Section 66 | Restrictions on section 63 expenses: lease premium receipts

(1)This section applies if a lease has been granted out of the taxed lease and—

(a)in calculating the amount of a receipt of a property business under Chapter 4 of Part 4 (profits of property businesses: lease premiums etc) in respect of the lease, there is a reduction under section 228 (the additional calculation rule) by reference to the taxed receipt, or

(b)in calculating the amount of a receipt of a property business under Chapter 4 of Part 3 of ITTOIA 2005 (profits of property businesses: lease premiums etc) in respect of the lease, there is a reduction under section 288 of that Act (the additional calculation rule) by reference to the taxed receipt.

In this section and section 67 the receipt that is so reduced is referred to as a “lease premium receipt”.

(2)Subsections (3) to (5) provide for the application of section 63 as a result of section 65 for a qualifying day that falls within the receipt period of the lease premium receipt.

(3)The tenant under the taxed lease is treated as incurring an expense under section 63 as a result of section 65 for the qualifying day by reference to the taxed receipt only if the daily amount of the taxed receipt exceeds the daily reduction of the lease premium receipt.

(4)If the condition in subsection (3) is met, the amount of that expense for the qualifying day by reference to the taxed receipt is equal to that excess.

(5)If the qualifying day falls within the receipt period of more than one lease premium receipt, the reference in subsection (3) to the daily reduction of the lease premium receipt is to be read as a reference to the total of the daily reductions of each of the lease premium receipts whose receipt period includes the qualifying day.

(6)In this section—

the “daily amount” of the taxed receipt is given by the formula—ATRPwhere—A is the unreduced amount of the taxed receipt, andTRP is the number of days in the receipt period of the taxed receipt, and

the “daily reduction” of a lease premium receipt is given by the formula—ARRRPwhere—AR is the reduction under section 228 below or section 288 of ITTOIA 2005 by reference to the taxed receipt, andRRP is the number of days in the receipt period of the lease premium receipt.

(7)In this section references to a reduction under section 228 below or section 288 of ITTOIA 2005 by reference to a taxed receipt have the same meaning as in Chapter 4 of Part 4 (see section 230(6)).

(8)Section 67 explains how this section operates if the lease does not extend to the whole of the premises subject to the taxed lease.