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Finance leasebacks: transitional provision |
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1 (1) | Sections 228B to 228E of the Capital Allowances Act 2001 (c. 2) (as inserted |
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by section 134) are subject to paragraphs 2 to 9 of this Schedule in their |
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application in relation to existing leasebacks. |
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(2) | Paragraph 10 of this Schedule makes provision in relation to the taxation of |
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chargeable gains where an existing leaseback terminates. |
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2 (1) | This paragraph applies if the pre-commencement rentals are greater than the |
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total of the actual rental deductions for periods of account up to, but |
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excluding, the transitional period of account. |
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(2) | Section 228B shall not apply in relation to— |
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(a) | the transitional period of account if the lessee’s excess rentals are |
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greater than the notional rental deduction for that period, or |
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(b) | a subsequent period of account if the unrelieved portion of the |
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lessee’s excess rentals is greater than the notional rental deduction |
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(3) | Section 228B is subject to sub-paragraph (4) in its application to— |
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(a) | the transitional period of account if the lessee’s excess rentals are not |
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greater than the notional rental deduction for that period, or |
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(b) | a subsequent period of account if the unrelieved portion of the |
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lessee’s excess rentals is not greater than the notional rental |
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deduction for that period. |
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(4) | The permitted maximum for that period of account is the total of— |
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(a) | the lessee’s excess rentals (in the case of the transitional period of |
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account) or the unrelieved portion of the lessee’s excess rentals (in |
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the case of a subsequent period of account), and |
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(b) | the amount given by this calculation—![equation: cross[times[char[B],char[a],char[s],char[i],char[c],string[" "],char[A],char[m],
char[o],char[u],char[n],char[t]],over[id[plus[times[char[N],char[o],char[t],char[
i],char[o],char[n],char[a],char[l],string[" "],char[R],char[e],char[n],char[t],char[
a],char[l],string[" "],char[D],char[e],char[d],char[u],char[c],char[t],char[i],char[
o],char[n]],minus[times[char[D],char[e],char[d],char[u],char[c],char[t],char[i],
char[b],char[l],char[e],string[" "],char[E],char[x],char[c],char[e],char[s],char[
s]]]]],times[char[N],char[o],char[t],char[i],char[o],char[n],char[a],char[l],string[
" "],char[R],char[e],char[n],char[t],char[a],char[l],string[" "],char[D],char[e],
char[d],char[u],char[c],char[t],char[i],char[o],char[n]]]]](missing.gif) |
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| “Basic Amount” means the amount calculated in accordance with |
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| “Notional Rental Deduction” means the notional rental deduction for |
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the period of account in question, and |
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| “Deductible Excess” means the amount included in the permitted |
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maximum by virtue of sub-paragraph (4)(a). |
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(5) | But where, in relation to the transitional period of account, the amount given |
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by sub-paragraph (4) is less than the appropriate fraction of the notional |
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rental deduction for that period, the permitted maximum shall be that |
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fraction of that deduction. |
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(a) | “the lessee’s excess rentals” means— |
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(i) | the pre-commencement rentals, minus |
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(ii) | the total of the actual rental deductions referred to in sub- |
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(b) | “the unrelieved portion of the lessee’s excess rentals”, in relation to a |
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period of account, means— |
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(i) | the lessee’s excess rentals, minus |
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(ii) | the total of the actual rental deductions for periods of account |
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from and including the transitional period up to, but |
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excluding, the period in question. |
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| “actual rental deduction”, in relation to a period of account, means the |
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amount that may be deducted in respect of amounts payable under |
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the existing leaseback in calculating the lessee’s income or profits |
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for that period of account for the purpose of income tax or |
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| “notional rental deduction”, in relation to a period of account, means |
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the amount that could, if section 228B did not apply, be deducted in |
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respect of amounts payable under the existing leaseback in |
