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HMRC internal manual

Business Leasing Manual

’Income-into-capital’ and back loaded leases: Relief for set-offs against rentals: rental excesses - approach in practice

The statute requires all Part 21 of CTA 2010 computations to be on a lease by lease basis. But representations were made during the passage of the legislation through Parliament that this requirement could be onerous in the case of lessors with large amount of small ticket business and for other lessors in relation to periods prior to the development of supporting software. HMRC responded by including the following paragraphs in the article on the legislation in the April 1997 issue of Tax Bulletin:

`Where large numbers of similar leases for similar assets are entered into at the same time on similar terms, we accept that an aggregate computation may be made of adjustments under Schedule 12 (now Part 21 of CTA 2010) - in much the same way as Statement of Practice SP1/86 of 1986 (entitled ‘Capital Allowances: Machinery and plant: Short-life assets’) permits aggregate computations for the purposes of the machinery and plant short-life asset rules.

Outside that situation some lessors may have difficulty in setting up immediately the systems necessary to ensure that they can track the tax position of each lease within Part II. In the interim we are advising Inspectors to be prepared to consider sympathetically any alternative rule-of-thumb method put forward by lessors and which enables lessors to provide reasonably accurate and fair computations. `