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HMRC internal manual

Business Leasing Manual

’Income-into-capital’ schemes and back loaded leases: Back loaded leases: purpose

The sole purpose of Chapter 3 of Part 21 of CTA 2010 is to ensure that recognition for tax of rentals from finance leases, which do not have the capacity to turn income into capital, does not lag behind recognition in the accounts. It contains no rules about capital allowances disposal adjustment. Nor are there any ‘catching up’ provisions equivalent to CTA10/S923 when a lease comes within Chapter 3 part way through its term.

You should make a report to CTIS (CT&BIT) where a lessor exits from a lease within Chapter 3 by indirect means which avoid ordinary disposal adjustments for capital allowances.