614BI Reduction of taxable rent by the cumulative accountancy rental excess
(1) This section applies if a period of account of the current lessor (“L”) is one for which—
(a) the normal rent in relation to the lease exceeds the accountancy rental earnings, and
(b) there is a cumulative accountancy rental excess.
(2) The taxable rent for the period of account is reduced by setting against it the cumulative accountancy rental excess (but not so as to reduce that rent below the amount of the accountancy rental earnings).
(3) But see section 614BL(3) and (4) (under which the amount of the cumulative accountancy rental excess which may be set against the taxable rent is limited in some circumstances).
614BJ Meaning of “normal rental excess” and “cumulative normal rental excess”
(1) For the purposes of this Chapter, there is a “normal rental excess” in relation to a lease for any period of account of the current lessor (“L”) throughout which the leasing arrangements fall for accounting purposes to be treated, in accordance with generally accepted accounting practice, as a finance lease or loan if—
(a) the normal rent for the period, exceeds
(b) the accountancy rental earnings for the period.
(2) The amount of the normal rental excess for that period is equal to that excess.
(3) But if the taxable rent for the period is reduced under section 614BI (reduction of taxable rent by the cumulative accountancy rental excess), there is only a normal rental excess for the period if—
(a) the normal rent, reduced by an amount equal to the reduction under that section, exceeds
(b) the accountancy rental earnings.
(4) And in that case the amount of the normal rental excess for the period is equal to that excess.
(5) In this Chapter “cumulative normal rental excess”, in relation to the lease and a period of account of L, means so much of the total of the normal rental excesses for previous periods of account of L (as increased under section 614BO: recovery of bad debts following reduction under section 614BN) as has not been—
(a) set off under section 614BK (reduction of taxable rent by the cumulative normal rental excess) against the taxable rent for any such previous period, or
(b) reduced under section 614BN (relief for bad debts: reduction of cumulative normal rental excess).
614BK Reduction of taxable rent by the cumulative normal rental excess
(1) This section applies if a period of account of the current lessor (“L”) is one for which—
(a) the taxable rent in relation to the lease is as a result of section 614BF (current lessor taxed by reference to accountancy rental earnings) an amount equal to the accountancy rental earnings, and
(b) there is a cumulative normal rental excess.
(2) The taxable rent for the period of account is reduced by setting against it the cumulative normal rental excess (but not so as to reduce that rent below the amount of the normal rent).
(3) But see section 614BN(3) and (4) (under which the amount of the cumulative normal rental excess which may be set against the taxable rent is limited in some circumstances).
614BL Relief for bad debts: reduction of cumulative accountancy rental excess
(1) This section applies if in relation to the lease for any period of account of the current lessor—
(a) there is a cumulative accountancy rental excess, and
(b) a bad debt deduction falls to be made in respect of rent from the lease.
(2) If for that period—
(a) the accountancy rental earnings in relation to the lease exceed the normal rent, and
(b) the amount of the bad debt deduction exceeds the amount of the accountancy rental earnings,
the cumulative accountancy rental excess for that period is reduced by the amount of the excess of that deduction over those earnings (but not so as to reduce the amount of that rental excess below nil).
(3) Subsections (4) and (5) apply if for that period the accountancy rental earnings in relation to the lease do not exceed the normal rent.
(4) The amount of the cumulative accountancy rental excess that may be set against the taxable rent for that period under section 614BI(2) (reduction of taxable rent by the cumulative accountancy rental excess) is limited to the amount (if any) by which the normal rent exceeds the bad debt deduction.
(5) If for that period the bad debt deduction exceeds the normal rent, the cumulative accountancy rental excess for that period is reduced by the amount of that excess (but not so as to reduce the amount of that rental excess below nil).
(6) In this section—
“bad debt deduction”, in relation to a period of account of the lessor, means the total of any sums falling within section 35(1)(a), (b) or (c) of ITTOIA 2005 in respect of amounts in respect of rents from the lease of the asset which are deductible as expenses for that period, and
“taxable rent” has the meaning given in section 614BG(2).
614BM Recovery of bad debts following reduction under section 614BL
(1) This section applies if in relation to the lease—
(a) the cumulative accountancy rental excess for any period of account of the current lessor (“L”) has been reduced under section 614BL(2) or (5) because of a bad debt deduction,
(b) in a subsequent period of account of L, an amount (“the relevant credit”) is recovered or credited in respect of the amount which constituted the bad debt deduction, and
(c) there is a cumulative accountancy rental excess for that subsequent period.
(2) The cumulative accountancy rental excess for the subsequent period is increased.
