There are a number of specific rules detailing the calculation of taxable profits for contractors ring fence profits. These address in particular the level of deduction for lease payments, loan relationships, management expenses, losses, capital allowances and group relief.
Lease payments
When calculating the contractors ring fence profits the total deduction that may be brought into account in respect of any lease payments for a relevant asset (D7.935) is limited to the hire cap1. Any amounts that are paid in excess of the hire cap are allowed as a deduction from the contractor's other total profits (ie non-ring fence or contractors ring fence profits) or may instead be surrendered for use against profits by other members of the paying company's group2. There is a targeted anti avoidance rule to prevent arrangements with a tax avoidance main purpose, from frustrating the intended application of these rules3.
The hire cap limitation is calculated by reference to the relevant percentage, which is applied to qualifying total costs4. If more than one lessor
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Web page updated on 17 Mar 2025 14:47