Corporation Tax Act 2010 section 904

The arrangements and circumstances referred to in section 902(8)

Section 904 defines the specific lease arrangements and surrounding circumstances that trigger Condition E under section 902(8), focusing on situations where a lessee is likely to reacquire a leased asset and pay a lump sum that is economically a return on the lessor's investment.

• Condition E is met where arrangements exist for the lessee (or a connected person) to acquire the leased asset (or a representative asset) from the lessor (or a connected person), with a qualifying lump sum being paid in connection with that acquisition.
• A "qualifying lump sum" is any payment that is not rent but which, under generally accepted accounting practice, would be treated at least in part as a return on investment in respect of a finance lease or loan.
• Condition E is also met where the circumstances make it more likely that the lessee will reacquire the asset and pay a qualifying lump sum than that an independent third party will buy the asset on the open market beforehand.
• An "independent third party" is someone who is neither the lessor nor the lessee and is not connected with either of them.