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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Specific receipts: reverse premiums: meaning of ‘reverse premium’ and terms used in connection with reverse premiums

S99 Income Tax (Trading and Other Income) Act 2005, S96 Corporation Tax Act 2009

A payment or other benefit is a ‘reverse premium’ if it meets all of the following conditions and it is not one of the excluded cases at BIM41090 and BIM41140. The conditions are:

  • a person receives the payment or benefit as an inducement in connection with a transaction being entered into either by the recipient or a connected person;
  • the transaction (the ‘property transaction’) is one under which the recipient or connected person becomes entitled to an estate, interest or right in or over land; and
  • the payment or benefit is paid or provided by:

    • the person (the ‘grantor’) by whom the estate, interest or right is granted (or was granted at an earlier time);
    • a person connected with the grantor; or
    • a nominee, or person acting on the directions, of the grantor or a person connected with the grantor.

The expression ‘property transaction’ as defined above encompasses far more than the grant of a lease that is the prime target of the legislation. It includes, for example, the conveyance of a freehold, the assignment of an existing lease or the grant of an easement or licence to occupy. The width of the term is, however, considerably cut down by limiting the charge to a payment made or other benefit provided by the person who granted the interest in land. See BIM41105.

There is further guidance on:

  • the meaning of a payment or other benefit received as an inducement in BIM41075 - BIM41090,
  • freehold interests in BIM41105, and
  • assignment of a lease in BIM41110.

Terms used in connection with reverse premiums

A landlord is a person who grants a lease, and may also be known as a lessor.

A tenant is a person who takes a lease, and may also be known as a lessee.

A lease is granted when the owner of an interest in land gives someone else the right to occupy it for a fixed term. When the term comes to an end, the right granted reverts to the landlord. As long as the lease continues, the landlord’s rights are called the reversion, or the reversionary interest.

A lease is assigned when an existing tenant disposes of his right to occupy for the remaining term of the lease to a new tenant.