BIM41070 - Receipts: reverse premiums: meaning of ‘reverse premium’

A reverse premium is a payment or other benefit received by any person as an inducement to enter into a transaction (FA99/SCH6/PARA1 (1)(a), ITTOIA05/S99 (2) and ITTOIA05/S311).

The transaction is called

• the ‘relevant transaction’ in FA99 and
• the ‘property transaction’ in ITTOIA05.

It consists in taking an estate or interest or right in or over land.

A reverse premium may be received by the person who takes the interest in land, or by a person connected with the person who takes the interest (FA99/SCH6/PARA1 (1)(b) and ITTOIA05/S99 (3)).

The reverse premium must be paid or provided by:

• the original grantor of the interest in land, or
• a person connected with that grantor, or
• a nominee or person acting on the directions of either.

(FA99/SCH6/PARA1 (1)(c) and ITTOIA05/S99 (4)).

There is further guidance on:

• the meaning of payment or other benefit by way of inducement in BIM41075 - BIM41090,
• relevant transaction or property transaction in BIM41095, and
• the significance of the grantor’s involvement in BIM41100 - BIM41110.