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HMRC internal manual

Property Income Manual

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 themself. If this happens:

  • any person other than the landlord will be chargeable if they receive 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 they are 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.

Statute

For IT cases 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).

For CT cases the charges under CTA09/S217, CTA09/S219, CTA09/S220 and CTA09/S221 are on the person receiving the payment. The charge under CTA09/S221 is restricted to the landlord or a company which is connected with the landlord by subsection (1) (b).

The definition of “connected person” is the one in ITA07/S993 and CTA10/S1122.

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).