Part 9

Leasing plant or machinery
Chapter 2

Long funding leases of plant or machinery

Lessors under long funding operating leases

Long funding operating lease: lessor’s additional expenditure
366
1
This section applies if in any period of account—
a
a company is the lessor of any plant or machinery under a long funding operating lease,
b
the company incurs capital expenditure in relation to the plant or machinery (the “additional expenditure”), and
c
the additional expenditure is not reflected in the market value of the plant or machinery at the commencement time (see subsection (7)).
2
An additional deduction is allowed in calculating the profits of the company for each period of account—
a
which ends after the incurring of the additional expenditure, and
b
in which the company is the lessor of the plant or machinery under the lease.
3
The amount of the deduction is so much of the expected reduction in value of the additional expenditure (“the expected reduction”) as is attributable to the period of account.
4
The expected reduction is the amount of the additional expenditure, less the remaining residual value of the plant or machinery resulting from that expenditure.
5
For how to determine that remaining residual value, see—
a
section 367 (determination of remaining residual value resulting from lessor’s first additional expenditure), and
b
section 368 (determination of remaining residual value resulting from lessor’s further additional expenditure).
6
The amount of the expected reduction attributable to the period of account is found by apportioning that reduction on a time basis according to the proportion of the term of the lease that falls in the period of account.
7
In this section “the commencement time” means—
a
except where section 365 applies, the commencement of the term of the lease, and
b
if that section applies, the time when the plant or machinery is first brought into use by the lessor for the purposes of the qualifying activity.