Introduction Overview Overview Section 897: Accountancy rental earnings
2658.This section defines “accountancy rental earnings”. It is based on paragraph 21 of Schedule 12 to FA 1997.
2659.This Part provides that the accountancy rental earnings of a lessor in relation to a lease are, in certain circumstances, to be brought into account for corporation tax purposes instead of the normal rent from the lease.
2660.Subsections (1) and (2) provide that in relation to a lease “accountancy rental earnings” are the highest of the following three figures for a period of account:
	the rental earnings (see section 898) of the lessor in relation to the lease;
	the rental earnings of a connected person of the lessor in relation to the lease; or
	the rental earnings in relation to the lease for the purposes of consolidated accounts of the group of which the lessor is a member.
2661.The purpose of taking the highest of the three figures is to ensure that the earnings fully reflecting the economic substance of the transaction are taxed. This is especially important when the capital sum which is an essential part of a leasing arrangement within Chapter 2 may be received not by the lessor but by a related party. In such a case it is only by considering the lessor’s position and that of the related party together that the true economic substance of the transaction can be appreciated. That is likely to be in the consolidated accounts of the group as a whole, or possibly in the accounts of the related party, rather than in those of the lessor company itself.