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Where Taxpayers and Advisers Meet

Termination of lease

Joined:Wed Aug 06, 2008 3:53 pm
Termination of lease

Postby Herbs16 » Thu Sep 12, 2019 2:02 pm

My friend owns a company which owns a property, this property leases to a shop who has terminated the 10 year lease early and they have paid a large sum to settle.

Is this whole sum taxable at 19% CT? any reliefs?

Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire

Re: Termination of lease

Postby jerome.lane » Fri Sep 13, 2019 11:39 am

Generally, where the lease is for a period of less than 50 years, the amount of the receipt is given by the formula–

(S×(50 − Y))/50

S is the sum payable instead of rent
Y is the number of complete periods of 12 months (other than the first) comprised in the period in relation to which the sum is payable.

The company could consider making pension contributions or other investments qualifying for relief to mitigate the tax payable. It depends if the company does anything else.
Jerome Lane
Tax Adviser
Telephone: 07943 005902

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