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HMRC internal manual

Business Leasing Manual

’Income-into-capital’ schemes and back loaded leases: Capital allowances: variation of lease terms

You may come across cases where the terms of a Part I lease are varied so as to ensure that the capital sum receivable when the lessor exits from the leasing arrangements does not contain any amount which counts as ‘return on investment’. This may be achieved for example by increasing rentals so that rolled up ‘interest’ or ‘negative depreciation’ (excess of accountancy rental earnings over normal rent) is eliminated before the capital sum falls due. As a result the capital sum will not be a ‘major lump sum’ and CTA10/SS916-922 are of no application. You should report these cases to CTIS (CT&BIT).