Corporation Tax Act 2010 section 893

Meaning of "capital payment", "relevant capital payment" etc

Section 893 defines the terms "capital payment", "relevant capital payment" and related references to payment used in the lease income reduction rules in this chapter.

• A capital payment is any payment that would not form part of the lessor's taxable income — essentially a non-revenue payment connected with a lease of plant or machinery.
• A capital payment becomes "relevant" if it is made by or on behalf of the lessee in connection with the lease (Condition A), or if rental payments under the lease are lower or deferred because of the capital payment (Condition B).
• A capital payment is not relevant to the extent it reduces the lessor's qualifying capital allowances expenditure on the plant or machinery, or is compensation for loss from damage to or caused by the plant or machinery.
• Where a capital payment is an initial payment under a long funding lease and triggers a disposal value for the lessor, only the amount exceeding that disposal value counts as a relevant capital payment.