Tales from the Front Line

Premium Leases

by Emma Bennett
on May 7, 2009 in Rental Property

Premium Leases have historically been a very tax efficient way for a company to pay for an employee’s housing.

The basic principal of a Premium Lease is simply that the Company ‘leases’ rather than ‘rents’ a property from the Owner for the period of time of the Lease (a period of at least one full year with no break clause).

The level of the Premium would be agreed between the parties along with a ‘peppercorn rent’. This figure would be paid, in full, on or before the first day of the term. The tax savings come as a result of the Rent being the taxable figure, rather than the Premium.

Darling announced at this year’s budget that legislation will be introduced in the Finance Bill 2009, relating to Leases entered into or extended on or after 22 April 2009, to put an end to these tax savings via a Premium Lease and claimed that the same tax regulations will apply as if the monies paid in respect of the Premium Lease was actually Rent paid.

This will undoubtedly impact those hoping to achieve significant tax savings by entering into a Premium Lease. With the rentals market as it is today, this change in legislation makes the argument for full, professional representation in the market place an even more valuable one.