Termination of lease

[Herbs16]

Hi
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?
Thanks

[jerome.lane]

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.