Income Tax Act 2007 (c. 3)

[F1 Part 12A U.K. Sale and lease-back etc]

Textual Amendments

F1 Pt. 12A inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 4 para. 2 (with Sch. 9 paras. 1-9, 22)

[F2 Chapter 4 U.K. Leased assets: capital sums

Textual Amendments

F2 Pt. 12A Ch. 4 inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 4 para. 5 (with Sch. 9 paras. 1-9, 22)

Charge to income tax U.K.

681DD Charge to income tax U.K.

(1) The person obtaining the capital sum is charged to income tax, for the tax year in which the sum is obtained, on the amount given by subsection (2).

(2) That amount is—

(a) the amount of the payment for which a deduction by way of relevant tax relief is allowed, or

(b) the total amount of such payments (if more than one).

(3) But subsections (1) and (2) have effect subject to—

(a) subsections (4) to (7), and

(b) section 681DE(3) (hire-purchase agreements).

(4) The amount on which tax is charged under this section is not to exceed the capital sum obtained (but see section 681DE(4)).

(5) Subsection (6) applies if—

(a) income tax is charged under this section in respect of a capital sum, and

(b) a payment or part of a payment is taken into account in deciding the amount on which the tax is charged.

(6) The payment or part must be left out of account in deciding—

(a) whether income tax is to be charged under this section in respect of another capital sum, and

(b) the amount on which the tax is to be charged (if any is to be charged).

(7) The order in which subsections (5) and (6) are applied is the order in which capital sums are obtained.

(8) An amount on which income tax is charged under this section is treated for income tax purposes as an amount of income.

681DE Hire-purchase agreements U.K.

(1) This section applies if—

(a) the lease is a hire-purchase agreement (as defined in section 998A), and

(b) the capital sum is obtained in respect of the lessee's interest in the lease (whether it is obtained by the person making the payment or by an associate).

(2) Find the total of the following amounts—

(a) so much of any payment made under the lease by the person obtaining the capital sum as is not a payment for which a deduction by way of relevant tax relief is allowed, and

(b) if the lessee's interest was assigned to the person obtaining the capital sum, any capital payment made by that person as consideration for the assignment.

(3) If the total of the amounts found under subsection (2) is equal to or greater than the capital sum, income tax is not charged under section 681DD in respect of the capital sum.

(4) If the total of those amounts is less than the capital sum, in applying section 681DD(4) that total must be deducted from the capital sum.

(5) If the capital sum is the consideration for part only of the lessee's interest in the lease—

(a) any amount found under subsection (2) (and still unallowed) must be reduced to a just and reasonable proportion of it, and

(b) in calculating that proportion account must be taken of the degree to which the payments mentioned in subsection (2) have contributed to the value of what is disposed of in return for the capital sum.

(6) Subsection (7) applies if—

(a) more than one capital sum is (or is treated as) obtained by the same person in respect of the lessee's interest in the lease, and

(b) in arriving at a total under subsection (2) a payment is taken into account in respect of one of the capital sums.

(7) So far as the payment is so taken into account it must not be taken into account in applying subsection (2) to another of the capital sums.

(8) The order in which subsections (6) and (7) are applied is the order in which capital sums are obtained.

(9) If the capital sum is obtained by the personal representatives of a deceased person, the reference in subsection (2)(a) to any payment made under the lease by the person obtaining the capital sum includes any payment made under the lease by the deceased.

681DF Adjustments where sum obtained before payment made U.K.

(1) This section applies if a capital sum is obtained as mentioned in section 681DC and later a payment is made as mentioned in section 681DB.

(2) Adjustments must be made if they are needed to give effect to a charge to income tax under section 681DD in respect of the capital sum.

(3) An adjustment may be made within the period ending with the fifth anniversary of the 31 January following the tax year in which the payment is made.

(4) Subsection (3) applies despite any time limit specified in the Income Tax Acts.]