Corporation Tax Act 2010 section 269ZY

Meaning of "relevant reversal credit"

Section 269ZY defines what constitutes a "relevant reversal credit" for the purposes of increasing a company's deductions allowance under section 269ZX, covering both onerous lease provisions and right-of-use asset impairment losses, and the conditions under which their reversal qualifies for relief.

• A relevant reversal credit is a credit or income arising from the reversal of either an onerous lease provision or a right-of-use asset impairment loss, where the underlying lease of land was entered into at arm's length and the company is the tenant.
• The reversal qualifies only where it results from an arm's length arrangement that varies or cancels the tenant company's lease obligations, and the tenant and landlord are not connected — unless both are in the same group and the sub-lease arrangement mirrors an arm's length deal on the superior lease with an unconnected party.
• At least one financial distress condition must be met: the company faced a material risk of being unable to pay its debts within 12 months and the arrangement's main purpose was to avert that risk (Condition X), the company is in insolvent administration (Condition Y), or the arrangement is part of a statutory insolvency arrangement (Condition Z).
• Where a company's accounts previously included an onerous lease provision, any right-of-use asset subsequently recognised for that same lease is treated as impaired unless there has been a material change of circumstances.