Corporation Tax Act 2010 section 838

Relevant corporation tax relief: deduction not to exceed commercial rent

Section 838 restricts the corporation tax relief deduction available for lease-back payments connected with transferred land, ensuring it does not exceed a commercial rent level, and sets out rules for spreading and carrying forward relief.

• The tax deduction for non-excluded lease-back payments (excluding service charges) is calculated by tracking cumulative expenses under generally accepted accounting practice and subtracting relief already claimed in earlier periods.
• In any accounting period where payments are still being made, the deduction is the lower of the cumulative unrelieved expenses and the commercial rent for that period.
• Once all payments under the arrangement have ceased — a "post-spread period" — no further deduction is allowed.
• Lease rental expenditure is spread in accordance with generally accepted accounting practice before the restriction is applied, placing existing HMRC practice on a clear statutory footing.