BIM41120 - Receipts: reverse premiums: type of income

The starting point of the charge is that a reverse premium is treated for all the purposes of the Taxes Acts as a receipt of a revenue nature (FA99/SCH6/PARA2 (1) and ITTOI05/S101 (1)).

A reverse premium received by a tenant for taking a lease of premises for the purposes of a trade, profession or vocation is to be taken into account in computing the trade, profession or vocation profits (FA99/SCH6/PARA2 (2) and ITTOIA05/S101 (2)).

In any other circumstances, the reverse premium will be treated as a receipt of a transaction assessable as property income (FA99/SCH6/PARA2 (3), ITTOIA05/S101 (3) and ITTOIA05/S311).

The reverse premium will be charged as a property business receipt in a variety of circumstances. Examples are amounts received:

• By an intermediate landlord for a property to be let in a rental business.
• By a person for premises to be occupied by that person otherwise than for the purposes of a trade, such as the office of a landlord or an investment company.
• By a person connected with the person who takes the lease.