PART XVII TAX AVOIDANCE
CHAPTER VI MISCELLANEOUS
Other provisions
C1C2C3C4C6C7C8C9781 Assets leased to traders and others.
M11
Subject to section 782, where—
a
a deduction by way of tax relief which is one of the kinds listed in subsection (4) below is allowable in respect of a payment made under a lease of an asset of any description, and
b
before, at or after the time when the payment is made, either—
i
the person who made the payment has obtained or obtains a capital sum in respect of the lessee’s interest in the lease, or
ii
the lessor’s interest in the lease, or any other interest in the asset, has belonged to an associate of the person who made the payment, and that associate has obtained a capital sum in respect of that interest,
F101A
An amount charged to income tax under subsection (1) above is treated for income tax purposes as an amount of income.
F141B
So far as relating to corporation tax, the charge to tax under subsection (1) has effect as an application of the charge to corporation tax on income.
2
A person shall not be assessed to tax under subsection (1) above on any amount to the extent to which it exceeds the capital sum by reference to which he is so assessed.
3
Subsection (1) above shall not apply to payments under a lease created on or before 14th April 1964.
4
The kinds of deductions by way of tax relief to which subsection (1) above applies are as follows—
a
a deduction in computing F3profits or losses of a trade, profession or vocation for the purposes of tax;
F8ab
b
F17ca
a deduction under section 1219 of CTA 2009 (expenses of management of a company's investment business);
d
F5a deduction from earnings allowed under section 336 of ITEPA 2003 (expenses) or allowable in computing losses in an employment for tax purposes;
e
a deduction allowable for tax purposes in computing profits or gains or losses arising from woodlands.
5
Where—
a
the deduction by way of tax relief mentioned in subsection (1)(a) above is a deduction in computing, for income tax purposes, profits or gains or losses of a trade, profession or vocation, or arising from woodlands, and
b
any part of the payments made under the lease by the person obtaining the capital sum is a payment in respect of which a deduction is not allowed for the reason that the whole or any part of the period in which the payment would fall to be allowed is not a period on the F3profits of which income tax falls to be computed in respect of the trade, profession or vocation,
for the reference in subsection (2) above to the amount of the capital sum there shall be substituted a reference to that amount after deducting the amount of the payment in respect of which a deduction is not allowed for that reason.
6
So far as in respect of a capital sum any part of a payment allowed as a deduction by way of tax relief of a kind to which this section applies is taken into account in making an assessment under subsection (1) above, that part of the payment shall be left out of account in determining whether any and if so what amount should be assessed by reference to any other capital sum; and the order in which this subsection is applied shall be the order in which the capital sums are obtained.
7
There shall be made all such adjustments of tax, whether by way of making assessments or by repayment of tax, as are required after the making of any such payment as is described in subsection (1) above to give effect to the charge under that subsection in respect of a sum obtained before the making of the payment.
8
Notwithstanding anything in the Tax Acts limiting the time within which an assessment may be made or a claim for relief may be admitted any such adjustment may be made, by making an assessment or otherwise, at any time F1within the period specified in subsection (8A) below.
F28A
The period mentioned in subsection (8) above is—
a
in the case of adjustments with respect to income tax, the period ending with the fifth anniversary of the 31st January next following the year of assessment in which the payment was made;
b
in the case of adjustments with respect to corporation tax, the period of six years beginning at the end of the accounting period in which the payment was made.
9
This section shall not apply if the capital sum obtained in respect of the lessee’s interest in a lease constituting a hire-purchase agreement for machinery or plant is a sum which is required to be brought into account as the whole or part of the disposal value of the machinery or plant under F4section 68 of the Capital Allowances Act.