Section 681DE | Hire-purchase agreements ^F1

(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.