BIM60130 - Measuring the profits (particular trades): land: trading transactions: acquisition and disposal of superior interest - leaseback
S681A-S681AN Income Tax Act 2007, S834-S848 Corporation Tax Act 2010
Where having acquired the freehold, a tenant immediately sells the freehold but subject to a leaseback giving him or her continuing occupation rights, it is doubtful whether a trading argument is possible.
This is because the tenant has not realised the potential marriage profit in the context of BIM60105. »Ê¹ÚÌåÓýapp tenant has acquired an encumbered asset (the freehold subject to a tenancy) and sold an encumbered asset (the freehold subject to the leaseback). Having established a position of being able to realise the marriage profit by a sale of the freehold the tenant has foregone the opportunity. This is almost certain to be for genuine 'capital' reasons - the desire to change landlords or secure more advantageous lease terms for example.
A trading argument in these circumstances will only be possible if, exceptionally, the lease back is for a materially shorter time than the original lease was due to run.
Note that where there is a sale and leaseback the anti-avoidance provisions listed above should be considered (see BIM61301)