BLM35075 - Taxation of leases that are not long funding leases: sale and leaseback: deductibility of rents under leaseback - 'income-into-capital' schemes

Particular issues regarding the deduction of rentals arise where the sale and lease-back transaction is such that the lessor's tax treatment is subject to FA97/Sch12/Part I, that is one where the arrangements enable the lessor to take part of the return on its investment in capital form ('income-into-capital' schemes). An example of a typical 'income-into-capital' scheme is at BLM33020.

Points to consider on the deduction of the lessee's rentals are

• whether or not it is appropriate to recognise rental payments on the basis that this is a finance lease, rather than an operating lease - see BLM33025, and
• what the payments are for - see BLM33030 onwards.