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HMRC internal manual

Business Leasing Manual

‘Income-into-capital’ schemes and back loaded leases: Definition of a Chapter 2 of Part 21 of CTA 2010 lease: what counts as a lease of an asset

Before you consider the five conditions described in the following paragraphs you need to establish that ‘a lease of an asset is or has been granted’ (CTA10/S901(1)(a)). In most cases the position will be self-evident and only in exceptional cases will it the point be arguable.

‘Lease’ is defined in CTA10/S937 in broad terms drawn from the sale and leaseback anti-avoidance legislation in Part 19 of CTA 2010 (described in BIM61200 and BIM61300). The first part of the definition (concerning land) is drawn from CTA10/S846 and the second part (assets other than land) comes from CTA10/S885. Asset is defined as ‘any form of property or rights’ (CTA10/S937).

Essentially a lease is any agreement or arrangement for the hiring of any sort of asset, wherever situated and including intangibles and intellectual property of all descriptions, such as rights in a film or book.

A lease of land is ‘granted’ within the meaning of CTA10/S901(1)(a) even though the agreement for a lease may not be followed up by the formal grant of a lease on completion. And a lease of an asset other than land is ‘granted’ simply by the making of an agreement to hire the asset.

Part 21 do not apply where the lease is a long funding lease in the hands of the lessor (CTA10/S901(1)(a)