Income Tax (Trading and Other Income) Act 2005 section 148FC

Cases where ss 148A to 148F do not apply: other avoidance

Section 148FC disapplies the long funding lease rules for lessors (sections 148A to 148F) where an arrangement involving a long funding lease is designed to create a substantial mismatch between accounting profits or losses and taxable profits or losses.

• The long funding lease rules for lessors are switched off where the lease forms part of a wider arrangement that includes other transactions, and that arrangement is designed to exploit those rules to generate a significant difference between accounting results and tax results over the life of the lease.
• Three conditions must all be met: the lease must be part of a broader arrangement (Condition A), the main purpose must be to secure a substantial difference between accounting and tax figures over the lease term (Condition B), and that difference must be attributable at least partly to the application of sections 148A to 148F (Condition C).
• Transactions form part of an arrangement if it is reasonable to assume they would not have been entered into independently or would not have taken the same form or terms if entered into independently — regardless of whether the parties differ between transactions.
• Where the long funding lease rules have already been applied before the avoidance conditions are met, HMRC may make just and reasonable adjustments to all relevant amounts and assessments retrospectively.