Part 2

Plant and machinery allowances
Chapter 17

Other anti-avoidance

Disposal of plant or machinery subject to lease where income retained

Determining the net present value of the rentals for purposes of s.228K
228L
1
For the purposes of section 228K, the amount of the net present value of the rentals is calculated as follows—
- Step 1
Find the amount (“RI”) of each rental payment—
  1. which is payable at any time during the term of the lease, and
  2. which is payable on or after the relevant day.
- Step 2For each rental payment find the day (“the payment day”) on which it becomes payable.
- Step 3
For each rental payment find the number of days in the period (“P”) which—
  1. begins with the relevant day, and
  2. ends with the payment day.
- Step 4
Calculate the net present value of each payment (“NPVRI”) by applying the following formula—
RI/((1 + T) i)
where—
  - T is the temporal discount rate, and
  - i is the number of days in P divided by 365.
- Step 5Add together each amount of NPVRI determined under step 4.
2
For the purposes of this section the “term” of a lease has the meaning given in Chapter 6A of this Part.
3
For the purposes of this section the “temporal discount rate” is 3.5% or such other rate as may be specified by regulations made by the Treasury.
4
The regulations may make such provision as is mentioned in subsection (3)(b) to (f) of section 178 of FA 1989 (power of Treasury to set rates of interest).
5
Subsection (5) of that section (power of Commissioners to specify rate by order in certain circumstances) applies in relation to regulations under this section as it applies in relation to regulations under that 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)