Taxes Consolidation Act 1997 section 372AO

Qualifying lease

Section 372AO sets out the conditions that must be met for a lease to be regarded as a qualifying lease for the purposes of the Chapter, including limits on premiums, how market value is determined and the circumstances in which a lease will not qualify.

• The market value of a property is defined as the best open-market price for the building less the portion of that price attributable to the site.
• A qualifying lease must provide for rent taxable under Case V, and any premium payable must not exceed 10 per cent of the relevant cost (for construction) or 10 per cent of the market value on completion (for conversion or refurbishment).
• Where a converted or refurbished dwelling forms part of a larger building and cannot be sold separately, its market value is apportioned on a floor area basis.
• A lease will not qualify if it contains a purchase option at below market value, if it is for less than three months in a qualifying rural area, or if it fails to meet the relevant guidelines in a qualifying student accommodation area.