Corporation Tax Act 2010 section 900

Purposes of this Chapter

Section 900 sets out the two main purposes of Chapter 2, which deals with finance leases where the lessor's return takes a capital rather than income form.

• The first purpose is to ensure that the lessor company is taxed on the true income return from the finance lease or loan, as recognised under generally accepted accounting practice (GAAP), from 26 November 1996 onwards.
• The income return is determined by looking at the substance of the arrangement as a whole, including the position shown in accounts of connected persons or consolidated group accounts, not just the lessor's own accounts.
• The second purpose is to recover any capital expenditure tax reliefs (such as capital allowances) already given in respect of the leased asset, if a non-rent sum falls due under the arrangement.
• These provisions exist because, in substance, such leases are equivalent to loans, and the income element embedded in the lessor's return needs to be properly identified and taxed.