BLM74350 | ’Income-into-capital’ schemes and back loaded leases: Lease changes: 'new' lease first comes within Chapter 2 of Part 21 of CTA 2010 - no catching-up charge

No catching-up charge is imposed when a ‘post-25 November 1996’ lease first comes within Chapter 2 of Part 21 of CTA 2010 because the accountancy measure of rental income from the lease (‘accountancy rental earnings’) should not have systematically exceeded the taxable measure for previous periods (the ‘normal rent’).

• In the case of a lease which is initially a finance lease (or loan) Chapter 3 of Part 21 of CTA 2010 will have applied to it and the excess of accountancy rental earnings over normal rents will have been recognised as income. CTA10/S924 provides continuity of treatment of excesses in this situation (see BLM73010).

• In the case of a ‘post-25 November 1996’ lease which is an operating lease the general rules applicable to the head of charge at issue (usually trading income but sometimes property income) will ensure that a satisfactory measure of income is brought to account for tax.