Commentary

B5.411 Leases—anti-avoidance provisions for assets other than land: charge where capital sum obtained

Business tax
Business tax | Commentary

B5.411 Leases—anti-avoidance provisions for assets other than land: charge where capital sum obtained

Business tax | Commentary

B5.411 Leases—anti-avoidance provisions for assets other than land: charge where capital sum obtained

Where a person (X) makes payments of rent under a lease or an asset, obtains a deduction by way of tax relief (see B5.410) in respect of the payments, and X or an associate of X obtains a capital sum in respect of the lessee's interest in the lease, the recipient of the sum is charged to tax as miscellaneous income on the total amount of deductions on which X has obtained tax relief in respect of the asset, limited to the amount of the capital sum received. The charge arises at the time the sum is obtained1. An amount charged to income tax is treated for income tax purposes as an amount of income2. For corporation tax purposes the charge is treated as a charge to corporation tax on income3.

A similar charge arises where the interest in the lease which is sold belonged to an associate of X; if the associate (or an associate of the associate) receives the capital sum, the charge is on the associate (or associate of the associate)4.

The following persons are associated with one another for this purpose5:

  1.  

    (a)     any individual (X) and their spouse or civil partner and any relative (or spouse or civil partner of a relative) of X (or of X's spouse or civil partner)

  2.  

    (b)     a trustee of a settlement and any person who is a settlor and any person who is associated with that settlor6

  3.  

    (c)     any

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