(3) If the relevant credit does not exceed the total of the reductions under section 614BL(2) or (5), the increase is by the relevant credit.
(4) Otherwise, the increase is limited to that total.
(5) In this section “bad debt deduction” has the meaning given in section 614BL(6).
614BN Relief for bad debts: reduction of cumulative normal rental excess
(1) This section applies if in relation to the lease for any period of account of the current lessor—
(a) there is a cumulative normal rental excess, and
(b) a bad debt deduction falls to be made in respect of rent from the lease.
(2) If for that period—
(a) the accountancy rental earnings in the case of the lease do not exceed the normal rent, and
(b) the amount of the bad debt deduction exceeds the amount of that rent,
the cumulative normal rental excess for that period is reduced by the amount of the excess of that deduction over that rent (but not so as to reduce the amount of that rental excess below nil).
(3) Subsections (4) and (5) apply if for that period the accountancy rental earnings in relation to the lease exceed the normal rent.
(4) The amount of the cumulative normal rental excess that may be set against the taxable rent for that period under section 614BK (reduction of taxable rent by the cumulative normal rental excess) is limited to the amount (if any) by which the accountancy rental earnings exceed the bad debt deduction.
(5) If for that period the bad debt deduction exceeds the accountancy rental earnings, the cumulative normal rental excess for that period is reduced by the amount of the excess (but not so as to reduce the amount of that rental excess below nil).
(6) In this section, in relation to a period of account of the lessor—
“bad debt deduction” has the meaning given in section 614BL(6), and
“taxable rent” has the meaning given in section 614BG(2).
614BO Recovery of bad debts following reduction under section 614BN
(1) This section applies if in relation to the lease—
(a) the cumulative normal rental excess for any period of account of the current lessor (“L”) has been reduced under section 614BN(2) or (5) as a result of a bad debt deduction,
(b) in a subsequent period of account of L, an amount (“the relevant credit”) is recovered or credited in respect of the amount which constituted the bad debt deduction, and
(c) there is a cumulative normal rental excess for that subsequent period.
(2) The cumulative normal rental excess for the subsequent period is increased.
(3) If the relevant credit does not exceed the total of the reductions under section 614BN(2) or (5), the increase is by the relevant credit.
(4) Otherwise, the increase is limited to that total.
(5) In this section “bad debt deduction” has the meaning given in section 614BL(6).
(1) This section applies if the current lessor (“L”) or a person connected with L disposes of—
(a) the lessor's interest under the lease,
(b) the leased asset, or
(c) an asset representing the leased asset (see section 614DD).
(2) This Part has effect as if immediately before the disposal a period of account of L ended and another began.
(3) If—
(a) two or more disposals within subsection (1) are made at the same time, and
(b) there is any cumulative accountancy rental excess for any period of account of L in which the disposal occurs,
subsection (2) has effect in relation to those disposals as if they together constituted a single disposal.
(4) In this section “dispose” and “disposal” are to be read in accordance with TCGA 1992.
(5) In cases where there is any cumulative accountancy rental excess for L's period of account in which the disposal occurs, section 37A of that Act (consideration on disposal of certain leases) makes provision for the purposes of that Act about the reduction of the consideration for the disposal by that excess in determining if a gain has accrued.
614BQ Assignments on which neither a gain nor a loss accrues
(1) This section applies if—
(a) the current lessor (“L”) assigns the lessor's interest under the lease, and
(b) the assignment is a disposal on which, as a result of any of the no gain/no loss provisions, neither a gain nor a loss accrues.
(2) This Part has effect as if—
(a) a period of account of L (“L's period”) ended with the assignment, and
(b) a period of account of the assignee (“A's period”) began with the assignment.
(3) Any cumulative accountancy rental excess for L's period becomes the cumulative accountancy rental excess for A's period.
(4) Any cumulative normal rental excess for L's period becomes the cumulative normal rental excess for A's period.
(5) If the assignee is a company subject to the charge to corporation tax on income, so far as this section relates to the assignee, it applies for the purposes of Part 21 of CTA 2010 as it would otherwise apply for the purposes of this Part.
(6) In this section “the no gain/no loss provisions” has the same meaning as in TCGA 1992 (see section 288(3A) of that Act).
(1) This section and sections 614BS to 614BW apply if an occasion occurs on which a major lump sum falls to be paid in relation to the lease of the asset.
(2) In those sections the occasion is called “the relevant occasion”.
614BS Cases where expenditure taken into account under Part 2, 5 or 8 of CAA 2001
(1) This section applies if capital expenditure incurred by the current lessor (“L”) in respect of the leased asset is or has been taken into account for the purposes of any allowance or charge under—
(a) Part 2 of CAA 2001 (plant and machinery allowances),
(b) Part 5 of that Act (mineral extraction allowances), or
(c) Part 8 of that Act (patent allowances).
