The taxable part of the capital sum is calculated by the formula:

16 − N

15

N is the term of the new lease expressed in years (taking part of a year as an appropriate proportion of a year).

(CTA 2010, s. 851).

Example 1

Ayep Ltd leases land, which it occupies for the purpose of its trade. The charge to corporation tax will be by virtue of CTA 2010, s. 851(7) as a receipt of AYEP Ltd's trade. AYEP Ltd receives tax relief for the annual rent of £1,000 paid under the lease by way of a deduction in computing its trading results.

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