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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: Condition A: foreign accounting standards

You should not ask a lessor drawing up their accounts in accordance with foreign (but non-IFRS) accounting standards to draw up a full set of accounts prepared under UK accounting standards. HMRC gave an assurance on this in the following extract from the article on FA97/Sch12 (now Part 21 of CTA 2010) published in the April 1997 issue of Tax Bulletin:

`In the case of a lessor not subject to UK accounting standards, typically a company not registered in the UK, it is necessary to consider how leasing arrangements would be accounted for if UK standards did apply, both at individual company and group level. But it is not necessary to consider more widely what effect UK standards would have had on the accounting treatment or for accounts actually to be prepared under those standards. In other words, the legislation does not require a full set of accounts to be prepared under UK standards.`

This assurance applies to consolidated accounts as it does to the accounts of lessors themselves. Now that Part 21 of CTA 2010 refer to generally accepted accounting practice, rather than UK GAAP, there is no need to seek information where the accounts are properly drawn up in accordance with IFRS. It follows that the principles outlined in the Tax Bulletin now only apply where the accounts are not drawn up under UK GAAP or IFRS.