Income Tax Act 2007 section 681DC

Sum obtained

Section 681DC sets out four alternative conditions (B, C, D and E) under which the anti-avoidance rules in this Chapter may apply, each focused on whether a capital sum is obtained in connection with an interest in a lease by the person making a tax-deductible payment, or by their associates.

• Conditions B and C apply where a capital sum is obtained in respect of the lessee's interest in the lease — by the person making the payment (Condition B) or by an associate of that person (Condition C), provided the recipient is within the charge to income tax.
• Conditions D and E apply where an associate of the person making the payment holds the lessor's interest or another interest in the asset and a capital sum is obtained in respect of that interest — by the associate themselves (Condition D) or by a further associate of that associate (Condition E), again provided the recipient is within the charge to income tax.
• Any of these conditions can be met before, at the same time as, or after the tax-deductible payment is made — the timing is irrelevant.
• None of the conditions apply where the lease is a hire-purchase agreement for plant or machinery and the capital sum is already required to be brought into account as disposal value under section 68 of the Capital Allowances Act 2001.