Annual payments from utility companies for wayleaves, and rent from mobile operators for mast sites, are taxed as property income. Electric, telegraph and telephone line wayleaves have their own charging rule but are pulled into an existing property business, and a farmer can choose to include them in trading profits. A one off lump sum is different: a capital payment for an easement or wayleave is a disposal for Capital Gains Tax, while a premium for a mast lease of 50 years or less is partly taxed as income.

What payments does a landowner receive?

HMRC’s Business Income Manual at BIM55220 describes an easement as the right to use, or to restrict the use of, another person’s property in some way, and a wayleave as the right to use a defined area for purposes unrelated to its primary use. In practice a landowner can receive:

  • an annual wayleave rent for poles, pylons, cables or pipes crossing their fields or buildings;
  • a lump sum for a permanent or long term easement, often for a pipeline or underground cable;
  • compensation for disturbance, crop loss or damage during installation;
  • rent for a mast or rooftop site under a lease or an agreement under the Electronic Communications Code; and
  • occasionally, a lump sum from an infrastructure investor for a long lease of a mast site or for the future rent.

Each is taxed according to what it pays for, so a single offer letter may contain several different tax treatments.

How are annual wayleave payments taxed?

PIM1114 says rent received for a wayleave is property income under Chapter 3 of Part 3 of the Income Tax (Trading and Other Income) Act 2005 and is part of the property business, unless it falls within Chapter 8 (rents connected with mines, quarries and similar concerns) or Chapter 9.

Chapter 9 covers UK electric line wayleaves. Under section 345, these are rights enjoyed in connection with an electric, telegraph or telephone wire or cable, including the use of a supporting pole or pylon and associated apparatus; PIM1118 adds that apparatus includes a transformer. Section 344 charges the rent separately, but section 346 then brings it into the person’s UK property business if they have one that includes other receipts from the same ground. So a landowner who already lets cottages or grazing on that farm simply adds the wayleave rent to their property income.

There is an alternative for traders. Section 22 lets a person who carries on a trade on the ground concerned bring wayleave rent, and related expenses, into the trading profits. BIM67600 says this is at the option of the taxpayer and covers payments for running a cable or pipe across property used for the trade, including the installation of a pole or pylon. A farmer with no other property income from that ground will often find this simpler. Companies follow parallel rules in sections 277 to 279 of the Corporation Tax Act 2009.

How is rent from a telecoms mast taxed?

Mast and rooftop sites are normally let under a lease or a code agreement giving the operator rights to install and keep apparatus. PIM1051 says property business receipts include payments for a licence to occupy or otherwise use property and for the exercise of any other right over it. Mast rent is therefore property income, taxed with the owner’s other UK lettings under the normal rules in how rental income is taxed; GOV.UK lists legal fees for renewing a lease for less than 50 years among allowable expenses.

The Electronic Communications Code in Schedule 3A to the Communications Act 2003 also affects the rent. Paragraph 24 says that where a court imposes an agreement, the consideration is market value assessed on the assumption that the right does not relate to the provision or use of an electronic communications network, and that there is more than one site the operator could use. That valuation basis does not change the tax treatment, but it is relevant when comparing a renewal offer with the existing rent.

How are lump sums for easements and wayleaves taxed?

A lump sum for granting an easement or wayleave for a term of years or in perpetuity is a capital receipt. CG12955 explains that section 22(1)(d) of the Taxation of Chargeable Gains Act 1992 treats a capital sum received for the use or exploitation of an asset as a disposal, and gives this as an example. CG70295, drawing on Chaloner v Pellipar Investments Ltd, distinguishes the two cases:

  • where the owner’s title is unaffected, as with an easement or licence, the receipt is a deemed disposal under section 22 and the disposal happens when the sum is received (CG12960);
  • where the title is affected, as with the grant of a lease, there is a part disposal of the owner’s interest under the ordinary rules.

Because the owner keeps the property, CG12945 says the part disposal formula in section 42 decides how much of the original cost is set against the payment. Reliefs available on an actual disposal, such as private residence relief, can apply to a deemed disposal if their conditions are met.

Compensation is analysed separately. PIM1114 says payments for disturbance and for reinstatement are not wayleave rent. For a trader such as a farmer, disturbance payments relating to the trade are trade receipts; otherwise they arise from the owner’s interest in the property and are property receipts. A lump sum for disturbance is normally capital unless it is paid to fill a hole in profits. BIM55220 adds that elements for temporary loss of profit, crop damage or reimbursement of repair costs are trading receipts for a farmer. Where reinstatement costs are matched by taxable compensation they are deductible; where the compensation is capital, the matching costs are excluded from the income computation.

What about lump sums for a mast lease or the future rent?

Some investors offer a single payment in place of future mast income. How it is taxed depends on what the owner gives up.

If the owner grants a lease of the site for a premium, PIM1205 explains that where the lease is for 50 years or less, part of the premium is taxed as property income in the year of grant: the premium multiplied by (50 minus Y) divided by 50, where Y is the number of complete years of the lease other than the first. The rest is dealt with under the capital gains rules. A premium for a longer lease falls outside the income charge. The rules are explained in lease premiums. Selling an existing lease outright is an assignment, which PIM1204 says is a capital gains matter rather than a premium.

If instead the owner sells only the right to receive the rent and keeps the property, section 809AZA of the Income Tax Act 2007 applies to the transfer of a right to receipts that would otherwise be taxed as the owner’s income. Under section 809AZB the price, or market value if substantially more, is treated as income chargeable in the same way as the rent would have been. The chapter does not apply where the right passes as a consequence of transferring the asset that produces it, which is why the legal form of these deals deserves close attention.

Is VAT charged on these payments?

VAT Notice 742 includes easements and wayleaves among rights over property and says UK law exempts the supply of such rights. Rent for a mast site is likewise an exempt grant unless the owner has opted to tax. HMRC’s Notice 742A says that once you have opted, supplies of your interest in the property will normally be standard rated. See the option to tax.

How might this look in practice?

Illustration only. A farmer owns a field bought for £50,000. In one year she receives:

  • £6,000 rent from a mobile operator for a mast in the corner of the field, which is property income;
  • £450 annual rent for an electricity pole in the same field; and
  • £20,000 from a water company for a permanent easement for a pipe across the field, plus £1,500 for crop loss.

Because the mast rent from that field is already in her property business, section 346 puts the £450 pole rent there too, and the trading option is not available for it. The £1,500 crop loss payment is a farming receipt. The £20,000 is a deemed disposal under section 22(1)(d). If the field is worth £180,000 after the easement, the cost allocated is £50,000 multiplied by 20,000 divided by 200,000, which is £5,000, giving a gain of £15,000 before the annual exempt amount. The remaining cost of £45,000 carries forward to any later sale. Gains are taxed at the Capital Gains Tax rates for the year.

What mistakes come up?

  • Putting an easement lump sum through the rental accounts, or leaving it off the return altogether.
  • Treating the whole payment as capital when part of it compensates for lost crops or profits.
  • Forgetting the cost apportioned to an easement, so the base cost on a later sale is overstated.
  • Assuming a mast premium is entirely capital when the lease is 50 years or less.
  • Selling a stream of mast rent without checking whether the transfer of income streams rules turn the price into income.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.