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HMRC internal manual

Business Income Manual

Leasing: avoidance: sale and leaseback of land: special arrangements

S681B-S681BM Income Tax Act 2007, S849-S862 Corporation Tax Act 2010

There are provisions in the above legislation which deal with situations where there is a leaseback following assignment or surrender of a lease. This covers cases where a leaseback of 15 years or less is disguised as a lease for a longer period. In such cases the length of the leaseback is taken to be the period for which the extra rent is payable.

For example:

  • if a lease has 16 years to run,
  • an assignment and leaseback for 16 years less one day,
  • at an increased rent for the first 8 years, and
  • thereafter at the lower rent which was payable under the original lease,

would fall within the scope of this legislation.

Other provisions extend the scope of this legislation to include:

  • variations in the terms of a lease in return for consideration, and
  • to deal with cases where one person receives the lump sum and the extra rent is payable by an associated person (for example, where a partner or an associated service company receives the consideration and the partnership pays the increased rent).