Part 2

Plant and machinery allowances
Chapter 11

Overseas leasing

Allowances reduced or, in certain cases, prohibited

Cases where allowances are prohibited
110
1
A person is not entitled to any writing-down or balancing allowances in respect of qualifying expenditure which is within subsection (2).
2
Expenditure is within this subsection if—
a
it is incurred on the provision of plant or machinery for leasing,
b
the plant or machinery is at any time in the designated period used for overseas leasing which is not protected leasing,
c
the plant or machinery is used otherwise than for a qualifying purpose (see sections 122 to 125), and
d
the lease is within any of the items in the list below.
List

Leases in relation to which allowances are prohibited
1. | The lease is expressed to be for a period of more than 13 years.
2. | The lease, or a separate agreement, provides for— 1. extending or renewing the lease, or 2. the grant of a new lease,making it possible for the plant or machinery to be leased for a period of more than 13 years.
3. | There is a period of more than one year between the dates on which any two consecutive payments become due under the lease.
4. | Any payments are due under the lease or a collateral agreement other than periodical payments.
5. | If payments due under the lease or a collateral agreement are expressed as monthly amounts due over a period, any payment due for that period is not the same as any of the others.
But, for this purpose, ignore variations made under the terms of the lease which are attributable to changes in— 1. the rate of corporation tax or income tax, 2. the rate of capital allowances, 3. any rate of interest where the changes are linked to changes in the rate of interest applicable to inter-bank loans, or 4. the premiums charged for insurance of any description by a person who is not connected with the lessor or the lessee.
6. | The lessor or a person connected with the lessor will, or may in certain circumstances, become entitled at any time to receive from the lessee or any other person a payment, other than a payment of insurance money, which is— 1. of an amount determined before the expiry of the lease, and 2. referable to a value of the plant or machinery at or after the expiry of the lease.
For this purpose, it does not matter whether the payment relates to a disposal of the plant or machinery.
3
In items 4 and 5 of the list “collateral agreement” means an agreement which might reasonably be construed as being collateral to the lease.