B3.340K Income and profits of parties to lease and finance leaseback of plant and machinery
Legislation applies to prevent double relief where there is a lease and finance leaseback, such as where the owner of the asset leases it to a loss-making or non-UK resident person and then leases it back. The owner would, for example, grant the lease for a peppercorn rent and a premium. The rents paid by the owner when the asset was leased back would in effect repay the premium received. The owner would continue to get capital allowances on the asset and would, but for the legislation, also get a deduction for the rents paid, effectively getting relief twice. Although the premium would be chargeable to capital gains tax the part disposal rules would usually mean that there is no chargeable gain or, alternatively any gain arising is covered by capital losses. So the owner would pay little, if any, tax on the premium received.
The provisions apply to amounts in accounts drawn up in accordance with generally accepted accounting practice ('correct accounts'). If accounts are not so drawn up, or if no accounts are drawn up, the provisions apply to amounts which would have been included if correct accounts had been drawn up1. Where accounts include amounts derived from an earlier period in which
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