Annex 1: Minor Changes in the Law Change 23: Trading income: reverse premiums: excluded cases: section 97
This change restores an exemption that was incorrectly removed by ITTOIA.
Paragraph 6 of Schedule 6 to FA 1999 exempted from the charge on reverse premiums a premium relating to an individual’s only or main residence. The rule was rewritten for income tax in section 100(2) of ITTOIA. Paragraph 509(5) of Schedule 1 to ITTOIA omits paragraph 6 of Schedule 6 from FA 1999 on the assumption that the exemption is not relevant for corporation tax.
But paragraph 1(1)(a) of Schedule 6 to FA 1999 caters for different persons receiving the reverse premium and entering into the transaction. So it is possible for an individual to enter into a property transaction which relates to a residence but for a (connected) company to receive the reverse premium. In such a case the exemption is relevant to companies and this change reinstates it.
This change is in taxpayers’ favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small.