Corporation Tax Act 2009 section 98

Tax treatment of reverse premiums

Section 98 establishes how reverse premiums are treated for corporation tax purposes, classifying them as revenue receipts and determining where they are taxed depending on whether the property transaction relates to a trade.

• A reverse premium is always treated as a revenue receipt, not a capital item, for corporation tax purposes
• If the recipient enters into the property transaction for the purposes of a trade they carry on or will carry on, the reverse premium is included in the calculation of trading profits
• If the reverse premium does not relate to a trade, it is instead taxed as a property business receipt under section 250
• Where the transaction is at arm's length, normal accountancy timing rules apply; where it is not at arm's length, a separate statutory timing rule under section 99 applies