estate or interest in land, such that some person is the owner or one of the owners before and after the transaction or transactions but another person becomes or ceases to be one of the owners.
(4) In relation to a transaction or series of transactions mentioned in subsection (3)(c), a person is to be regarded as a transferor for the purposes of this Chapter if the person—
(a) is an owner before the transaction or transactions, and
(b) is not the sole owner afterwards.
(5) The liability mentioned in subsection (1)(b) or (2)(b) is one resulting from a transaction or series of transactions affecting the land or an estate or interest in it.
(6) The liability mentioned in subsection (1)(b) or (2)(b) is one arising at the time of the transfer or later.
(7) The reference in subsection (1)(a) or (2)(a) to a transfer does not include a transfer on or before 14 April 1964.
681AC Relevant income tax relief and relevant deduction from earnings
(1) For the purposes of this Chapter each of the following is a deduction by way of relevant income tax relief—
(a) a deduction in calculating profits or losses of a trade, profession or vocation for income tax purposes,
(b) a deduction in calculating the profits of a UK property business for income tax purposes, and
(c) a deduction in calculating any loss for which relief is given under section 152 (losses from miscellaneous transactions), or in calculating profits or other income or gains chargeable to income tax under or by virtue of any provision to which section 1016 applies.
(2) For the purposes of this Chapter each of the following is a relevant deduction from earnings—
(a) a deduction under section 336 of ITEPA 2003 (expenses), and
(b) a deduction from earnings in calculating losses in an employment for income tax purposes.
681AD Relevant income tax relief: deduction not to exceed commercial rent
(1) The rules in subsection (3) apply to the calculation of the deduction by way of relevant income tax relief allowed in a relevant period—
(a) for the non-excluded element of the payment within section 681AA(1) or 681AB(1), or
(b) if there are two or more such payments, for the non-excluded elements of those payments.
(2) For the purposes of this section—
(a) in relation to a deduction within section 681AC(1)(a) “relevant period” means—
(i) a period of account of the trade, profession or vocation concerned, or
(ii) if no accounts of the trade, profession or vocation are drawn up for a period, ... a tax year,
(b) in relation to a deduction within section 681AC(1)(b) or (c) “relevant period” means—
(i) a period of account of the business or person concerned, or
(ii) if no accounts of the business are drawn up for a period or the person does not draw up accounts for a period, a tax year, and
(c) the non-excluded element of a payment is the element of the payment not excluded under section 681AI (service charges etc).
(3) The rules are—
Rule 1 —meaning of amount E For any relevant period, amount E (which may be nil) is the expense or total expenses to be brought, in accordance with generally accepted accounting practice, into account in the period in respect of—
the non-excluded element of the payment, or
the non-excluded elements of the payments.
Rule 2 — calculations For every relevant period—
calculate the total of amount E for the period and amount E for every previous relevant period ending on or after the date of the transfer mentioned in section 681AA(1)(a) or 681AB(1)(a),
calculate the total of the deductions by way of relevant income tax relief for every previous relevant period ending on or after the date of that transfer, and
subtract the total at (b) from the total at (a) to give the cumulative unrelieved expenses for the period.
Rule 3 — meaning of post-spread period A relevant period is a post-spread period if for that relevant period, and every later relevant period, there are no payments within section 681AA(1) or 681AB(1).
Rule 4 — the deduction allowed in a relevant period If a relevant period is not a post-spread period, the deduction allowed for the period is equal to the cumulative unrelieved expenses for the period, but is the commercial rent for the period if that is less (see section 681AJ or 681AK).
Rule 5 — relevant periods in which no deduction allowed If a relevant period is a post-spread period, no deduction is allowed for the period.
681AE Deduction from earnings not to exceed commercial rent
(1) Subsection (3) applies to the calculation of the relevant deduction from earnings allowed for the non-excluded element of the payment within section 681AA(2) or 681AB(2).
(2) For the purposes of this section the non-excluded element of a payment is the element of the payment not excluded under section 681AI (service charges etc).
(3) The deduction must not exceed the commercial rent for the period for which the payment is made (see section 681AJ or 681AK).
(1) This section applies if—
(a) section 681AE has effect, and
(b) conditions A and B are met.
(2) Condition A is that under section 681AE part of a payment which would otherwise be allowed as a relevant deduction from earnings is not allowed.
(3) Condition B is that one or more later payments are made, by the transferor or a person associated with the transferor, under—
(a) the lease (if section 681AE has effect because of section 681AA(2)), or
(b) the rentcharge or other transaction mentioned in section 681AB(2)(b) (if section 681AE has effect because of section 681AB(2)).
(4) The part of the payment mentioned in subsection (2) may be carried forward and treated for the purposes of a relevant deduction from earnings as if it were made—
(a) when the next of the later payments is made, and
(b) for the period for which that later payment is made.
(5) So far as a part of a payment carried forward under this section is not allowed as a relevant deduction from earnings, it may be carried forward again under this section.
(1) This section applies for the purposes of section 681AE.
(2) If more than one payment is made for the same period, the payments must be taken together.
