Annex 1: Minor Changes in the Law Change 46: Property income: lease premiums etc: additional calculation rule may reduce receipts in respect of sums payable for variation or waiver of a term of a lease: sections 221, 227, 228, 229 and 234
This change permits reductions, under the additional calculation rule, in arriving at the amount of a property business receipt arising in relation to the variation or waiver of a term of a lease.
It brings the income tax and corporation tax codes back into line.
Section 37(2) of ICTA (the additional calculation rule) permits a reduction, in certain cases, in arriving at the amount of a property business receipt that would otherwise be given by section 34 or 35 of ICTA. Section 37(2) of ICTA applies if:
Where section 34(5) of ICTA gives rise to a property business receipt the receipt arises in respect of:
	the variation or waiver of any of the terms of a lease
So section 37(2) of ICTA does not appear to allow a reduction in arriving at a property business receipt arising because of section 34(5) of ICTA (amount in respect of variation or waiver). But, in practice, such a reduction is allowed.
Sections 221(5), 227(1) and (3), 228(2), 229(2) and 234(1) and (2) explicitly provide for a reduction in the calculation of a receipt under section 221 (sums payable for variation or waiver of terms of lease). The same change was made for income tax in sections 281, 287, 288, 289 and 294 of ITTOIA (see Change 71 in ITTOIA).
Section 295 of ITTOIA (as amended by Schedule 1 to this Act) and section 235 place a cap on the total amount of relief that can be obtained by reference to a taxed receipt. So if, as a result of this change, the relief to which a company is entitled is increased, this may reduce the amount of relief subsequently available to other persons under Chapter 4 of Part 3 of ITTOIA or under Chapter 4 of Part 4 of this Act.
This change is adverse to some taxpayers and favourable to others in principle. But it is expected to have no practical effect as it is in line with generally accepted practice.