Throwing in the towel

Business tenants are entitled to protections under the Landlord and Tenant Act 1954 (LTA 1954) such as security of tenure. If a landlord opposes the renewal of a tenancy say because he wishes to occupy redevelop or demolish the property the tenant is entitled to statutory compensation from him. According to the statute this is assessed as the rateable value of the property or if the tenant has been occupied it for 14 years or more twice the rateable value.

This statutory compensation has been exempt from tax since the Court of Appeal’s decision in Drummond v Brown [1984] STC 321. In that case the taxpayer was served with a notice to quit because the landlord wished to occupy the property. At the end of the notice period the taxpayer left the property and received compensation calculated in accordance with LTA 1954. HMRC sought to...