Part 21Leasing arrangements: finance leases and loans
Chapter 2Finance leases with return in capital form
Introduction
899Arrangements to which this Chapter applies
1
This Chapter applies to arrangements involving the lease of an asset that meet conditions A and B.
2
Condition A is that in accordance with generally accepted accounting practice the arrangements fall to be treated as a finance lease or loan.
3
Condition B is that the effect of the arrangements is that some or all of the return on investment in respect of the finance lease or loan—
a
is or may be in the form of a sum that is not rent, and
b
would not, apart from this Part and Part 11A of ITA 2007, be wholly brought into account for tax purposes as rent from the lease of the asset.
4
It does not matter—
a
when the arrangements are or have been entered into, or
b
whether they are or have been entered into by companies or other persons.
900Purposes of this Chapter
1
This section sets out the main purposes of this Chapter where there are any arrangements to which this Chapter applies.
2
The first main purpose is, in relation to a company entitled to the lessor's interest under the lease of the asset, to apply the charge to corporation tax on income to amounts determined as mentioned in subsections (3) and (4).
3
The amounts referred to in subsection (2) are determined by reference to the amounts that fall for accounting purposes to be treated, in accordance with generally accepted accounting practice, as the income return on and after 26 November 1996 on investment in respect of the finance lease or loan.
4
The amounts referred to in subsection (2) are also determined taking into account the substance of the matter as a whole, including, in particular, the state of affairs—
a
as between connected persons, or
b
within a group of companies,
as reflected or falling to be reflected in accounts of any of those persons or in consolidated group accounts.
5
The second main purpose of this Chapter is, if the sum mentioned in section 899(3)(a) that is not rent falls due, to recover by reference to that sum the whole or any part of the capital expenditure reliefs.
6
In subsection (5) “the capital expenditure reliefs” means any reliefs, allowances or deductions that are or have been allowed or made in respect of capital expenditure incurred in respect of the leased asset.