BLM70201 - 鈥業ncome-into-capital鈥� schemes and back loaded leases: Introduction to 'income-into-capital' schemes: pre-FA97/Sch 12
Tax avoidance was possible, pre-FA97/Sch 12 (now Part 21 of CTA 2010), on leases of real property because part of the lessor鈥檚 鈥榠nterest鈥� return was taken in the form of a capital sum. Lessors argued that the capital sum was outside the charge on property income (see BLM70020). 皇冠体育app 鈥榠nterest鈥� amounted to a capital gain and was usually covered by indexation and other reliefs.
皇冠体育app gross earnings in the commercial accounts under GAAP - the 鈥榠nterest鈥� line at the bottom of the example at BLM70035 - would be exactly the same for both straightforward deferral leases and for income-into-capital schemes (back-loaded rentals with a capital sum). 皇冠体育app 鈥榣oan repayment鈥� element in the capital sum would just go straight to the balance sheet to pay off the 鈥榣oan鈥�.