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HMRC internal manual

Business Leasing Manual

‘Income-into-capital’ schemes and back loaded leases: Introduction to back-loaded leases: lessors' within trading income

Where the leasing was taxable under trading income rules, lessors argued that their taxable earnings could not be more than the rent actually receivable under the lease for the accounting period. This was a tenable view but we believed that the better view was to follow the accountancy as far as possible, as was done for rental payments by lessees in Gallagher v Jones in 1993 (66 TC 77). The technical argument was not resolved. But FA97/Sch 12 (now Part 21 of CTA 2010) effectively applied HMRC’s view by statute.