(3) If payments are made for periods which overlap—
(a) the payments must be apportioned, and
(b) the apportioned payments which belong to the common part of the overlapping periods must be taken together.
(4) References in subsections (2) and (3) to payments include references to parts of payments which under section 681AF are treated as if made later than they were made.
(1) This section applies for the purposes of sections 681AE to 681AG.
(2) For the purposes of this section the relevant year, in relation to a payment, is the year which begins with the date it is made.
(3) If a payment is made for a period all of which is after the relevant year, it must be treated as made for the relevant year.
(4) If a payment is made for a period part of which is after the relevant year, it must be treated as if a corresponding part of it was made for the relevant year (and no part for a later period).
(1) This section applies for the purposes of sections 681AD and 681AE.
(2) A payment must be excluded so far as it is in respect of any of the following—
(a) services,
(b) the use of relevant assets, and
(c) rates usually borne by the tenant.
(3) The amount excluded must be just and reasonable.
(4) If a lease or agreement contains provisions fixing the payments or parts of payments which are in respect of services or the use of assets, those provisions are not conclusive.
(5) A relevant asset is any description of property or rights other than land or an interest in land.
681AJ Commercial rent: comparison with rent under a lease
(1) Subsection (3) applies—
(a) for the purpose of making a comparison under rule 4 of section 681AD(3) if section 681AD has effect because of section 681AA(1), and
(b) for the purpose of making a comparison under section 681AE(3) if section 681AE has effect because of section 681AA(2).
(2) In this section “the actual lease” means the lease mentioned in section 681AA(1)(b) or (2)(b).
(3) The commercial rent is the rent which might be expected to be paid under a lease, of the land in respect of which the payment mentioned in section 681AA(1)(b) or (2)(b) is made, which—
(a) was negotiated in the open market when the actual lease was created,
(b) is of the same duration as the actual lease,
(c) is subject to the terms and conditions of the actual lease as respects liability for maintenance and repairs, and
(d) provides for rent payable at uniform intervals and at an appropriate rate.
(4) Rent is payable at an appropriate rate if—
(a) it is payable at a uniform rate, or
(b) in a case where the rent payable under the actual lease is rent at a progressive rate (and such that the amount of rent payable for a year is never less than the amount payable for a previous year), it progresses by gradations proportionate to those provided by the actual lease.
681AK Commercial rent: comparison with payments other than rent
(1) Subsection (2) applies—
(a) for the purpose of making a comparison under rule 4 of section 681AD(3) if section 681AD has effect because of section 681AB(1), and
(b) for the purpose of making a comparison under section 681AE(3) if section 681AE has effect because of section 681AB(2).
(2) The commercial rent is the rent which might be expected to be paid under a lease, of the land in respect of which the payment mentioned in section 681AB(1)(b) or (2)(b) is made, which—
(a) was negotiated in the open market when the rentcharge or other transaction mentioned in section 681AB(1)(b) or (2)(b) was effected,
(b) is a tenant's repairing lease, and
(c) is of an appropriate duration.
(3) A tenant's repairing lease is a lease where the lessee is under an obligation to maintain and repair the whole (or substantially the whole) of the premises comprised in the lease.
(4) To see whether a lease is of an appropriate duration, take the period over which payments are to be made under the rentcharge or other transaction, and—
(a) if that period is 200 years or more (or the obligation to make the payments is perpetual) an appropriate duration is 200 years, or
(b) if that period is less than 200 years, an appropriate duration is the same duration as that period.
(1) This section applies for the purposes of this Chapter.
(2) A reference to a lease includes a reference to any of the following—
(a) an underlease, sublease, tenancy or licence, and
(b) an agreement for a lease, underlease, sublease, tenancy or licence, and
(c) in the case of land outside the United Kingdom, an interest corresponding to a lease (as defined here).
(3) A reference to rent includes a reference to any payment under a lease.
(4) A reference to rent under a lease includes a reference to expenses which the tenant under the lease is treated as incurring in respect of the land subject to the lease under any of—
(a) sections 61 to 67 of ITTOIA 2005 (land occupied for trade purposes), and
(b) sections 292 to 297 of that Act (taxed leases).
(5) Expenses within subsection (4) must be treated as having been paid as soon as they were incurred.
(1) This section applies for the purposes of this Chapter.
(2) The following persons are associated with one another—
(a) the transferor in an affected transaction and the transferor in another affected transaction, if the two persons are acting in concert or if the two transactions are in any way reciprocal, and
(b) any person who is an associate of either of those associated transferors.
(3) Two or more bodies corporate are associated with one another if they participate in, or are incorporated for the purposes of, a scheme—
(a) for the reconstruction of any body or bodies corporate, or
(b) for the amalgamation of any two or more bodies corporate.
(4) Persons are associated with one another if they are associates as defined in section 681DL (relatives, settlements, persons controlling bodies, joint owners etc).
(5) In subsection (2) “affected transaction” means a transaction within—
(a) section 681AA(1) or (2) or 681AB(1) or (2), or
(b) section 835(1) or (2) or 836(1) or (2) of CTA 2010.
In the case of land outside the United Kingdom, expressions in this Chapter relating to interests in land and their disposition must be taken to relate to corresponding interests and dispositions.
