What is the definition of a lease under Corporation Tax Act 2010 section 884?

Under section 884, a lease means any agreement or arrangement under which payments are made for the use of, or otherwise in respect of, an asset. This intentionally broad definition covers conventional leases, rental agreements, hire purchase contracts, and any instalment arrangements linked to the use or acquisition of an asset.

Does section 884 include hire purchase agreements within the definition of a lease?

Yes. Section 884 explicitly includes agreements where payments represent instalments of a purchase price or contributions towards a purchase price. This means hire purchase contracts and similar instalment structures fall within the lease definition and are subject to the sale and lease-back provisions of the chapter.

Why is the lease definition in section 884 so broad?

The definition is deliberately broad to prevent the sale and lease-back anti-avoidance rules from being circumvented by structuring arrangements as something other than a conventional lease. Any structure involving payments linked to the use or acquisition of an asset can be caught, regardless of how the parties label the arrangement.

When should the section 884 lease definition be considered in practice?

If a company is involved in any arrangement where an asset has been disposed of and payments are made for continued use of that asset, or where payments are structured as instalments towards eventual ownership, the arrangement is likely treated as a lease. The wider sale and lease-back rules should then be considered.

Corporation Tax Act 2010 section 884

Lease

Section 884 defines what constitutes a "lease" for the purposes of the sale and lease-back provisions in this chapter of the Act.

A lease is any agreement or arrangement under which payments are made for the use of an asset or otherwise in respect of that asset.
The definition is deliberately broad, covering not only traditional rental arrangements but also hire purchase and similar structures.
Agreements where payments represent instalments of a purchase price, or contributions towards a purchase price, are specifically included within the definition of a lease.
This wide definition ensures that the sale and lease-back rules cannot be circumvented simply by structuring an arrangement as something other than a conventional lease.

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