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HMRC internal manual

Business Leasing Manual

From
HM Revenue & Customs
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‘Income-into-capital’ schemes and back loaded lease: Definition of a Chapter 2 of Part 21 of CTA 2010 lease: Condition E: asset representing leases asset

An ‘asset which represents the leased asset’ is intended to encompass any means by which the lessor (or the lessor group) effectively disposes of its economic stake in leasing arrangements without straightforwardly disposing of the leased asset. It is defined in CTA10/S934 as any of the following:

  • ‘an asset derived from or created out of the leased asset’ - an example might be an interest in the leased asset which is subordinate to that of the lessor, such as a sub-lease or under-lease of land;
  • ‘any asset out of which the leased asset was derived or created’ - for example, where the lessor’s interest in the leased asset itself takes the form of a lease, such an asset may be the freehold (held by a connected person of the lessor);
  • ‘any asset derived from or created out of an asset out of which the leased asset was derived or created’ - for example a lease created out of the same freehold out of which the lease in question is created; or
  • ‘any asset which derives the whole or a substantial part of its value from the leased asset or an asset which itself represents the leased asset’ - the shares in a company whose sole asset was the leased asset would be one example; another would be the shares in the 100% parent company of such a lessor assuming the parent held no significant assets apart from the shares in the leasing subsidiary.

You should not regard the cash derived from the sale etc of a leased asset as an ‘asset representing the leased asset’.