(2) The Part of that Act in question (“the relevant Part”) has effect as if the relevant occasion were an event (“the relevant event”) as a result of which a disposal value is to be brought into account of an amount equal to the amount or value of the major lump sum (but subject to any applicable limiting provision).
(3) In this section “limiting provision” means a provision to the effect that the disposal value of the asset in question is not to exceed an amount (“the limit”) described by reference to capital expenditure incurred in respect of the asset.
(4) Subsection (5) applies if—
(a) as a result of subsection (2), a disposal value (“the relevant disposal value”) falls or has fallen to be brought into account by a person in respect of the leased asset for the purposes of the relevant Part, and
(b) a limiting provision has effect in the case of that Part.
(5) The limiting provision has effect (so far as it would not otherwise do so), in relation to the relevant disposal value and any simultaneous or later disposal value, as if—
(a) it did not limit any particular disposal value, but
(b) it limited the total amount of all the disposal values brought into account for the purposes of the relevant Part by L in respect of the leased asset.
(6) In subsection (5) “simultaneous or later disposal value” means any disposal value which falls to be brought into account by L in respect of the leased asset as a result of any event occurring at the same time as, or later than, the relevant event.
614BT Cases where expenditure taken into account under other provisions of CAA 2001
(1) This section applies if any allowance is or has been given in respect of capital expenditure incurred by the current lessor (“L”) in respect of the leased asset under any provision of CAA 2001 other than—
(a) Part 2 of CAA 2001 (plant and machinery allowances),
(b) Part 5 of that Act (mineral extraction allowances), or
(c) Part 8 of that Act (patent allowances).
(2) The amount specified in subsection (3) is treated, in relation to L, as if it were a balancing charge to be made on L for the chargeable period in which the relevant occasion falls.
(3) That amount is an amount equal to—
(a) the total of the allowances given as mentioned in subsection (1) (so far as not previously recovered or withdrawn), or
(b) if it is less, the amount or value of the major lump sum.
(4) In this section “chargeable period” has the meaning given by section 6 of CAA 2001.
614BU Capital allowances deductions: waste disposal and cemeteries
(1) This section applies if any deduction is or has been allowed to the current lessor (“L”) in respect of capital expenditure incurred in connection with the leased asset as a result of—
(a) section 165 or 168 of ITTOIA 2005 (preparation and restoration expenditure in relation to waste disposal site), or
(b) section 170 of that Act (cemeteries and crematoria: deduction for capital expenditure).
(2) L is treated as if trading receipts arose to L from the trade in question on the relevant occasion.
(3) The amount of those receipts is equal to the lesser of—
(a) the amount or value of the major lump sum, and
(b) the deductions previously allowed.
614BV Capital allowances deductions: films and sound recordings
(1) This section applies if—
(a) any relevant deduction has been allowed to the current lessor (“L”) in respect of expenditure incurred in connection with the leased asset, and
(b) the amount or value of the major lump sum exceeds so much of that sum as was treated as receipts of a revenue nature under section 134(2) of ITTOIA 2005 (disposal proceeds of original master version of film or sound recording treated as receipt of a revenue nature).
(2) In subsection (1) “relevant deduction” means any deduction as a result of—
(a) section 135 of ITTOIA 2005 (allocation of expenditure on master versions of films or sound recordings to periods), or
(b) section 138, 138A, 139 or 140 of that Act (relief for production or acquisition expenditure in respect of films).
(3) L is treated as if receipts of a revenue nature arose to L from the trade or business in question on the relevant occasion.
(4) The amount of those receipts is equal to the excess mentioned in subsection (1)(b).
(1) This section applies if—
(a) section 614BS or 614BT applies in relation to a leased asset,
(b) allowances are or have been made to a person (“the contributor”) as a result of sections 537 to 542 of CAA 2001 (allowances in respect of contributions to capital expenditure), and
(c) those allowances are or were in respect of the contributor's contribution of a capital sum to expenditure on the provision of the leased asset.
(2) Section 614BS or, as the case may be, section 614BT has effect in relation to the contributor and those allowances as it has effect in relation to the current lessor and allowances in respect of capital expenditure incurred by the current lessor in respect of the leased asset.
614BX Pre-26 November 1996 schemes where this Chapter does not at first apply
(1) This section applies if—
(a) the lease of an asset forms part of a pre-26 November 1996 scheme, but
(b) the conditions in section 614BC become met after 26 November 1996.
