Introduction Agreement for lease
9.Paragraph 6 changes the rules that apply when an agreement for lease is substantially performed before the lease itself (“the actual lease”) is granted. The current rules are contained in paragraph 12A and 19 of Schedule 17A. Paragraph 19 makes provision for leases (or, where appropriate, missives of let) in Scotland.
10.Paragraph 12A applies where, before a lease is granted, an agreement for lease is entered into and the agreement is substantially performed. The agreement is treated as the grant of a lease beginning on the date of substantial performance. If the transaction is notifiable, a return has to be submitted, and any tax chargeable paid, within 30 of the date of substantial performance. When the actual lease is granted, the notional lease is treated as surrendered and the actual lease is treated as if it were granted in consideration of the surrender of the notional lease. A second return is required for the actual lease. Relief is available for any period of overlap between the notional and actual leases.
11.Paragraph 6(2) replaces paragraph 12A(3) with a new paragraph 12A(3) and inserts new paragraphs 12A(3A) and 12A(3B).
12.The new paragraph 12A(3) provides that, where an agreement for lease has been substantially performed and a lease is subsequently granted, the notional lease is treated as a lease granted on the day of substantial performance, for a term beginning on that day and ending at the end of term of the actual lease. The consideration for the lease is the total rent (and any other consideration) payable over its term.
13.The new paragraph 12A(3A) provides that, where paragraph 12A(3) applies, the actual lease is disregarded except for the purposes of section 81A of FA 2003. Section 81A requires a return, or further return, to be submitted when a transaction is linked with an earlier transaction and the effect of the later transaction is that the earlier transaction becomes notifiable or there is any additional tax to pay.
14.The new paragraph 12A(3B) provides that the notional and actual leases are linked for purposes of section 81A and that, if there is any additional tax to pay, it is lessee under the actual lease who must submit a further return and pay the tax.
15.Paragraph 6(3) replaces paragraphs 19(2) and (4) of Schedule 17A with new paragraphs 19(2), 19(2A), 19(2B), 19(4), 19(4A) and 19(4B). These make similar provisions for Scotland.