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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 leases: Definition of a Chapter 2 of Part 21 of CTA 2010 lease: Condition E: 'arrangements' or 'circumstances'

Condition E in CTA10/S902(8) is satisfied if either:

  • ‘arrangements’ exist whereby the future event (BLM70650) may occur; or
  • ‘circumstances’ exist which make it more likely that the future event (BLM70650) will occur than that beforehand the leased asset (or the asset representing the leased asset) should be sold in the open market to a third party who is not connected either with the lessor or the lessee (CTA10/S904(3)-(5)).

‘Arrangements’ are not defined in the legislation and take their natural meaning. In recognition of the evidential and other problems which can occur in practice in showing that ‘arrangements’ exist the provisions include a further test based on ‘circumstances’.

In applying the ‘circumstances’ test you should bear in mind what types of transaction Chapter 2 of Part 21 of CTA 2010 is intended to catch, namely leases providing a clear opportunity for income to be turned into capital.