Corporation Tax Act 2010 section 890

Capital payments in respect of leases treated as income

Section 890 ensures that capital payments received by a lessor in connection with a lease of plant or machinery, such as premiums or similar lump sums, are taxed as income for corporation tax purposes.

• Capital payments made under a lease of plant or machinery, or a related arrangement, are treated as taxable income of the lessor rather than capital receipts
• The rule applies both where there is an unconditional obligation to make a capital payment and where a capital payment is made voluntarily without such an obligation
• Where an unconditional obligation exists, the income is recognised in the accounting period when that obligation first arises, not when the payment is actually made
• Where no such obligation exists and a capital payment is simply made, the income is recognised in the accounting period in which the payment is actually received