Corporation Tax Act 2010 section 857

Position where lease may be varied

Section 857 deals with how the term of a new lease is treated for tax purposes where the lessee, or a person linked to the lessee, has the power to vary obligations under the lease in a way that benefits them.

• This section applies where the lessee (L), or a person linked to L, holds a power under the new lease to vary lease obligations in their own favour.
• The obligations in question must be ones owed by L or a person linked to L — for example, the obligation to pay a certain level of rent.
• Where such a power exists, the lease is treated as ending on the earliest date from which L, or a linked person, could exercise that power to vary the obligations.
• The effect is to shorten the assumed lease term for tax purposes, which can affect the tax relief available in connection with the lease.