Section 851 — Corporation Tax Act 2010: Taxation of consideration

Taxation of consideration 851 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 Corporation 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 - N 15 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, 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 mentioned in subsection (6)(a).

8 If the conditions are not met the appropriate amount must be treated as an amount chargeable to corporation tax under the charge to corporation tax on income.