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HMRC internal manual

Business Leasing Manual

‘Income-into-capital’ schemes and back loaded leases: Introduction to 'income-into-capital' schemes: Overview of Part 21 of CTA 2010

Part 21 of CTA 2010 contains rules for determining the tax treatment of ‘income-into-capital’ schemes and deferral leases.

  • Chapter 2 of Part 21 counter ‘income-into-capital’ leasing schemes whereby finance lessors try to turn some of their lease rental income into capital receipts. It applies to leases in existence on 26 November 1996 as well as new leases. See BLM70215.
  • Chapter 3 of Part 21 deals with a possible deferral of tax liability by means of leases under which rentals are concentrated towards the end of the lease term. It applies only to new leases after 26 November 1996. See BLM70230 

In both cases, from 26 November 1996 the minimum rental income for tax purposes should be the income recognised in lessors’ commercial accounts (the `accountancy rental earnings`). But there are also provisions intended to ensure that there is no double taxation of the lessor’s total return from the lease (see BLM72001 onwards).