Income Tax Act 2007 section 681AB

Transferor or associate becomes liable for payment other than rent

Section 681AB sets out the conditions under which the sale and leaseback anti-avoidance rules apply where, following a transfer of land, the transferor or an associated person becomes liable to make a payment connected with the land that is not rent under a lease.

• Where land or an interest in land is transferred and the transferor (or an associate) becomes liable for a non-rent payment connected with the land, and income tax relief is claimed for that payment, section 681AD limits the relief to no more than a commercial rent
• Where the same circumstances arise but a deduction from earnings (rather than income tax relief) is claimed for the payment, section 681AE limits that deduction to no more than a commercial rent
• "Transfer" is broadly defined to include granting leases, creating new interests, surrendering or forfeiting leases, and transactions that change the ownership structure of land — and a person who was an owner before such a transaction but is no longer the sole owner afterwards is treated as a transferor
• The liability for the non-rent payment must result from a transaction affecting the land and must arise at or after the time of transfer, and transfers on or before 14 April 1964 are excluded