Finance Leasing Manual - FLM20.16

Schedule D Case I: income tax loss relief

Where Schedule D Case I treatment is applicable for a finance lessor who is an individual, loss relief against general income will normally be available under Section 380 ICTA 1988, but in many cases the provisions of Section 384(6)-(8) ICTA 1988 (see CA2970 onwards) will prevent capital allowances being used under Section 383 ICTA 1988 to create or augment a loss. The rules in Section 384(6)-(8) ICTA 1988 aim to prevent allowances being set sideways unless, broadly, the individual is engaged personally full-time in carrying on the business. The object is to deny the benefit of trading treatment for what is, in substance, merely a form of investment.