Income Tax (Trading and Other Income) Act 2005 section 55B

Rental rebates

Section 55B limits the tax deduction a lessor of plant or machinery can claim when paying a rental rebate to a lessee, and provides rules for how any disallowed amount may be treated for capital gains tax purposes.

• When a lessor pays a rental rebate linked to the termination value of leased plant or machinery, the deduction is capped at the lessor's total lease income (or, for a finance lease, that income excluding the finance charge).
• Termination value means the asset's value at or around lease end, and includes sale proceeds, insurance or compensation receipts, market value estimates, or any method producing a broadly similar result.
• Where all or part of a rental rebate deduction is disallowed, the lesser of the disallowed amount or the excess of the rebate over the lessor's capital expenditure may be treated as a capital gains tax allowable loss, but only against gains on the disposal of that same asset.
• These rules do not apply to long funding finance leases, which are dealt with separately under section 148C.