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calculating the lessee’s income or profits for that period of account |
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for the purpose of income tax or corporation tax. |
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(8) | Nothing in sub-paragraphs (3) to (5) prevents the inclusion of an amount in |
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the permitted maximum by virtue of section 228B(3) and (4). |
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(9) | This paragraph does not apply in relation to any period of account later than |
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a period of account for which the permitted maximum has been determined |
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in accordance with sub-paragraph (3) to (5). |
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3 (1) | This paragraph applies where— |
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(a) | the existing leaseback terminates, and |
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(b) | in the period of account immediately following that in which it |
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terminates, paragraph 2(2)(b) or 2(3)(b) would apply were it not for |
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(2) | The permitted maximum for the period of account in which the leaseback |
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terminates shall also include an amount equal to the amount that the |
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unrelieved portion of the lessee’s excess rentals would have been in the |
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period of account immediately following. |
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4 | Section 228C shall not apply where the existing leaseback terminates before |
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5 (1) | Section 228C applies subject to this paragraph where— |
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(a) | the existing leaseback terminates otherwise than by expiry of its |
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(b) | the amount calculated in accordance with section 228C(3) exceeds |
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(2) | In determining the amount by which income or profits are to be increased |
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under section 228C(2), the amount calculated in accordance with section |
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228C(3) shall be disregarded to the extent that it exceeds the relevant cap. |
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(3) | The relevant cap is—![equation: cross[id[plus[times[char[O],char[r],char[i],char[g],char[i],char[n],char[a],char[
l],string[" "],char[C],char[o],char[n],char[s],char[i],char[d],char[e],char[r],char[
a],char[t],char[i],char[o],char[n]],minus[times[char[R],char[e],char[l],char[e],
char[v],char[a],char[n],char[t],string[" "],char[R],char[e],char[n],char[t],char[
a],char[l],char[s]]]]],over[times[char[N],char[e],char[t],string[" Consideration"]],
times[char[O],char[r],char[i],char[g],char[i],char[n],char[a],char[l],string[" Consideration"]]]]](missing.gif) |
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| “Original Consideration” has the same meaning as in section 228B; |
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| “Relevant Rentals” means— |
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(a) | the pre-commencement rentals, minus |
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(i) | finance charges shown in the accounts for periods that |
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end before 17 March 2004, and |
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(ii) | the appropriate proportion of finance charges shown in |
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the accounts for the transitional period of account; |
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| “Net Consideration” has the same meaning as in section 228C. |
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6 (1) | This paragraph applies if— |
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(a) | the existing leaseback terminates otherwise than by expiry of its |
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(b) | upon the termination of the leaseback, or during the period of one |
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month beginning with the date of termination, the lessee becomes |
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the owner of the plant of machinery by acquiring it— |
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(ii) | where no person other than the lessor or a person connected |
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with the lessee has owned the plant or machinery at any time |
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since the termination of the leaseback, from a person |
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connected with the lessee, |
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(c) | the person who first acquires the plant or machinery from the lessor |
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does so as a result of incurring capital expenditure equal (at least) to |
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the market value of the plant or machinery at the termination of the |
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(d) | the amount of the lessee acquisition expenditure that counts as |
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qualifying expenditure is restricted under section 226. |
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(2) | If the section 226 restriction is greater than the amount calculated in |
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accordance with section 228C(3)— |
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(a) | section 228C(2) to (4) shall not apply, but |
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(b) | if there is a taxable disposal, section 228C(2) to (4) shall apply subject |
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(3) | If the section 226 restriction is not greater than the amount calculated in |
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accordance with section 228C(3)— |
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(a) | the amount by which profits or income are increased in accordance |