(2) For the meaning of “forming part of a pre-26 November 1996 scheme”, see section 614D.
(3) This Part has effect as if—
(a) a period of account (“period 1”) of the current lessor (“L”) ended immediately before the time at which those conditions become met,
(b) another period of account of L (“period 2”) began immediately before that time and ended immediately after that time, and
(c) another period of account of L began immediately after that time.
(4) If, on the continuous application assumption (see subsection (9)), there would be an amount of cumulative accountancy rental excess for period 2, that amount is the cumulative accountancy rental excess for period 2.
(5) If subsection (4) applies, L is treated for income tax purposes as if in period 1 L had been entitled to, and there had arisen to L, rent from the lease of an amount equal to that cumulative accountancy rental excess.
(6) The amount of rent mentioned in subsection (5)—
(a) is in addition to any other rent from the lease for period 1, and
(b) is left out of account for the purposes of section 614BF (current lessor taxed by reference to accountancy rental earnings).
(7) Rent within subsection (5) is treated for income tax purposes as if it had accrued and L had become entitled to it immediately before the end of period 1.
(8) If, on the continuous application assumption, there would be an amount of cumulative normal rental excess for period 2, that amount is the cumulative normal rental excess for period 2.
(9) In this section “the continuous application assumption” means the assumption that this Chapter (other than this section) had applied in the case of the lease at all times on or after 26 November 1996.
(10) If at any time the person who was the lessor at that time was a person within the charge to corporation tax on income, the reference in subsection (9) to this Chapter (other than this section) includes a reference to Chapter 2 of Part 21 of CTA 2010 (other than section 923 of that Act).
614BY Post-25 November 1996 schemes to which Chapter 3 applied first
(1) This section applies if—
(a) the conditions in section 614BC become met in the case of the lease of the asset, and
(b) immediately before those conditions become met, Chapter 3 applied.
(2) Subsection (3) applies for the purpose of determining—
(a) the cumulative accountancy rental excess for any period of account ending after those conditions become met, or
(b) the cumulative normal rental excess for any such period.
(3) This Part has effect as if this Chapter had applied in relation to the lease at any time when Chapter 3 applied in relation to it.
(4) If at any time the person who was the lessor at that time was a person within the charge to corporation tax on income—
(a) the reference in subsection (1)(a) to the conditions in section 614BC becoming met at that time includes a reference to the conditions in section 902 of CTA 2010 becoming so met,
(b) the reference in subsection (1)(b) to Chapter 3 applying immediately before that time includes a reference to Chapter 3 of Part 21 of that Act so applying, and
(c) the reference in subsection (3) to Chapter 3 applying at that time includes a reference to Chapter 3 of that Part so applying.
(1) This Chapter applies to arrangements involving the lease of an asset that—
(a) fall to be treated, in accordance with generally accepted accounting practice, as a finance lease or loan, but
(b) are not arrangements to which Chapter 2 applies.
(2) It does not matter whether the arrangements are or have been entered into by companies or other persons.
(1) The main purpose of this Chapter where there are arrangements to which this Chapter applies is to charge a person entitled to the lessor's interest under the lease of the asset to income tax on amounts of income determined as mentioned in subsection (2).
(2) The amounts referred to in subsection (1) are determined by reference to the amounts that fall for accounting purposes to be treated, in accordance with generally accepted accounting practice, as the income return on and after 26 November 1996 on investment in respect of the finance lease or loan.
(3) The amounts referred to in subsection (1) are also determined taking into account the substance of the matter as a whole, including, in particular, the state of affairs—
(a) as between connected persons, or
(b) within a group of companies,
as reflected or falling to be reflected in accounts of any of those persons or in consolidated group accounts.
(1) This Chapter applies if—
(a) a lease of an asset is or has been granted on or after 26 November 1996,
(b) the lease forms part of a post-25 November 1996 scheme,
(c) condition A in section 614BC is or has been met at some time on or after 26 November 1996 in relation to the lease in a period of account of the current lessor (“L”), and
(d) Chapter 2 does not apply in relation to the lease because of the other conditions in that section not all being, or having been, met as mentioned in section 614BB.
(2) For the meaning of “forming part of a post-25 November 1996 scheme”, see section 614D.
(3) This Chapter does not apply so far as, in relation to L, the lease falls to be regarded as a long funding lease for the purposes of Part 2 of CAA 2001 (plant and machinery allowances) in accordance with Chapter 6A of that Part (interpretation of provisions about long funding leases) (see section 70G of that Act).
