98A Taxation of reverse premiums.
(1) (a) In this section—
“chargeable period” means an accounting period of a company or a year of assessment;
“first relevant chargeable period” means—
(a) the chargeable period in which a relevant transaction is entered into, or
(b) if a relevant transaction is entered into—
(i) by a person receiving a reverse premium, and
(ii) for the purposes of a trade or profession which that person is about to carry on,
the chargeable period in which the person commences to carry on the trade or profession;
“relevant arrangements” means a relevant transaction and any arrangements entered into in connection with it, whether before, at the same time or after it;
“relevant transaction” means a transaction under which a person is granted an estate or interest in, or a right in or over, land;
“reverse premium” means a payment or other benefit received by a person by way of inducement in connection with a relevant transaction being entered into by that person or by a person connected with that person;
“sale and lease-back arrangement” means an arrangement under which a person disposes of the full estate or interest held by that person in land to another person and the terms subject to which the disposal is made provide for the grant of a lease of an interest in or a right in or over the land concerned to the person by that other person.
(b) For the purposes of this section persons are connected with each other if they are connected within the meaning of section 10 at any time during the chargeable period or periods when the relevant arrangements are entered into.
(2) A reverse premium shall, for the purposes of the Tax Acts, be regarded as a receipt of a revenue nature.
(3) Subject to subsections (4) and (6), the amount or value of a reverse premium shall be treated as if it were an amount of rent.
(4) Where a relevant transaction is entered into—
(a) by a person receiving a reverse premium, and
(b) for the purposes of a trade or profession carried on or to be carried on by that person,
the amount or value of the reverse premium shall be taken into account in computing the profits or gains of that trade or profession under Case I or II of Schedule D, as the case may be, as if it were a receipt of that trade or profession.
(a) two or more of the persons who enter into relevant arrangements are connected with each other, and
(b) the terms of those arrangements are not such as would reasonably have been expected if those persons had been dealing at arm’s length,
the whole of the amount or value of the reverse premium shall, for the purposes of subsections (3) and (4) be treated as accruing in the first relevant chargeable period.
(6) Where a reverse premium is received by an assurance company (within the meaning of section 706) carrying on life business (within the meaning of section 706) in respect of which it is chargeable to tax otherwise than in accordance with the rules applicable to Case I of Schedule D, the amount or value of the reverse premium shall be deducted from the amount treated as the company’s expenses of management for the chargeable period in which the reverse premium is received.
(7) This section does not apply to a payment or benefit—
(a) received by an individual in connection with a relevant transaction and the transaction relates to the grant of an estate or interest in, or a right in or over premises occupied or to be occupied by that individual as his or her only or main residence,
(b) to the extent that it is consideration for the transfer of an estate or interest in land which constitutes the sale in a sale and lease-back arrangement where the terms of that arrangement at the time the arrangement is entered into are on bona fide commercial terms, or
(c) to the extent that, apart from this section, it is taken into account in computing the profits or gains of a trade or profession under Case I or II of Schedule D, as the case may be, as a receipt of that trade or profession.