Taxes Consolidation Act 1997 section 106A

Transfer of rent

Section 106A counters a tax avoidance scheme whereby a person transfers the right to receive rental income to another person in exchange for a lump sum (capital sum), and sets out how both sides of the transaction are taxed.

• A "relevant transaction" arises where a person receives a capital sum and the consideration given consists wholly or mainly of transferring a right to receive rent to another person — this includes the grant of a lease in similar circumstances.
• Where an individual receives a capital sum under such a transaction, it is taxed as income under Case IV in the earlier of the year the entitlement arises or the year it is actually received.
• The person who acquires the right to receive the rent is taxed on the rental income under Case V, meaning a company pays corporation tax at 25% rather than at the lower 12.5% trading rate.
• An exception applies where the transaction is a securitisation under section 110, but this exception does not protect individuals — an individual who receives a capital sum is always taxed under Case IV, and rent acquired from an individual is always taxed under Case V.