Part 9 Leasing plant or machinery

Chapter 2 Long funding leases of plant or machinery

Lessors under long funding operating leases

369 Lessor under long funding operating lease: termination of lease
(1) This section applies in calculating the profits of a company for corporation tax purposes if it is the lessor immediately before the termination of a long funding operating lease.
(2) If the termination amount (see section 381(3)(l)) exceeds the sum of the amounts in subsection (3), an amount equal to the excess is treated as income of the company attributable to the lease arising in the period of account in which it terminates.
(3) The amounts referred to in subsection (2) are—
(a) the total amounts paid to the lessee that are calculated by reference to the termination value (see section 381(3)(m)),
(b) the excess relevant value for section 363 (see subsection (6)), and
(c) the excess expenditure for section 366 (see subsection (7)).
(4) If the sum of the amounts in subsection (3) exceeds the termination amount, the excess is treated as a revenue expense incurred by the company in connection with the lease in the period of account in which it terminates.
(5) No deduction is allowed in respect of any sums within subsection (3)(a).
(6) “The excess relevant value for section 363” is the amount (if any) by which—
(a) the starting value of the plant or machinery for the purposes of section 363(4) (lessor under long funding operating lease: periodic deduction), exceeds
(b) the total of the deductions allowable under section 363 for periods of account for the whole or part of which the company was the lessor.
(7) “The excess expenditure for section 366” is the amount (if any) by which—
(a) the total of any amounts of capital expenditure incurred by the company which constitute additional expenditure in the case of the lease for the purposes of section 366 (long funding operating lease: lessor's additional expenditure), exceeds
(b) the total of any deductions allowable under section 366 for periods of account for the whole or part of which the company was the lessor.