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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Targeted rules to prevent income to capital converter schemes by companies - sale and leaseback exclusion

TCGA92/S184G to I include provisions for certain common commercial transactions to beexcluded from consideration. These are arm’s length sale and leaseback transactionsinvolving land where there is no connection between the lessor and the lessee. Whilst itwould seem unlikely that such transactions would amount to arrangements where there was amain purpose of securing a tax advantage, the exclusion has been provided to eliminate anyuncertainty. The exclusion does not mean that other types of sale and leaseback betweenunconnected parties will necessarily be caught. Nor does it mean that all sucharrangements between connected parties will be caught. Taxpayers should in such cases beguided by the information given in this document that the rules are targeted atarrangements where a main purpose was to secure a tax advantage through the use of capitallosses in ways that reduce income profits.

For the purposes of TCGA92/S184H, the definition of tax advantage in TCGA92/S184D applies,but the tax advantage must also involve both the deduction of expenditure in calculatingtotal profits, and the deduction of losses from the chargeable gain.