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HMRC internal manual

Business Leasing Manual

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HM Revenue & Customs
Updated
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’Income-into-capital’ schemes and back loaded leases: Capital allowances: introduction

CTA10/SS917-922 provides rules to ensure that lessors cannot avoid capital allowances disposal adjustments by indirect methods of exiting from leasing arrangements within Chapter 2 of Part 21 of CTA 2010. Examples of indirect disposal methods include:

  • a sale of the shares in the lessor company, and
  • the grant by the lessor of a subordinate interest in the leased asset on terms which extract all the value from the lessor’s own interest even though they continue to hold it.

TCGA92/S37A does not apply to leases within Chapter 3. You should make a report to CTIS (CT&BIT) where a lessor exits from a lease within Chapter 3 of Part 25 by indirect means which avoid ordinary disposal adjustments for capital allowances and which are not caught by the provisions introduced by FA06 (BLM80000 onwards) or would have been caught had the transaction occurred after those provisions took effect.