Income Tax Act 2007 section 614BE

The arrangements and circumstances referred to in section 614BC(8)

Section 614BE defines what types of arrangements and circumstances satisfy Condition E under section 614BC(8), which is one of the conditions that must be met for the finance lease anti-avoidance rules to apply.

• Arrangements exist under which the lessee (or a connected person) may acquire the leased asset (or a representative asset) from the lessor (or a connected person), and the lessor may receive a qualifying lump sum in connection with that acquisition
• A qualifying lump sum is any payment that is not rent but at least part of which would be treated under generally accepted accounting practice as a return on investment in respect of a finance lease or loan
• The relevant circumstances are those where it is more likely that the lessee will acquire the asset and pay a qualifying lump sum than that the asset will instead be sold on the open market to an independent third party
• An independent third party is someone who is neither the lessor nor the lessee and is not connected with either of them