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HMRC internal manual

Business Leasing Manual

Taxation of leases that are not long funding leases: sale and leaseback: sale of asset for more than original cost

In some instances the assets to be leased back may be sold for more than original cost, the sale proceeds either being taken into account in computing chargeable gains and covered by otherwise unrelieved capital losses, or not taxable at all. This is a feature of some of the more tax orientated arrangements. These cases should be reviewed carefully not only to consider the treatment of the sale proceeds, but also the rents under the lease-back. It may be, for example, that any excess of sale proceeds over cost effectively escapes taxation because the gain is sheltered by reliefs or capital losses. Prior to FA 2004, the capital element of the rentals is, however, likely to be allowable as a deduction in computing profits.

Where significant amounts are at stake, particularly where you have concerns over the valuation of the assets, you may seek further guidance from CTIS (CT&BIT).