(4) If condition A in section 614BC has been met at any time on or after 26 November 1996 in a period of account of the person who was at that time the lessor, it is taken to continue to be met unless and until one of the conditions in subsection (5) is met.
(5) The conditions are that—
(a) the asset ceases to be leased under the lease, or
(b) the lessor's interest under the lease is assigned to a person who is not connected with any of the persons specified in subsection (6).
(6) Those persons are—
(a) the assignor,
(b) any person who was the lessor at some time before the assignment, and
(c) any person who at some time after the assignment becomes the lessor pursuant to arrangements made by a person who was the lessor, or was connected with the lessor, at some time before the assignment.
(7) If at any time the person who was the lessor at that time was a person within the charge to corporation tax on income—
(a) the reference in subsection (4) to condition A in section 614BC having been met at that time includes a reference to condition A in section 902 of CTA 2010 having been so met, and
(b) the reference in subsection (1)(d) to the other conditions in section 614BC not having been met as mentioned in section 614BB includes a reference to the other conditions in section 902 of that Act not having been met as mentioned in section 901 of that Act.
(8) Nothing in subsection (4) prevents this Chapter from applying again in relation to the lease where the lessor's interest is assigned if the conditions for its application are met after the assignment.
614CC Current lessor taxed by reference to accountancy rental earnings
(1) This section applies if, in the case of any period of account of the current lessor (“L”)—
(a) this Chapter applies in relation to the lease, and
(b) the accountancy rental earnings in respect of the lease for that period of account exceed the normal rent for that period.
(2) For income tax purposes, L is treated as if in that period of account L had been entitled to, and there had arisen to L, rent from the lease of an amount equal to those accountancy rental earnings (instead of the normal rent referred to in subsection (1)(b)).
(3) Such rent from the lease of an asset is treated for income tax purposes—
(a) as if it had accrued at an even rate throughout so much of the period of account as falls within the period for which the asset is leased, and
(b) as if L had become entitled to it as it accrued.
614CD Application of provisions of Chapter 2 for purposes of this Chapter
Sections 614BG to 614BQ apply for the purposes of this Chapter as they apply for the purposes of Chapter 2, but taking the references in sections 614BH(1) and 614BK(1)(a) to section 614BF as references to section 614CC.
614D Pre-26 November 1996 schemes and post-25 November 1996 schemes
(1) For the purposes of this Part, a lease of an asset—
(a) forms part of a pre-26 November 1996 scheme if (and only if) the conditions in subsection (2) or (3) are met, and
(b) in any other case, forms part of a post-25 November 1996 scheme.
(2) The conditions in this subsection are that—
(a) a contract in writing for the lease of the asset was made before 26 November 1996,
(b) either—
(i) the contract was unconditional, or
(ii) if the contract was conditional, the conditions were met before that date, and
(c) no terms remain to be agreed on or after that date.
(3) The conditions in this subsection are that—
(a) a contract in writing for the lease of the asset was made before 26 November 1996,
(b) the condition in subsection (2)(b) or (c) was not met in the case of the contract,
(c) either—
(i) the contract was unconditional, or
(ii) if the contract was conditional, the conditions were met before the end of the finalisation period or within such further period as the Commissioners for Her Majesty's Revenue and Customs may allow in the particular case,
(d) no terms remain to be agreed after the end of the finalisation period or such further period as those Commissioners may so allow, and
(e) the contract in its final form was not materially different from the contract as it stood when it was made before 26 November 1996.
(4) In subsection (3) “the finalisation period” means the period which ended with the later of—
(a) 31 January 1997, and
(b) the end of the period of six months beginning with the day after that on which the contract was made as mentioned in subsection (3)(a).
614DA Time apportionment where periods of account do not coincide
(1) Subsection (2) applies if a period of account of the lessor (“L”) does not coincide with a period of account of a person connected with L.
(2) Any amount which falls for the purposes of this Part to be found for L's period of account but by reference to the connected person is found by making such apportionments as may be necessary between two or more periods of account of the connected person.
(3) Subsection (4) applies if a period of account of L does not coincide with a period for which consolidated group accounts of a group of companies of which L is a member fall to be prepared.
(4) Any amount which falls for the purposes of this Part to be found for L's period of account but by reference to the consolidated group accounts is found by making such apportionments as may be necessary between two or more periods for which consolidated group accounts of the group fall to be prepared.
(5) Any apportionment under subsection (2) or (4) must be made in proportion to the number of days in the respective periods that fall within L's period of account.
614DB Periods of account and related periods of account and tax years
(1) In this Part “period of account” means a period for which accounts are made up.
(2) Except for the purposes of sections 614BB to 614BE and subsection (3), in this Part “period of account” does not include a period that begins before 26 November 1996.