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with section 228C(2) shall be reduced by the section 226 restriction, |
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(b) | if there is a taxable disposal, section 228C(2) to (4) shall apply again |
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subject to sub-paragraph (5). |
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(4) | For the purposes of sub-paragraphs (2) and (3) there is a taxable disposal if, |
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during the period of six years beginning with the date of termination of the |
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(a) | the whole of the plant or machinery is the subject of a disposal event |
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(within the meaning of Part 2), or |
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(b) | part of the plant or machinery is the subject of such a disposal event. |
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(5) | Where section 228C(2) to (4) applies subject to this sub-paragraph— |
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(a) | a reference to the termination shall be treated as a reference to the |
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cessation of ownership of the plant or machinery, and |
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(b) | the amount by which profits or income are increased in accordance |
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with section 228C(2) shall be— |
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(i) | in a case falling within sub-paragraph (2)(b), the relevant |
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fraction of the amount calculated in accordance with section |
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(ii) | in a case falling within sub-paragraph (3)(b), the relevant |
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fraction of the section 226 restriction. |
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(6) | In sub-paragraph (5)(b)(i) and (ii) “relevant fraction” means—![equation: over[id[plus[times[char[D],char[i],char[s],char[p],char[o],char[s],char[a],char[
l],string[" "],char[P],char[r],char[o],char[c],char[e],char[e],char[d],char[s]],
minus[times[char[R],char[e],char[s],char[t],char[r],char[i],char[c],char[t],char[
e],char[d],string[" "],char[Q],char[u],char[a],char[l],char[i],char[f],char[y],char[
i],char[n],char[g],string[" "],char[E],char[x],char[p],char[e],char[n],char[d],char[
i],char[t],char[u],char[r],char[e]]]]],id[plus[times[char[L],char[e],char[s],char[
s],char[e],char[e],string[" "],char[A],char[c],char[q],char[u],char[i],char[s],char[
i],char[t],char[i],char[o],char[n],string[" "],char[E],char[x],char[p],char[e],char[
n],char[d],char[i],char[t],char[u],char[r],char[e]],minus[times[char[R],char[e],
char[s],char[t],char[r],char[i],char[c],char[t],char[e],char[d],string[" "],char[
Q],char[u],char[a],char[l],char[i],char[f],char[y],char[i],char[n],char[g],string[
" "],char[E],char[x],char[p],char[e],char[n],char[d],char[i],char[t],char[u],char[
r],char[e]]]]]]](missing.gif) |
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| where “Disposal Proceeds” means the consideration due to the lessee under |
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the taxable disposal or, if higher, the market value of the plant or machinery |
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at the time of the taxable disposal; but— |
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(a) | where that amount is greater than the lessee acquisition expenditure, |
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the Disposal Proceeds shall be the amount of the lessee acquisition |
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(b) | where that amount is less than the restricted qualifying expenditure, |
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the Disposal Proceeds shall be the amount of the restricted |
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(7) | Where there is a taxable disposal by virtue of sub-paragraph (4)(b), this |
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paragraph applies in relation to that disposal with the following |
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(a) | references in sub-paragraphs (5)(a) and (6) to the plant or machinery |
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shall be taken to be references to the part of the plant or machinery |
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comprised in the taxable disposal; |
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(b) | the amount by which profits or income are to be increased by virtue |
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of sub-paragraph (5)(b) shall be the partial disposal fraction of the |
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amount given by sub-paragraph (5)(b)(i) or (ii); |
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(c) | the partial disposal fraction of the restricted qualifying expenditure |
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and of the lessee acquisition expenditure shall be used for the |
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purposes of sub-paragraph (6) instead of those amounts of |
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(8) | For the purposes of sub-paragraph (7) the partial disposal fraction is—![equation: over[times[char[A],char[p],char[p],char[o],char[r],char[t],char[i],char[o],char[
n],char[e],char[d],string[" Lessee Acquisition Expenditure"]],times[char[L],char[
e],char[s],char[s],char[e],char[e],string[" "],char[A],char[c],char[q],char[u],char[
i],char[s],char[i],char[t],char[i],char[o],char[n],string[" "],char[E],char[x],char[
p],char[e],char[n],char[d],char[i],char[t],char[u],char[r],char[e]]]](missing.gif) |
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| where “Apportioned Lessee Acquisition Expenditure” means so much of the |
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lessee acquisition expenditure as was attributable to the acquisition of the |
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part of the plant or machinery comprised in the taxable disposal. |
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| “lessee acquisition expenditure” means the capital expenditure |
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incurred by the lessee in acquiring the plant or machinery as |
