Income Tax Act 2007 section 681AF

Carrying forward parts of payments

Section 681AF allows the disallowed portion of a sale-and-leaseback payment to be carried forward and potentially deducted against later payments made under the same lease or arrangement.

• Where section 681AE has reduced a payment deduction to the commercial rent level, the excess amount that was disallowed is not permanently lost
• The disallowed portion can be carried forward to the next payment period under the same lease or arrangement, and treated as if it were made at that later date
• The carried-forward amount is then tested again against the commercial rent cap for that later period, and if still not fully deductible, can be carried forward again indefinitely
• This carry-forward mechanism applies whether the original payments arise under a lease (rent) or under a rentcharge or other transaction connected with the transferred land