CG44125 | Targeted rules to prevent income to capital converter schemes by companies - sale and leaseback exclusion

TCGA92/S184G to I include provisions for certain common commercial transactions to be excluded from consideration. These are arm’s length sale and lease back transactions involving land where there is no connection between the lessor and the lessee. Whilst it would seem unlikely that such transactions would amount to arrangements where there was a main purpose of securing a tax advantage, the exclusion has been provided to eliminate any uncertainty. The exclusion does not mean that other types of sale and lease back between unconnected parties will necessarily be caught. Nor does it mean that all such arrangements between connected parties will be caught. Taxpayers should in such cases be guided by the information given in this document that the rules are targeted at arrangements where a main purpose was to secure a tax advantage through the use of capital losses in ways that reduce income profits.

For the purposes of TCGA92/S184H, the definition of tax advantage in TCGA92/S184D applies,but the tax advantage must also involve both the deduction of expenditure in calculating total profits, and the deduction of losses from the chargeable gain.