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HMRC internal manual

Business Leasing Manual

’Income-into-capital’ schemes and back loaded leases: Back loaded leases: second condition requirements

HMRC made some observations on the second requirement (see BLM74640) in an article published in the April 1997 issue of Tax Bulletin:

`Definition of existing leases-paragraph 27 Schedule 12 (now CTA10/S930): Paragraph 27 of Schedule 12 grandfathers from Part II (now Chapter 3 of Part 21 of CTA 2010) leases finalised before Budget Day and also some leases in the course of negotiation at that time. Leases in the latter category have to meet a number of conditions. In particular, where the contract is conditional and conditions remain unsatisfied at Budget Day:

a ‘contract in writing for the lease’ must have been made before Budget Day;

the contract in its final form must not be ‘materially different’ from the earlier contract.

On the first point, we regard the provision of a detailed term sheet and the lessee’s acceptance of it as amounting to a ‘contract for the lease’ even if it is expressed not to be binding on the parties. On the second, neither minor changes to major provisions nor changes of any description to other provisions would be regarded as material differences. What counts here is primarily the substantive effect of the changes and not the volume of redrafting they entail.’