Finance Leasing Manual - FLM28.01

Part I Schedule 12 FA 1997: 'Income-into-capital' schemes: summary

Part 1 Schedule 12 targets 'income-into-capital' schemes. An 'income-into-capital' scheme uses leasing to turn interest earnings in the commercial accounts of Banks and other financiers into tax-free capital. It can also shift title to capital allowances to the Banks from the Borrower in a way which avoids the normal recovery of excess allowances.

Part I Schedule 12 FA 1997 counters such schemes by:

• treating the minimum taxable earnings as being no less than the commercial accounts earnings (effectively converting any 'interest' which has been turned into capital back into income);

• ensuring that normal capital allowances disposal adjustments are made.