Taxes Consolidation Act 1997 section 98A

Taxation of reverse premiums

Section 98A deals with the taxation of reverse premiums, which are payments or benefits received by a person as an inducement to enter into a lease or other land transaction.

• A reverse premium is treated as revenue income and is generally taxed as rental income, unless it relates to a trade or profession, in which case it is taxed as business income.
• Where connected persons enter into arrangements that are not on arm's length terms, the full amount of the reverse premium is taxed in the first relevant chargeable period.
• The section does not apply to payments relating to a person's main residence, genuine sale and leaseback arrangements on commercial terms, or amounts already taxed as business receipts.
• For life assurance companies not taxed under Case I of Schedule D, a reverse premium reduces the company's expenses of management for the chargeable period in which it is received.