Finance Act 2008

Lessors under long funding leases of plant or machinery

11 (1) If, at the beginning of 13 December 2007 (“the relevant date”)—

(a) a company or a person carrying on a trade is the lessee of any plant or machinery under a lease that is not a long funding lease (“lease A”), and

(b) the company or person is the lessor of any of that plant or machinery under a lease that is a long funding finance lease (“lease B”),

sub-paragraphs (2) to (10) apply in respect of lease B.

(2) Section 502B of ICTA or section 148A of ITTOIA 2005 (rental earnings) does not apply in relation to a period of account within sub-paragraph (3).

(3) A period of account is within this sub-paragraph if—

(a) it begins on or after the relevant date, and

(b) no rentals which were due under lease B before the relevant date are (wholly or in part) in respect of any part of the period of account.

(4) For the purpose of calculating the profits of the lessor under lease B for a period of account ending on or after the relevant date that is not within sub-paragraph (3), treat the lessor as receiving for that period of account income attributable to lease B of an amount equal to the relevant amount.

(5) The “relevant amount” is an amount equal to so much of the rentals that—

(a) become due on or after the relevant date, and

(b) are wholly or partly in respect of the period of account,

as would not reasonably be regarded as reflected in the rental earnings for that period of account.

“Rental earnings” here has the same meaning as in section 502B of ICTA or section 148A of ITTOIA 2005.

(6) If any rental is paid for a period (“the rental period”) which begins before the relevant date or is not wholly within the period of account, for the purposes of sub-paragraph (5) treat the amount of that rent as equal to the amount apportioned (on a time basis) in respect of so much of the rental period as falls on or after the relevant date and within the period of account.

(7) The income treated as received by virtue of sub-paragraph (4) is in addition to any amount brought into account under section 502B(2) of ICTA or section 148A(2) of ITTOIA 2005.

(8) Section 502C of ICTA or section 148B of ITTOIA 2005 (exceptional items) does not apply in relation to any profit or loss arising on or after the relevant date.

(9) If section 502D of ICTA or section 148C of ITTOIA 2005 (lessor making termination payment) applies in respect of the termination of lease B on or after the relevant date, a deduction is allowed (in calculating the profits of the lessor) in respect of the sum paid to the lessee.

(10) The amount of that deduction is (if it would otherwise exceed that amount) limited to the total amount brought into account in respect of the lease by virtue of sub-paragraph (2) or (4).

(11) If lease A becomes a long funding lease by virtue of section 70H of CAA 2001 (and does not cease to be such a lease), treat this paragraph as never having applied in relation to lease B.

(12) Chapter 6A of Part 2 of CAA 2001 (interpretation of provisions about long funding leases) applies in relation to this paragraph.