Corporation Tax Act 2010 section 905

Current lessor taxed by reference to accountancy rental earnings

Section 905 requires a lessor to be taxed on the higher of the actual rent or the accountancy rental earnings from a lease, ensuring that corporation tax reflects the economic substance of rental income.

• Where the long funding lease rules apply and accountancy rental earnings exceed the normal rent, the lessor is taxed on the higher accountancy figure instead of the actual rent received.
• The lessor is treated for corporation tax purposes as though they were entitled to rent equal to the accountancy rental earnings for that period of account.
• The deemed rent is treated as accruing evenly over whichever part of the accounting period falls within the lease term.
• The lessor is treated as becoming entitled to the deemed rent as it accrues, ensuring a smooth and consistent recognition of income across the period.