Income Tax Act 2007 section 681DD

Charge to income tax

Section 681DD imposes an income tax charge on a person who obtains a capital sum in connection with a leased asset where the underlying payments attracted tax relief.

• The person who obtains a capital sum is charged to income tax for the tax year in which the sum is received, based on the amount of the payment (or total payments) for which relevant tax relief was allowed.
• The taxable amount is capped at the capital sum actually obtained, subject to special rules for hire-purchase agreements under section 681DE.
• Once a payment or part of a payment has been used to calculate a charge under this section, it cannot be counted again when determining whether a further charge arises on a different capital sum, preventing double taxation.
• Where multiple capital sums are obtained, the no-double-counting rule is applied in the chronological order in which those sums were received, and any amount charged is treated as income for income tax purposes.