Background

Rent factoring schemes usually provide that in exchange for a lump sum, in essence a loan, a property company diverts future rental income in respect of property in the UK to a bank or other factoring agency. By exchanging future income for a lump sum in this way, the company is, in effect, receiving a loan. The rental income forgone, which would otherwise be taxable, repays that loan, and in the hands of the lender is not taxable. The company would claim that the lump sum was only chargeable to tax, if at all, as a capital receipt (see IR Commrs v John Lewis Properties plc [2003] BTC 127).

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