Income Tax Act 2007 section 681AD

Relevant income tax relief: deduction not to exceed commercial rent

Section 681AD limits the tax deduction a person can claim for sale-and-leaseback payments connected with transferred land, ensuring the deduction never exceeds the commercial rent for the period.

• The allowable deduction for each accounting period (or tax year where no accounts are drawn up) is capped at the lower of cumulative unrelieved expenses and the commercial rent for that period
• Cumulative unrelieved expenses are calculated by totalling the accounting expense (Amount E) for the current and all previous periods since the transfer date, then subtracting the total deductions already claimed in those earlier periods
• Only the non-excluded element of each payment is considered — service charges and similar amounts excluded under section 681AI are stripped out before the calculation is performed
• Once all relevant payments have ceased (a "post-spread period"), no further deduction is allowed, meaning any remaining unrelieved expenses cannot be carried forward beyond that point