Income Tax (Trading and Other Income) Act 2005 (c. 5)

Part 2 U.K. Trading income

[F1 Chapter 10A U.K. Leases of plant or machinery: special rules for long funding leases

Textual Amendments

F1 Pt. 2 Ch. 10A, (ss 148A-148J) inserted (19.7.2006) by Finance Act 2006 (c. 25), s. 81, Sch. 8 para. 13

[F2 Lessees under long funding finance leases] U.K.

Textual Amendments

F2 Pt. 2 Ch. 10A inserted (19.7.2006) by Finance Act 2006 (c. 25), s. 81, Sch. 8 para. 13

148G Lessee under long funding finance lease: limit on deductions U.K.

(1) This section applies for the purpose of calculating the profits of a person carrying on a trade, profession or vocation for a period of account in which the person is the lessee of any plant or machinery under a long funding finance lease.

(2) In calculating the person's profits for the period of account,—

(a) the amount deducted in respect of amounts payable under the lease,

must not exceed

(b) the amounts which, in accordance with generally accepted accounting practice, fall (or would fall) to be shown in the person's accounts as finance charges [F3 , or interest expenses,] in respect of the lease.

(3) If the lease is one which, under generally accepted accounting practice, falls (or would fall) to be treated as a loan, subsection (2) applies as if the lease were one which, under generally accepted accounting practice, fell to be treated as a finance lease.

Textual Amendments

F3 Words in s. 148G(2) inserted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 2(2)

[F4 148GA Lessee under long funding finance leases: right-of-use leases U.K.

(1) This section applies if—

(a) for the whole or part of any period of account, a person carrying on a trade, profession or vocation is the lessee of any plant or machinery under a right-of-use lease that is a long funding finance lease,

(b) there is a change in the amounts payable under the lease, and

(c) as a result of the change and in accordance with generally accepted accounting practice—

(i) a remeasurement of the lease liability is shown in the person's accounts for the period of account, or

(ii) a deduction is shown in those accounts other than as an interest expense under the lease or an amount of depreciation, or an impairment, in respect of the right-of-use asset arising from the lease.

(2) In calculating the profits of the person's trade, vocation or profession for the period of account, the amount deducted in respect of amounts payable under the lease (after taking account of any limitation as a result of section 148G) is to be increased or decreased so as to take account of the remeasurement or deduction mentioned in subsection (1)(c).

(3) No adjustment is to be made under subsection (2) if the remeasurement or deduction results in the person being treated by section 70D of CAA 2001 (long funding finance lease: additional expenditure: allowances for lessee) as having incurred further capital expenditure on the provision of the plant or machinery.]

Textual Amendments

F4 S. 148GA inserted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 2(3)

148H Lessee under long funding finance lease: termination U.K.

(1) This section applies where—

(a) a person carrying on a trade, profession or vocation is or has been the lessee under a long funding finance lease, and

(b) in connection with the termination of the lease, a payment calculated by reference to the termination value falls to be made to the person.

(2) The payment is not to be brought into account in calculating the profits of the person for any period of account.

(3) Subsection (2) does not affect the amount of any disposal value that falls to be brought into account by the person under CAA 2001.]