Part 2

Plant and machinery allowances
Chapter 17

Other anti-avoidance

Disposal of plant or machinery subject to lease where income retained

Disposal of plant or machinery subject to lease where income retained
228K
1
This section applies for corporation tax purposes if—
a
on any day (“
the relevant day
”) a person (“the lessor”) carries on a business of leasing plant or machinery (the “leasing business”),
b
on the relevant day the lessor sells or otherwise disposes of any relevant plant or machinery subject to a lease to another person,
c
the lessor remains entitled immediately after the disposal to some or all of the rentals under the lease in respect of the plant or machinery which are payable on or after the relevant day, and
d
the lessor is required to bring a disposal value of the plant or machinery into account under this Part.
2
The disposal value to be brought into account is determined as follows.
3
If the amount or value of the consideration for the disposal exceeds the limit that would otherwise be imposed on the amount of the disposal value by section 62 (general limit) or 239 (limit on disposal value where additional
VAT
rebate)—
a
that limit is not to apply, and
b
the whole of the amount or value of the consideration for the disposal is to be the disposal value to be brought into account.
4
In any other case, the disposal value to be brought into account is the sum of—
a
the amount or value of the consideration for the disposal, and
b
the value of the rentals under the lease in respect of the plant or machinery (see subsections (7) and (8)) which are payable on or after the relevant day and to which the lessor remains entitled immediately after the disposal,
but subject to the limit imposed on the amount of the disposal value by section 62 or 239.
5
If—
a
any of the rentals under the lease are receivable by the lessor on or after the relevant day, and
b
the value of any of those rentals is represented in the amount of the disposal value under subsection (4)(b),
the amount of those rentals that is equal to their value as so represented is left out of account in calculating the income of the lessor's leasing business for corporation tax purposes.
6
If, in determining under subsection (5) the amount of any rental to be so left out of account, it is necessary to apportion the amount of the rental, the apportionment is to be made on a just and reasonable basis.
7
For the purposes of this section, the value of any rentals under the lease in respect of the plant or machinery is taken to be the amount of the net present value of the rentals (see section 228L).
8
If any land or other asset which is not plant or machinery is subject to the lease, the value of any rentals under the lease in respect of the plant or machinery is taken to be so much of the amount of the net present value of the rentals as, on a just and reasonable basis, relates to the plant or machinery.
9
This section is supplemented by—
a
section 228L (which provides rules for determining the net present value of the rentals), and
b
section 228M (which defines other expressions used in this section).
Pt. 2 modified (24.2.2003) by Proceeds of Crime Act 2002 (c. 29), s. 458(1), Sch. 10 para. 12 (with Sch. 10 para. 17(1)); S.I. 2003/120, art. 2, Sch. (with arts. 3 4) (as amended (20.2.2003) by S.I. 2003/333, art. 14)
S. 45H(2) modified (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14) , Sch. 30 para. 7
Pt. 2 restricted (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 4 para. 4 ; S.I. 2004/2575 , art. 2(1) , Sch. 1
Pt. 2 modified (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 paras. 9(2), 21(2) (with s. 38(2)); S.I. 2004/2575, art. 2(1) , Sch. 1
Pt. 2 restricted (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 paras. 10, 22 (with s. 38(2) ); S.I. 2004/2575 , art. 2(1) , Sch. 1
Ss. 228K-228M and cross-heading inserted (with effect in accordance with s. 84(5)(6) of the amending Act) by Finance Act 2006 (c. 25), s. 84(3)
Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 19
Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 35
Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 paras. 36, 37
Pt. 2 modified (21.7.2009) by Finance Act 2009 (c. 10), s. 24
Pt. 2 Ch. 17 heading substituted (8.4.2010) (with effect in accordance with Sch. 4 para. 5 to the amending Act) by Finance Act 2010 (c. 13), Sch. 4 para. 3
Pt. 2 modified (17.7.2013) by Finance Act 2013 (c. 29), s. 73(7)-(11) (with s. 73(6))
Pt. 2 modified (10.6.2021) by Finance Act 2021 (c. 26), s. 9(1)(a)