Introduction Overview Overview Section 851: Taxation of consideration
2520.This section taxes, as if it were income, some or all of the consideration received by the lessee. It is based on section 780(1), (3), (3A), (7) and (8) of ICTA.
2521.Subsection (1) requires an “appropriate amount” of the consideration to be found.
2522.Subsection (1)(a) refers to the assignment of the original lease. Section 1166 provides that in the application of the Act to Scotland “assignment” means assignation. This gives effect to the application of section 24(5) of ICTA by section 780(8) of that Act. Section 1166 also provides that in the application of the Act to Scotland “surrender” includes renunciation.
2523.Subsection (2) provides that the appropriate amount is not to be treated as a capital receipt.
2524.Subsection (3) defines the appropriate amount if the term of the new lease is not more than one year. Subsection (4) defines the appropriate amount if the term of the new lease is more than one year.
2525.In a case in which the term of the new lease (a) exceeds one year and (b) is not for a whole number of years, the formula in section 780(3) of ICTA does not expressly say how to deal with parts of years. Subsection (5) makes it clear that, in such a case, a part of a year is to be taken as an appropriate proportion of a year.
2526.Subsection (6) provides that the way in which the appropriate amount is treated depends on whether certain specified conditions are met.
2527.If these conditions are met, subsection (7) treats the appropriate amount as a receipt of the trade mentioned in subsection (6)(a).
2528.Subsections (6)(a) and (7) omit references to a profession and to a vocation where the source legislation refers to the carrying on by a company of a trade, profession or vocation. See the commentary on section 837 and Change 4 in Annex 1. This Change is not made in subsection (6)(b), because a person linked to L is not necessarily a corporation tax payer.
2529.If the conditions in subsection (6) are not met, subsection (8) treats the appropriate amount as chargeable to corporation tax under the charge to corporation tax on income.