Beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Property Income Manual

Deductions: premiums paid: premises used for rental business

ITTOIA05/S292 and CTA09/S232

This page is about the relief that the payer of a chargeable premium can have in computing rental business profits. It applies when the premises are used for the purposes of a rental business, other than as a source of rents - for example as offices to run the business from.

Similar guidance on the relief for premises used for a trade, profession or vocation is at BIM46250 onwards.

Calculating the relief due

Relief is given by spreading the chargeable amount over the period of the lease and treating it as if it were rent due (in addition to any actual rent). There are two stages to working out how much relief is due.

1) Work out the chargeable amount of the premium

The chargeable amount of the premium must be calculated - that is the amount of the premium on which the recipient of the premium is taxed (or would be if they were chargeable). In the legislation this is referred to as the ‘taxed receipt’. You need to know the amount of the premium and the length of the lease. The calculation is described in PIM1205.

2) Spread the chargeable amount over the period of the lease

The chargeable amount is treated as if it were rent for the property (in addition to any actual rent) which becomes due from day to day throughout the period of the lease. This will be a deduction in computing the rental business profit.

Liaison with other offices

What to do about checking the chargeable amount of the premium with the office dealing with the landlord is covered at PIM2320.

Part only of premises used

The premium may have been paid for the premises only part of which is actually used for business. Then an appropriate fraction of the relief is due, a fraction of the ‘chargeable amount’ based on a ‘just apportionment’.

Successors in title

The relief is available provided that the lease was granted for a chargeable premium etc. If the original tenant assigns the lease to someone else, the new tenant may have relief if the premises are used for rental business purposes.

Interaction with Capital Allowances

For the ways that lease premium relief interacts with Capital Allowances see PIM2310.