Annex 1: Minor Changes in the Law Change 43: Property income: lease premiums etc: identifying when a company (not the landlord) takes amounts into account as a receipt in calculating the profits of a property business: sections 217, 219, 220 and 221
This change explicitly identifies the period in which a company (not being the landlord) is required to take account of a receipt which it is treated as receiving in respect of a lease premium (or an amount that is treated as a lease premium).
It brings the income tax and corporation tax codes back into line.
For corporation tax purposes, section 34(1), (4) and (5) of ICTA provide for cases in which a landlord is treated as receiving rent and also for the time at which the landlord is treated as receiving that rent. Section 34(7A) of ICTA then explicitly deals with the period in which that deemed rent must be brought into account.
If section 34(6) of ICTA applies, the landlord is not treated as receiving an amount of rent but a company (not being the landlord) is treated as receiving an equivalent amount as a receipt of a property business. Section 34(7A) of ICTA does not explicitly deal with the period in which the company (not being the landlord) must bring the equivalent amount into account. That is because section 34(7A) of ICTA is expressed in terms of amounts that section 34 of ICTA treats as rent and section 34(6) of ICTA does not expressly treat the company (not being the landlord) as receiving rent.
In practice, receipts under section 34(6) of ICTA are brought into account as if section 34(7A) of ICTA applied to them (in other words at the same time as the landlord would otherwise have had to bring them into account). Sections 217(3), 219(3), 220(3) and 221(3) reflect this practice. The same change was made for income tax in sections 277, 279, 280 and 281 of ITTOIA (see Change 69(A) in ITTOIA).
This change has no implications for the amount of income liable to tax or who is liable for tax on it. In principle it affects the timing of the tax liability but it is expected to have no practical effect as it is in line with generally accepted practice.