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HMRC internal manual

Trusts, Settlements and Estates Manual

Capital items that are income for tax purposes: premiums treated as rent


A landlord may require a premium under a lease. If the lease does not exceed 50 years, the landlord is treated as receiving rent. This is in addition to any actual rent.

Under trust law the deemed rent is capital. But, it is treated as the trustees’ income for income tax purposes. For periods to 5 April 2006 it is not liable at the special trust rate, even if the trustees are normally liable at that rate. For periods from 6 April 2006 it is liable at the special trust rate in both discretionary and non-discretionary trusts (ITA/Sections 481 and 482) but not in the case of unauthorised unit trusts, where it remains chargeable at basic rate.