HMRC internal manual

Business Leasing Manual

‘Income-into-capital’ schemes and back loaded leases: 'Income-into-capital' schemes: summary

Chapter 2 of Part 21 of CTA 2010 target ‘income-into-capital’ schemes. An ‘income-into-capital’ scheme uses leasing to turn interest earnings in the commercial accounts of Banks and other financiers into tax-free capital. It can also shift title to capital allowances to the Banks from the Borrower in a way which avoids the normal recovery of excess allowances.

Chapter 2 counter such schemes by:

  • treating the minimum taxable earnings as being no less than the commercial accounts earnings (effectively converting any ‘interest’ which has been turned into capital back into income);
  • ensuring that normal capital allowances disposal adjustments are made.