(3) But this Part applies in relation to a period of account that begins before 26 November 1996 and ends on or after that date as if—
(a) so much of the period as falls before that date, and
(b) so much of the period as falls on or after that date,
were separate periods of account.
(4) For the purposes of this Part, a tax year is related to a period of account if the tax year consists of or includes the whole or any part of the period of account.
(5) For the purposes of this Part a period of account is related to a tax year if the tax year is related to the period of account.
(1) For the purposes of this Part in its application as a result of any leasing arrangements, if a person (“A”) is connected with another (“B”) at some time during the relevant period A is treated as being connected with B throughout that period.
(2) The relevant period is the period that—
(a) begins at the earliest time at which any of the arrangements were made, and
(b) ends when the current lessor finally ceases to have an interest in the asset or any arrangements relating to it.
(1) For the purposes of this Part, the assets described in subsection (2) are treated as representing the leased asset.
(2) Those assets are—
(a) any asset derived from the leased asset or created out of it,
(b) any asset from which the leased asset was derived or out of which the leased asset was created,
(c) any asset derived from or created out of an asset within paragraph (b), and
(d) any asset that derives the whole or a substantial part of its value from the leased asset or an asset that itself represents the leased asset.
614DE Parent undertakings and consolidated group accounts
(1) This Part has effect in relation to a body corporate that—
(a) is a parent undertaking, but
(b) for accounting purposes is not required to prepare consolidated group accounts in accordance with generally accepted accounting practice,
as if it were so required.
(2) For the purposes of subsection (1) it does not matter where the body corporate is incorporated.
(3) In subsection (1) “parent undertaking” is to be read in accordance with section 1162 of the Companies Act 2006.
In this Part, unless the context otherwise requires—
“accountancy rental earnings” has the meaning given by section 614AB(1),
“accountancy rental excess” is to be read—
for the purposes of Chapter 2, in accordance with section 614BH(1) to (4), and
for the purposes of Chapter 3, in accordance with section 614BH(1) to (4) as it has effect as a result of section 614CD,
“asset” means any form of property or rights,
“asset representing the leased asset” is to be read in accordance with section 614DD,
“cumulative accountancy rental excess” is to be read—
for the purposes of Chapter 2, in accordance with section 614BH(5), and
for the purposes of Chapter 3, in accordance with section 614BH(5) as it has effect as a result of section 614CD,
“cumulative normal rental excess” is to be read—
for the purposes of Chapter 2, in accordance with section 614BJ(5), and
for the purposes of Chapter 3, in accordance with section 614BJ(5) as it has effect as a result of section 614CD,
“the current lessor”, in relation to a lease of an asset, means the person who is for the time being entitled to the lessor's interest under the lease,
“finance lessor” means a person who for accounting purposes is treated, in accordance with generally accepted accounting practice, as the person with—
the grantor's interest in relation to a finance lease, or
the lender's interest in relation to a loan,
“for accounting purposes” means for the purposes of—
accounts of companies incorporated in any part of the United Kingdom, or
consolidated group accounts for groups all the members of which are companies so incorporated,
“lease”—
in relation to land, includes an underlease, sublease, tenancy or licence, and any agreement for a lease, underlease, sublease, tenancy or licence and, in the case of land outside the United Kingdom, any interest corresponding to a lease as so defined, and
in relation to any form of property or right other than land, means any kind of agreement or arrangement under which payments are made for the use of, or otherwise in respect of, an asset,
and “rent” is to be read accordingly,
“the leasing arrangements”, in relation to a lease of an asset, means—
the lease,
any arrangements relating to or connected with the lease, and
any other arrangements of which the lease forms part,
and includes a reference to any of the leasing arrangements,
“the lessee”, in relation to a lease of an asset, means (except in the expression “the lessee's interest under the lease”) the person entitled to the lessee's interest under the lease,
“the lessor”, in relation to a lease of an asset, means (except in the expression “the lessor's interest under the lease”) the person entitled to the lessor's interest under the lease,
“major lump sum” is to be read in accordance with section 614BC(5),
“normal rent” is to be read in accordance with section 614AA,
“normal rental excess” is to be read—
for the purposes of Chapter 2, in accordance with section 614BJ(1) to (4), and
for the purposes of Chapter 3, in accordance with section 614BJ(1) to (4) as it has effect as a result of section 614CD,
“period of account” is to be read in accordance with section 614DB(1) to (3),
“post-25 November 1996 scheme” is to be read in accordance with section 614D(1)(b),
“pre-26 November 1996 scheme” is to be read in accordance with section 614D(1)(a),
“related period of account” is to be read in accordance with section 614DB(5),
“related tax year” is to be read in accordance with section 614DB(4),
“the rental earnings”, in relation to a lease of an asset and any period, has the meaning given by section 614AC, and
“sum” includes any money or money's worth (and “pay” and related expressions are to be read accordingly).
