Corporation Tax Act 2010 section 859

Lease varied to provide for increased rent

Section 859 deals with situations where a company's lease is varied to increase the rent in return for a capital consideration, and sets out the tax consequences by treating the arrangement as a surrender and re-grant of the lease.

• Where a company holds a lease with 50 years or less to run and agrees with the landlord to pay a higher rent in return for a capital payment, this section applies provided certain conditions are met.
• The increased rent period must end no more than 15 years after the capital consideration (or its final instalment) is paid to the lessee.
• If the conditions are satisfied, the lessee is treated as having surrendered the original lease in exchange for the capital consideration and as having been granted a new lease of 15 years or less on the varied terms.
• This deemed surrender and re-grant brings the arrangement within the scope of the anti-avoidance rules in this chapter, ensuring the capital consideration does not escape a corporation tax charge.