Corporation Tax Act 2010 section 926

Purpose of this Chapter

Section 926 explains the main purpose of the Chapter, which is to ensure that a leasing company's taxable income from a finance lease is not less than the income return recognised under generally accepted accounting practice.

• The Chapter applies corporation tax on income to the company holding the lessor's interest under a lease, based on amounts calculated under specific rules.
• The taxable amount is determined by reference to the income return on investment recognised under generally accepted accounting practice (GAAP) from 26 November 1996 onwards.
• The calculation also takes into account the substance of the overall arrangement, including relationships between connected persons or companies within a group as reflected in their accounts or consolidated group accounts.
• The effect is that the taxable income is the higher of the amount the lessor would otherwise bring into account as rent and the GAAP income return on the lease — unlike Chapter 2, this Chapter contains no special rules for capital expenditure reliefs.