(1) This Part makes provision about—
(a) accrued income profits and losses, and
(b) exemptions which apply where there is interest on securities.
(2) In this Part “accrued income profits” means profits which under Chapter 2 are treated as made where securities which carry or have carried interest are transferred.
(3) See sections 628, 630 and 670(2) and (3) for when such profits are treated as made.
(4) In this Part “accrued income losses” means losses which under Chapter 2 are treated as made where securities which carry or have carried interest are transferred.
(5) See section 628 for when such losses are treated as made.
(6) For the meaning of “securities”, “transfer” and “interest”, see sections 619, 620 and 671 respectively.
(1) Tax is charged under this Chapter on the full amount of the accrued income profits treated as made in the tax year.
(2) Accrued income profits within section 628(5) (profits treated as made where the settlement day falls within an interest period) are treated as made in the tax year in which the last day of the interest period in which the profits are treated as made falls.
(3) Accrued income profits within section 630(2) (profits treated as made where the settlement day falls after the end of the securities' last interest period) are treated as made in the tax year in which the settlement day for the transfer falls.
(4) Accrued income profits within section 670(2) or (3) (withdrawal of relief for unremittable transfer proceeds) are treated as made in the tax year in which the proceeds cease to be unremittable.
(5) Section 668(5) (when proceeds are unremittable) applies for the purposes of subsection (4) as it applies for the purposes mentioned in section 668(5).
(6) For the meaning of “interest period” and “the settlement day”, see sections 673 and 674 respectively.
(7) Subsection (1) is subject to section 832 of ITTOIA 2005 (relevant foreign income charged on remittance basis).
(1) The person liable for any tax charged under this Chapter is the person treated as making the accrued income profits.
(2) But see section 666 (under which nominees and trustees may be disregarded).
619 Meaning of “securities” and when securities are of the same kind
(1) In this Chapter “securities” includes—
(a) any loan stock or similar security other than an excluded security, and
(b) shares in a building society which are qualifying shares for the purposes of section 117(4) of TCGA 1992 (qualifying corporate bonds),
but (subject to paragraph (b)) it does not include any shares in a company.
(2) For the purposes of subsection (1)(a), it does not matter—
(a) whether the security is of the government of the United Kingdom, any other government, any public or local authority in the United Kingdom or elsewhere, or any company or other body,
(b) whether or not the security is secured,
(c) whether or not the security carries a right to interest of a fixed amount or at a fixed rate percentage of the nominal value of the security, or
(d) whether or not the security is in bearer form.
(3) In this section “excluded securities” means—
(a) national savings certificates (including Ulster Savings Certificates as defined in section 693(7) of ITTOIA 2005),
(b) war savings certificates,
(c) uncertificated eligible debt security units as defined in section 986,
(d) certificates of deposit (see section 1019),
(e) a security which is a right falling within section 552(1)(c) of ITTOIA 2005 at the time of the transfer in question,
(f) a security that meets the redemption conditions (see subsection (5)), and
(g) a security that is a deeply discounted security within the meaning of Chapter 8 of Part 4 of ITTOIA 2005.
(4) But subsection (3)(g) does not include a security if, on its transfer, Chapter 8 of Part 4 of ITTOIA 2005 would apply subject to the rules in sections 454 to 456 of that Act (listed securities held since 26 March 2003).
(5) The redemption conditions are that—
(a) the security is redeemable,
(b) the amount payable on its redemption exceeds its issue price, and
(c) no return other than the amount of that excess is payable on it.
(6) Securities are treated as being of the same kind for the purposes of this Chapter if they—
(a) are treated as being of the same kind by the practice of a recognised stock exchange, or
(b) would be so treated if dealt in on such an exchange.
(1) References in this Chapter to the transfer of securities are—
(a) to the transfer of securities by way of sale, exchange, gift or otherwise,
(b) to the conversion of securities in any case where there is no transfer of the securities within paragraph (a),
(c) to the redemption of variable rate securities in any case where there has been a transfer of the securities at any time before redemption, or
(d) to a transaction or event treated as a transfer under—
(i) section 648(1) or (3) (strips of gilt-edged securities),
(ii) section 649(4) (new securities issued with extra return),
(iii) section 650(2), (4) or (6) (trading stock appropriations etc),
(iv) section 651(2) (owner becoming entitled to securities as trustee), or
(v) section 652(2) (securities ceasing to be held on charitable trusts).
