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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 D: normal rent

‘Normal rent’ is defined in CTA10/S896 as the sums which would be taxable as rent on the lessor apart from Part 21 of CTA 2010.

HMRC gave guidance on the application of this definition to the third condition in the article on Schedule 12 (now Part 21 of CTA 2010) published in the April 1997 issue of Tax Bulletin. The part relevant generally for the purposes of Schedule 12 is reproduced below:

`So long as they are taxable revenue items on first principles, we would regard termination receipts and other sums representing consideration for the hire of the asset as ‘normal rent’ within paragraph 20 of Schedule 12 (now CTA10/S896)and therefore within paragraph 3(3) (now Condition C in CTA10/S902(6). This is the case whether or not such sums are described as rentals in the relevant documentation. By ‘first principles’ we mean the basic charging rules of Schedule A [property income] or Schedule D [trading income] as opposed to special rules, such as the Schedule A premium rules.`