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HMRC internal manual

Business Leasing Manual

’Income-into-capital’ schemes and back loaded leases: Lease changes: existing operating lease becomes a lease within Chapter 3 of Part 21 of CTA 2010

Where a ‘pre-26 November 1996’ operating lease becomes a finance lease Part 21 of CTA 2010 does not apply unless the lease also falls within Chapter 2 of Part 21 (in which case, see BLM74335). Chapter 3 of Part 21 does not apply to leases which count as ‘pre-26 November 1996 schemes’ even if the terms are changed after 26 November 1996.

You should report any case, where an attempt is made to exploit the protection from Chapter 3 of Part 21 afforded to ‘pre-26 November 1996’ leases by changing the terms of an operating lease to make it a finance lease with a back-loaded rental profile, to CTIS (CT&BIT).