Taxes Consolidation Act 1997 section 646

Postponement of payment of income tax to be permitted in certain cases

Section 646 allows a vendor in a sale-and-leaseback transaction to postpone payment of income tax attributable to the value of the leaseback right, paying it instead in nine equal annual instalments over a ten-year period.

• Where a land dealer sells property and leases it back from an unconnected purchaser within six months, and the value of the leaseback right forms part of the trading profit, 90 per cent of the tax attributable to that value may be postponed.
• The postponed tax is payable in nine equal annual instalments, the first falling due on 1 January in the year after the year in which the full tax would otherwise have been payable.
• The postponement applies only while the vendor retains the leasehold interest and has not disposed of any interest derived from it, such as by granting a sub-lease.
• If the vendor parts with the leasehold interest, grants a sub-lease, dies, or (being a company) goes into liquidation, the entire unpaid balance becomes immediately payable.