(2) But subsection (1)(a) does not include—
(a) the vesting of securities in personal representatives on death, or
(b) the transfer of a security to which Chapter 8 of Part 4 of ITTOIA 2005 applies subject to the rules in sections 454 to 456 of that Act.
(3) For the purposes of this Chapter—
(a) a transfer of securities under an agreement takes place when the agreement is made, and
(b) the person to whom they are to be transferred under the agreement becomes entitled to them at that time.
(4) But in the case of a conversion of securities within subsection (1)(b), the transfer takes place on the day of the conversion.
(5) And in the case of a redemption of securities within subsection (1)(c), the transfer takes place on the day of the redemption.
(6) Subsection (1) is subject to—
section 648(7) (transactions forming part of exchanges concerning strips of gilt-edged securities),
section 653 (stock lending), and
section 655 (transfers under sale and repurchase arrangements).
(7) In this Chapter “conversion”, in relation to securities, has the meaning given by section 132 of TCGA 1992.
(1) In this Chapter “transferor” and “transferee” are to be read in accordance with section 620 (but this is subject to subsections (2) to (4)).
(2) In the case of a conversion of securities within section 620(1)(b)—
(a) the person who was entitled to the securities immediately before the conversion is treated as the transferor, but
(b) no one is treated as the transferee.
(3) In the case of a redemption of securities within section 620(1)(c)—
(a) the person who was entitled to the securities immediately before the redemption is treated as the transferor, but
(b) no one is treated as the transferee.
(4) The following provisions also contain rules about who is the transferor or the transferee for certain transfers—
section 648(1) to (4) (strips of gilt-edged securities),
section 649(4) and (5) (new securities issued with extra return),
section 650 (trading stock appropriations etc),
section 651(2) and (3) (owner becoming entitled to securities as trustee),
section 652(2) and (3) (securities ceasing to be held on charitable trusts), and
section 666 (certain transfers by or to nominees or trustees treated as made by or to others).
(5) See also sections 638 to 647 (excluded transferors and transferees).
622 Application of Chapter to different kinds of transfer
(1) Different rules apply under this Chapter for the different kinds of transfer specified in subsection (2).
(2) The transfers are—
(a) transfers with accrued interest (see section 623),
(b) transfers without accrued interest (see section 624),
(c) transfers with unrealised interest (see section 625), and
(d) transfers of variable rate securities (see section 626).
(3) If a transfer is both a transfer with unrealised interest and a transfer of a kind specified in subsection (2)(a), (b) or (d), both the provisions of this Chapter applicable to transfers with unrealised interest and the provisions applicable to the other kind of transfer apply to the transfer.
(1) The general rule is that securities are transferred with accrued interest for the purposes of this Chapter if they are transferred with the right to receive interest payable—
(a) in a case where the settlement day is an interest payment day, on the settlement day, and
(b) in any other case, on the first interest payment day after the settlement day.
(2) But, in the case of the transfers specified in subsection (3), subsection (4) applies instead of subsection (1).
(3) The transfers are those treated as made under—
(a) section 620(1)(b) (conversion),
(b) section 650 (trading stock appropriations etc),
(c) section 651 (owner becoming entitled to securities as trustee), and
(d) section 652 (securities ceasing to be held on charitable trusts).
(4) If the person treated as the transferor had the right to receive interest payable as mentioned in subsection (1)(a) or (b), the securities are treated as transferred with accrued interest.
(5) This section is subject to section 626 (transfers of variable rate securities).
(6) See also—
section 648(6) (certain exchanges of strips treated as transfers with accrued interest), and
section 649(4) (issue of new securities with extra return treated as transfer with accrued interest).
(1) The general rule is that securities are transferred without accrued interest for the purposes of this Chapter if they are transferred without the right to receive interest payable as mentioned in section 623(1)(a) or (b).
(2) But, in the case of the transfers specified in subsection (3), subsection (4) applies instead of subsection (1).
(3) The transfers are those treated as made under—
(a) section 620(1)(b) (conversion),
(b) section 650 (trading stock appropriations etc),
(c) section 651 (owner becoming entitled to securities as trustee), and
(d) section 652 (securities ceasing to be held on charitable trusts).
(4) If the person treated as the transferor did not have the right to receive interest payable as mentioned in section 623(1)(a) or (b), the securities are treated as transferred without accrued interest.
(5) This section is subject to section 626 (transfers of variable rate securities).
(6) See also section 648(5) (certain exchanges of strips treated as transfers without accrued interest).