Section 681BB: Taxation of consideration
998.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), (3B), (3C), (7) and (8) of ICTA.
999.Subsection (1) requires an “appropriate amount” of the consideration to be found.
1000.Subsection (1)(a) refers to the assignment of the original lease. Section 1008 of ITA provides that in Scotland “assignment” means assignation, and thus gives effect to the application of section 24(5) of ICTA by section 780(8) of that Act. Section 1008 of ITA also provides that in Scotland “surrender” includes renunciation.
1001.Subsection (2) provides that the appropriate amount is not to be treated as a capital receipt.
1002.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.
1003.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.
1004.Subsection (6) provides that the way in which the appropriate amount is treated depends on whether certain specified conditions are met.
1005.If these conditions are met, subsection (7) treats the appropriate amount as a receipt of the trade, profession or vocation mentioned in subsection (6)(a).
1006.If the conditions in subsection (6) are not met, subsection (8) treats the appropriate amount as chargeable to income tax.
1007.Subsection (9) quantifies the amount charged, specifies the person liable and treats the amount charged as income.