Capital Allowances Act 2001 section 228C

S's income or profits: termination of leaseback

Section 228C deals with the tax consequences for the seller (S) when a sale-and-leaseback arrangement terminates, requiring an uplift to S's taxable income or profits calculated by reference to the original consideration and the plant's book value.

• When a leaseback terminates, S's income or profits from the relevant qualifying activity must be increased for tax purposes
• The increase is calculated as: Original Consideration × (Current Book Value ÷ Original Book Value)
• The restriction on deductions under section 228B does not affect the tax treatment of any refund amounts S receives on termination of the leaseback
• Refund amounts include any sum that would be received in respect of S's interest under the leaseback if amounts due to the buyer (B) or B's assignee were disregarded