What types of leasing arrangements does section 899 of the Corporation Tax Act 2010 apply to?

Section 899 applies to arrangements involving the lease of any asset, including property or rights of any kind, where two conditions are met: the arrangement is classified as a finance lease or loan under generally accepted accounting practice, and part or all of the lessor's return takes a form other than rent that would otherwise escape taxation as rental income.

What is Condition A under section 899 CTA 2010?

Condition A requires that the leasing arrangements are treated as a finance lease or a loan under generally accepted accounting practice (GAAP). This is an accounting classification test, meaning the commercial label given to the arrangement matters less than how it is recognised and classified in the parties' accounts under applicable accounting standards.

What is Condition B under section 899 CTA 2010?

Condition B is satisfied where some or all of the lessor's return on investment comes in a form other than rent, such as a capital sum or lump-sum payment, and without the provisions of Chapter 2 that return would not be fully taxed as rental income from the leased asset. This targets arrangements where economic returns are disguised to avoid normal rental income taxation.

Are there any time limits or restrictions on which parties section 899 CTA 2010 can apply to?

No. Section 899 applies regardless of when the arrangements were entered into — whether before, on, or after the original enactment of these provisions. It also applies irrespective of whether the parties are companies or other types of persons. This broad scope prevents avoidance through the choice of timing or the legal form of the parties involved.

Corporation Tax Act 2010 section 899

Arrangements to which this Chapter applies

Section 899 defines the types of leasing arrangements that fall within the scope of Chapter 2, which deals with the taxation of finance lease returns that are not structured as rent.

The chapter applies to arrangements involving the lease of any asset (including property or rights) that meet two specific conditions.
Condition A requires that the arrangements are treated under generally accepted accounting practice (GAAP) as a finance lease or loan.
Condition B is met where some or all of the lessor's return on investment takes a form other than rent and would not otherwise be fully taxed as rental income.
The rules apply regardless of when the arrangements were entered into and regardless of whether the parties are companies or other persons.

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