(1) This Chapter provides that in certain circumstances where a lease of land is assigned or surrendered and another lease is granted or assigned—
(a) consideration received for the assignment or surrender of the first lease is taxed as a receipt of a trade, profession or vocation or charged to income tax, and
(b) tax relief is allowed for rent under the other lease.
(2) The Chapter provides that in certain circumstances where a lease is varied it is treated as surrendered and another lease is treated as granted.
(1) This Chapter has effect if each of conditions A to E is met.
(2) Condition A is that—
(a) a person (“L”) is a lessee of land under a lease which has 50 years or less to run (“the original lease”), and
(b) L is entitled in respect of the rent under the original lease to a deduction by way of relevant income tax relief.
(3) Condition B is that—
(a) L assigns the original lease to another person or surrenders it to L's landlord, and
(b) the consideration for the assignment or surrender would not (apart from this Chapter) be taxable except as capital in L's hands.
(4) Condition C is that—
(a) another lease (“the new lease”) is granted, or assigned, to L or a person linked to L, and
(b) the new lease is for a term of 15 years or less.
(5) Condition D is that the new lease—
(a) is of all or part of the land which was the subject of the original lease, or
(b) includes all or part of the land which was the subject of the original lease.
(6) Condition E is that neither L nor a person linked to L had, before 22 June 1971, a right enforceable at law or in equity to the grant of the new lease.
(7) If each of conditions A to D is met but condition E is not met, see the relevant provisions in Schedule 2 to CTA 2010 and Schedule 9 to TIOPA 2010.
(1) An appropriate amount must be found under subsection (3) or (4) of—
(a) the consideration received by L for the assignment or surrender, or
(b) each instalment of the consideration (if it is paid in instalments).
(2) For the purposes of the Income Tax Acts the appropriate amount must be treated in accordance with subsections (6) to (8) and not as a capital receipt.
(3) If the term of the new lease is one year or less, the appropriate amount of the consideration or instalment is the whole of it.
(4) If the term of the new lease is more than one year, the appropriate amount of the consideration or instalment is the proportion of it found by the formula—
16—N15
(5) In subsection (4) N is the term of the new lease expressed in years (taking part of a year as an appropriate proportion of a year).
(6) The way the appropriate amount must be treated depends on whether the following conditions are met—
(a) the consideration is received by L in the course of a trade, profession or vocation, and
(b) the rent payable by L, or a person linked to L, under the new lease is allowable as a deduction in calculating profits or losses of a trade, profession or vocation for tax purposes.
(7) If the conditions are met the appropriate amount must be treated as a receipt of the trade, profession or vocation mentioned in subsection (6)(a).
(8) If the conditions are not met the appropriate amount must be treated as an amount chargeable to income tax.
(9) If income tax is charged under subsection (8)—
(a) it must be charged on the proportion of the appropriate amount arising in the tax year,
(b) the person liable for the tax is L, and
(c) the amount charged must be treated for income tax purposes as an amount of income.
681BC Position where new lease does not include all original property
(1) This section applies for the purposes of section 681BB if the property which is the subject of the new lease does not include all the property which was the subject of the original lease.
(2) The consideration received by L must be treated as reduced to the portion of it found under subsection (3).
(3) The portion is that which is reasonably attributable to such part of the original property as—
(a) consists of the property which is the subject of the new lease, or
(b) is included in the property which is the subject of the new lease.
(4) The original property is the property which was the subject of the original lease.
(1) This section applies if the rent under the new lease is payable by a person within the charge to income tax.
(2) This section also applies if—
(a) Chapter 2 of Part 19 of CTA 2010 (provision for corporation tax corresponding to this Chapter) has effect, and
(b) the rent under the new lease is payable by a person within the charge to income tax.
(3) The provisions of ITTOIA 2005 providing for deductions or allowances by way of income tax relief in respect of payments of rent apply in relation to the rent under the new lease.
(4) In subsection (2), and in subsection (3) as applied by subsection (2), references to the new lease and rent are to be read as in Chapter 2 of Part 19 of CTA 2010.
(1) Sections 681BF to 681BH treat the new lease as ending in certain circumstances for the purposes of this Chapter.
(2) If any of those provisions apply in a given case, and the new lease is treated as ending on different dates, it must be treated as ending on the earlier or earliest of them.
(1) If the rent for a relevant period exceeds the rent for the following comparable period, the term of the new lease must be treated as ending on the date when the relevant period ends.
(2) For the purposes of this section—
(a) a relevant period is a rental period of the new lease ending before its fifteenth anniversary,
(b) the following comparable period (in relation to a relevant period) is the rental period which is of the same duration as the relevant period and which begins on the day following the end of the relevant period,
(c) the rent for a period is the total rent payable under the new lease in respect of the period,
(d) a rental period is a period in respect of which a payment of rent is to be made, and
(e) the fifteenth anniversary of the new lease is the fifteenth anniversary of the date on which its term begins.
(3) For the purposes of this section—
(a) all rental periods of a quarter must be treated as being of the same duration, and
(b) all rental periods of a month must be treated as being of the same duration.