Leasing and the new CFC rules

The current CFC regime treats leasing and property businesses as investment business which cannot qualify for the exempt activities exemption from the rules. The new rules introduce the concept of a gateway that applies to particular types of profit and activities. Only to the extent that profits pass through the gateway will there be a CFC charge. The new provisions represent a comprehensive exemption from a CFC charge for property business profits. The profits of equipment operating leases that do not fall within the tax definition of a long funding lease are treated in the same way as profits from other trades. This is a significant improvement for commercial leasing businesses. Profits from all equipment finance leases and long funding operating leases are treated as financing profits. In practice the CFC charge should only apply to the extent that such companies are over capitalised.