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HMRC internal manual

Business Income Manual

Leasing: avoidance: assets other than land: meaning of ‘commercial rent’

S681C-S681CG Income Tax Act 2007, S863-S869 Corporation Tax Act 2010

The commercial rent for the purpose of the leased trading assets legislation is the rent, which at the time when the lease was created, might be expected to be paid, if:

  • the lease were for the remainder of the anticipated normal working life of the asset,
  • the rent were payable at uniform intervals and at a uniform rate, and
  • the rent, having regard to the terms and conditions of the lease, afforded a reasonable return for the market value of the asset at that time.

Where the asset is not wholly used for trade purposes, the commercial rent is the rent that would be paid for the actual trading use.

Where the legislation applies, the taxpayer should be asked for their estimate of the commercial rent, supported by any available evidence. Any case in which the commercial rent cannot be agreed should be submitted to CTISA (Technical).