xmlns:atom="http://www.w3.org/2005/Atom" xmlns:atom="http://www.w3.org/2005/Atom"
Textual Amendments
F1Pt. 2 Ch. 10A, (ss 148A-148J) inserted (19.7.2006) by Finance Act 2006 (c. 25), s. 81, Sch. 8 para. 13
Textual Amendments
F2Pt. 2 Ch. 10A, (ss. 148A-148J) inserted (19.7.2006) by Finance Act 2006 (c. 25), s. 81, Sch. 8 para. 13
(1)This section applies for the purpose of calculating the profits of a person carrying on a trade in a period of account—
(a)for the whole of which, or
(b)for any part of which,
the person is the lessor of any plant or machinery under a long funding operating lease.
(2)A deduction is allowed in calculating the profits of the person for the period of account.
(3)The amount of the deduction for any period of account is determined as follows.
(4)First, find the “relevant value” for the purposes of subsection (6)(a), which is—
(a)if the only use of the plant or machinery by the lessor has been the leasing of it under the long funding operating lease as a qualifying activity, cost;
(b)if the last previous use of the plant or machinery by the lessor was the leasing of it under another long funding operating lease as a qualifying activity, market value;
(c)if the last previous use of the plant or machinery by the lessor was the leasing of it under a long funding finance lease as a qualifying activity, the recognised value;
(d)if the last previous use of the plant or machinery by the lessor was for the purposes of a qualifying activity other than leasing under a long funding lease, the lower of cost and market value;
(e)if the lessor owns the plant or machinery as a result of having incurred expenditure on its provision for purposes other than those of a qualifying activity, but—
(i)the plant or machinery is brought into use by the lessor for the purposes of a qualifying activity on or after 1st April 2006, and
(ii)that qualifying activity is the leasing of the plant or machinery under the long funding lease,
the relevant value is the lower of first use market value and first use amortised value.
(5)In subsection (4)—
“cost” means the amount of the expenditure incurred by the lessor on the provision of the plant or machinery;
“first use amortised value” means the value that the plant or machinery would have at the time when it is first brought into use for the purposes of the qualifying activity, on the assumption that—
the cost of acquiring the plant or machinery had been written off on a straight line basis over the remaining useful economic life of the plant or machinery, and
any further capital expenditure incurred had been written off on a straight line basis over so much of the remaining economic life of the plant or machinery as remains at the time when the expenditure is incurred;
“first use market value” means the market value of the plant or machinery at the time when it is first brought into use for the purposes of the qualifying activity;
“market value” means the market value of the plant or machinery at the commencement of the term of the long funding operating lease;
“recognised value” means the value at which the plant or machinery is recognised in the books or other financial records of the lessor at the commencement of the long funding operating lease.
(6)From—
(a)the relevant value determined in accordance with subsection (4),
subtract
(b)the amount which, at the commencement of the term of the lease, is (or, in a case falling within subsection (4)(e), would have been) expected to be the residual value of the plant or machinery,
to find the expected gross reduction in value over the term of the lease.
(7)Apportion the amount of that expected gross reduction in value to each period of account in which any part of the term of the lease falls.
(8)The apportionment must be on a time basis according to the proportion of the term of the lease that falls in each period of account.
(9)The amount of the deduction for any period of account is the amount so apportioned to that period.]
Textual Amendments
F3Pt. 2 Ch. 10A, (ss. 148A-148J) inserted (19.7.2006) by Finance Act 2006 (c. 25), s. 81, Sch. 8 para. 13
(1)This section applies if, in a period of account,—
(a)a person carrying on a trade is the lessor of any plant or machinery under a long funding operating lease,
(b)the person incurs capital expenditure in relation to the plant or machinery, and
(c)that capital expenditure (the “additional expenditure”) is not reflected in the market value of the plant or machinery at the commencement of the term of the lease.
(2)In a case falling within section 148D(4)(e), subsection (1)(c) has effect as if the reference to the commencement of the term of the lease were a reference to the time when the plant or machinery is first brought into use by the lessor for the purposes of the qualifying activity.
(3)Where this section applies, an additional deduction is allowed in calculating the profits of the person for each post-expenditure period of account in which the person is the lessor of the plant or machinery under the lease.
(4)The amount of the deduction for any such period of account is to be determined as follows.
(5)Find ARV, CRV, PRV and TRV where—
“ARV” is the amount which, at the time when the additional expenditure is incurred, is expected to be the residual value of the plant or machinery;
“CRV” is the amount which, at the commencement of the term of the lease, is expected to be the residual value of the plant or machinery;
“PRV” is the sum of any amounts that fell to be taken into account as RRV (see subsection (6)) in the application of this section in relation to any previous additional expenditure incurred by the person in relation to the leased plant or machinery;
“TRV” is the total of CRV and PRV.
(6)Find RRV, where—
(a)if ARV exceeds CRV, RRV is the portion of the excess that is a result of the additional expenditure, but
(b)if ARV does not exceed CRV, RRV is nil.
(7)From—
(a)the amount of the additional expenditure,
subtract
(b)RRV,
to find the expected partial reduction in value over the remainder of the term of the lease.
(8)Apportion the amount of that expected partial reduction in value to each post-expenditure period of account in which any part of the term of the lease falls.
(9)The apportionment must be on a time basis according to the proportion of the term of the lease that falls in each post-expenditure period of account.
(10)The amount of the additional deduction for any period of account is the amount so apportioned to that period.
(11)In this section “post-expenditure period of account” means any period of account ending after the incurring of the additional expenditure.]
Textual Amendments
F4Pt. 2 Ch. 10A, (ss. 148A-148J) inserted (19.7.2006) by Finance Act 2006 (c. 25), s. 81, Sch. 8 para. 13
(1)This section applies for the purpose of calculating the profits of a person carrying on a trade in a period of account if—
(a)a long funding operating lease terminates in that period of account, and
(b)the person is the lessor under that lease immediately before the termination.
(2)Step 1 is to find—
(a)the termination amount (TA);
(b)the total of any sums paid to the lessee that are calculated by reference to the termination value (LP).
(3)Step 2 is to find—
(a)the relevant value for the purposes of section 148D(6)(a) (RV);
(b)the total of the deductions allowable under section 148D for periods of account for the whole or part of which the person was the lessor before the termination of the lease (TD1);
(c)the amount, if any, (ERV) by which RV exceeds TD1.
(4)Step 3 is to find—
(a)the total of any amounts of capital expenditure incurred by the person which constitute additional expenditure for the purposes of section 148E in the case of the lease (TAE);
(b)the total of any deductions allowable under section 148E for periods of account for the whole or part of which the person was the lessor before the termination of the lease (TD2);
(c)the amount, if any, (EAE) by which TAE exceeds TD2.
(5)Step 4 is to find the total of ERV and EAE (T).
(6)If (TA ? LP) exceeds T, treat a profit of an amount equal to the excess as arising to the person in the period of account in which the lease terminates.
(7)If T exceeds (TA ? LP), treat a loss of an amount equal to the excess as arising to the person in that period of account.
(8)A profit or loss treated as arising to the person under subsection (6) or (7) is to be treated—
(a)in the case of a profit, as income of the person attributable to the lease,
(b)in the case of a loss, as a revenue expense incurred by the person in connection with the lease.
(9)In calculating the profits of the person for the period, no deduction is allowed in respect of any sums paid to the lessee that are calculated by reference to the termination value.]]
Textual Amendments
F5Pt. 2 Ch. 10A, (ss. 148A-148J) inserted (19.7.2006) by Finance Act 2006 (c. 25), s. 81, Sch. 8 para. 13