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Finance Act 2004

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This is the original version (as it was originally enacted).

Section 228B

2(1)This paragraph applies if the pre-commencement rentals are greater than the total of the actual rental deductions for periods of account up to, but excluding, the transitional period of account.

(2)Section 228B shall not apply in relation to—

(a)the transitional period of account if the lessee’s excess rentals are greater than the notional rental deduction for that period, or

(b)a subsequent period of account if the unrelieved portion of the lessee’s excess rentals is greater than the notional rental deduction for that period.

(3)Section 228B is subject to sub-paragraph (4) in its application to—

(a)the transitional period of account if the lessee’s excess rentals are not greater than the notional rental deduction for that period, or

(b)a subsequent period of account if the unrelieved portion of the lessee’s excess rentals is not greater than the notional rental deduction for that period.

(4)The permitted maximum for that period of account is the total of—

(a)the lessee’s excess rentals (in the case of the transitional period of account) or the unrelieved portion of the lessee’s excess rentals (in the case of a subsequent period of account), and

(b)the amount given by this calculation—

Formula - Basic Amount multiplied by (Notional Rental Deduction minus Deductible Excess) divided by Notional Rental Deduction

where—

  • “Basic Amount” means the amount calculated in accordance with section 228B(2),

  • “Notional Rental Deduction” means the notional rental deduction for the period of account in question, and

  • “Deductible Excess” means the amount included in the permitted maximum by virtue of sub-paragraph (4)(a).

(5)But where, in relation to the transitional period of account, the amount given by sub-paragraph (4) is less than the appropriate fraction of the notional rental deduction for that period, the permitted maximum shall be that fraction of that deduction.

(6)In this paragraph—

(a)“the lessee’s excess rentals” means—

(i)the pre-commencement rentals, minus

(ii)the total of the actual rental deductions referred to in sub-paragraph (1), and

(b)“the unrelieved portion of the lessee’s excess rentals”, in relation to a period of account, means—

(i)the lessee’s excess rentals, minus

(ii)the total of the actual rental deductions for periods of account from and including the transitional period up to, but excluding, the period in question.

(7)In this paragraph—

  • “actual rental deduction”, in relation to a period of account, means the amount that may be deducted in respect of amounts payable under the existing leaseback in calculating the lessee’s income or profits for that period of account for the purpose of income tax or corporation tax;

  • “notional rental deduction”, in relation to a period of account, means the amount that could, if section 228B did not apply, be deducted in respect of amounts payable under the existing leaseback in calculating the lessee’s income or profits for that period of account for the purpose of income tax or corporation tax.

(8)Nothing in sub-paragraphs (3) to (5) prevents the inclusion of an amount in the permitted maximum by virtue of section 228B(3) and (4).

(9)This paragraph does not apply in relation to any period of account later than a period of account for which the permitted maximum has been determined in accordance with sub-paragraph (3) to (5).

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