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HMRC internal manual

Business Leasing Manual

Taxation of Long funding leases: Long funding lessors: Anti-avoidance provisions: "other Avoidance - S373-375 CTA 2010

Sections 373-375 CTA 2010

This counters arrangements involving a long funding lease which are intended to create taxable profits or allowable losses that are substantially different from the profits shown in the company accounts for those arrangements. In contrast to Sections 370-371, it takes a purposive approach in achieving this. It disapplies CTA10/S.360-369 where three conditions are met:

  • Condition A - The long funding lease forms part of any arrangement entered into by the company which includes one or more other transactions, and
  • Condition B - The main purpose or one of the main purposes of the arrangement is to secure that, over the lease period (Section 374(4)), there would be a substantial difference between the profit or loss recognised in the accounts and calculated for the purposes of corporation tax, and
  • Condition C - The difference would be attributable (wholly or partly) to the application of any of the sections CTA10/Ss360-369 to the company by reference to plant or machinery under the lease.

Condition A ensures that single transactions, further supported by Section 374(1)-(3), are unable to trigger the section.

Where conditions A to C are met then the relevant sections in CTA10Ss360-369 are unable to apply.

Section 375(2), mirrors Section371(2), by providing that where any of sections CTA10/Ss360-369 have previously applied and then conditions A to C are met, the company’s profits are adjusted on a just and reasonable basis.

For accounting periods ending before 1 April 2010

This legislation was previously located at s.502GC ICTA 88 and stopped the application of S502B to S502G ICTA 88. It was effective for leases entered into on or after 9 October 2007.