SCHEDULE 6 continued
(1) This section supplements section 437A.
Finance (No. 3) BillPage 159
Market value is to be determined on the assumption of a disposal by
an absolute owner free from all leases and other encumbrances
(including any agreement or arrangement that is or includes a plant
or machinery lease).
If plant or machinery is a fixture, its market value is so much of the
market value of the relevant land and the fixture together as is
attributable to the fixture on a just and reasonable apportionment.
“Relevant land” has the meaning given in section 173(2) of CAA
For the purposes of section 437A, the present value of a lease is the
present value of the amounts mentioned in subsection (2).
(2) The amounts are—
the amounts payable under the lease after the relevant time,
(b) any residual amount.
Subsection (2)(a) does not apply to amounts payable by the lessor or
to amounts that represent—
(a) charges for services, or
(b) qualifying UK or foreign tax to be paid by the lessor.
Present value is to be calculated by using the interest rate implicit in
The interest rate implicit in the lease is the interest rate that would
apply in accordance with normal commercial criteria, including, in
particular, generally accepted accounting practice (where
But if a rate cannot be determined in accordance with subsection (5),
the interest rate implicit in the lease is taken to be 1% above LIBOR.
(7) For this purpose—
LIBOR means the London interbank offered rate on the
applicable day for deposits for a term of 12 months in the
the applicable day is the day comprising or including the
relevant time (or, if that day is not a business day, the first
business day after it), and
the applicable currency is the currency in which payments
under the lease are payable.
the lessee has an option to continue the lease for a period after
expiry of its initial term, and
it is reasonably certain at the relevant time that the lessee will
exercise that option,
references in this section to amounts payable under the lease include
amounts payable under the lease as continued for any such period.