Lease premium or rent?

[LOUIE]

I own a buy-to-let property (actually my former home; I now live in Australia so am non-UK resident). We have potential new tenants who want a corporate let. The suggestion is a two year lease with a break clause at 18 months and 18 months rent up front, the remainder to be paid after eighteen months if the break clause is not invoked.

Is this within the lease premium rules (as it is a two year lease)? Or does the fact that there is a break clause and only eighteen months rent is payable up front mean the lease is considered to be eighteen months for lease premium purposes? Or is it not a lease premium situation as in reality there is just rent being paid in advance? My concern is that if it is a lease premium situation the upfront rent would be taxable in full in the year of receipt which would mean tax being paid at a higher rate than if it was taxed on the accruals basis.

Also the tenants have said "As a Corporate let the company also would like to avail itself of the various tax breaks available to Corporate lets in the UK and therefore will be paying the first 18 month of the rent in advance". What are these tax breaks?

[LOUIE]

Over 300 views and no replies. Must be more complicated than I thought.

Another question then. Is rent paid in advance automatically a lease premium? The amount proposed is simply 18 (months) x the monthly amount at which the property is being advertised, followed by a further 6 x monthly advertised rent. Is this even within the lease premium rules even if it is a two year lease?

If no-one knows, can anyone recommend a specialist tax adviser? It must be a question that comes up all the time given the number of corporate lets there are out there.

[bd6759]

Rent is rent. A premium is a premium. The tenancy agreement should make it clear what is being paid.

Simply put,
A premium is a payment for the grant of a lease.
Rent is a payment for the use of the subject matter of the lease.

Rent being paid up front is not a premium.

Rent is taxable over the term of the agreement. If you receive 18 months in advance it should be apportioned over the two tax years it covers.

I cannot think what tax breaks they refer to.