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HMRC internal manual

Property Income Manual

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HM Revenue & Customs
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Other sums treated like premiums: Payments to a person other than the landlord

Summary

A landlord might arrange for a premium or similar payment to be made to someone other than himself. If this happens:

  • any person other than the landlord will be chargeable if he receives an actual premium, or a sum in commutation of rent or as consideration for the surrender of a lease, but
  • any person other than the landlord who receives a sum as consideration for the variation or waiver of any of the terms of a lease will be chargeable only if he is a person connected with the landlord. (So, for example, a payment by a tenant to a neighbour adversely affected by a change in the tenant’s lease is not chargeable.)

The receipt is charged as property income.

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Statute

For CT cases (and IT cases up to 2004-05) the charge on a person other than the landlord is imposed by ICTA88/S34 (6). It applies to a payment falling within ICTA88/S38 (1), (4) or (5) which is due to a person other than the landlord. The scope of this is cut down by ICTA88/S34 (7), which imposes a charge on someone other than the landlord in respect of a receipt within subsection (5) only where that person is connected with the landlord. There is no corresponding requirement for subsections (1) and (4), and a charge may be imposed under either on any recipient, whether connected with the landlord or not.

For IT cases (for 2005-06 onwards) the charges under ITTOIA05/S277, ITTOIA05/S279, ITTOIA05/S280 and ITTOIA05/S281 are on the person receiving the payment. The charge under ITTOIA05/S281 is restricted to the landlord or a person connected with the landlord by subsection (1) (b).

The definition of “connected person” is the one in ICTA88/S839.

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Chargeable amount

The chargeable amount of the receipt is calculated in the same way as a premium etc. received by the landlord. It is then treated as if it were received in the course of a rental business carried on by the recipient. If the recipient already has a rental business, it is part of the same business, not a separate one, unless it is received in a different capacity such as trustee, personal representative, partner etc. (see PIM1020).