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described in sub-paragraph (1)(b), |
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| “restricted qualifying expenditure” means the qualifying expenditure |
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| “section 226 restriction” means— |
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(a) | the lessee acquisition expenditure, minus |
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(b) | the restricted qualifying expenditure. |
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|
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|
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7 (1) | This paragraph applies if the pre-commencement rentals are greater than the |
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total of the actual taxed rentals for periods of account up to, but excluding, |
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the transitional period of account. |
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(2) | Section 228D shall not apply in relation to— |
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(a) | the transitional period of account if the lessor’s excess rentals are |
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greater than the notional taxed rental for that period, or |
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(b) | a subsequent period of account if the untaxed portion of the lessor’s |
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excess rentals is greater than the notional taxed rental for that period. |
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(3) | Section 228D is subject to sub-paragraph (4) in its application to— |
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(a) | the transitional period of account if the lessor’s excess rentals are not |
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greater than the notional taxed rental for that period, or |
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(b) | a subsequent period of account if the untaxed portion of the lessor’s |
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excess rentals is not greater than the notional taxed rental for that |
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(4) | The permitted threshold for that period of account is the total of— |
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(a) | the lessor’s excess rentals (in the case of the transitional period of |
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account) or the untaxed portion of the lessor’s excess rentals (in the |
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case of a subsequent period of account), and |
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(b) | the amount given by this calculation—![equation: times[char[B],char[a],char[s],char[i],char[c],cross[times[string[" "],char[A],char[
m],char[o],char[u],char[n],char[t]],over[id[plus[times[char[N],char[o],char[t],char[
i],char[o],char[n],char[a],char[l],string[" "],char[T],char[a],char[x],char[e],char[
d],string[" "],char[R],char[e],char[n],char[t],char[a],char[l]],minus[times[char[
D],char[e],char[d],char[u],char[c],char[t],char[i],char[b],char[l],char[e],string[
" "],char[E],char[x],char[c],char[e],char[s],char[s]]]]],times[char[N],char[o],char[
t],char[i],char[o],char[n],char[a],char[l],string[" "],char[T],char[a],char[x],char[
e],char[d],string[" "],char[R],char[e],char[n],char[t],char[a],char[l]]]]]](missing.gif) |
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| “Basic Amount” means the amount calculated in accordance with |
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| “Notional Taxed Rental” means the notional taxed rental for the |
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period of account in question, and |
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| “Deductible Excess” means the amount included in the permitted |
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threshold by virtue of sub-paragraph (4)(a). |
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(5) | But where, in relation to the transitional period of account, the amount given |
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by sub-paragraph (4) is less than the appropriate fraction of the notional |
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taxed rental for that period, the permitted threshold shall be that fraction of |
| 30 |
| |
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(a) | “the lessor’s excess rentals” means— |
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(i) | the pre-commencement rentals, minus |
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(ii) | the total of the actual taxed rentals referred to in sub- |
| 35 |
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(b) | “the untaxed portion of the lessor’s excess rentals”, in relation to a |
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period of account, means— |
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(i) | the lessor’s excess rentals, minus |
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(ii) | the total of the actual taxed rentals for periods of account |
| 40 |
from and including the transitional period up to, but |
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excluding, the period in question. |
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| “actual taxed rental”, in relation to a period of account, means the |
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amount that should be taken into consideration in respect of |
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amounts receivable under the existing leaseback in calculating the |
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|
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|
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lessor’s income or profits for that period of account for the purpose |
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of income tax or corporation tax; |
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| “notional taxed rental”, in relation to a period of account, means the |
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amount that would, if section 228D did not apply, be taken into |
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consideration in respect of amounts receivable under the existing |
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leaseback in calculating the lessor’s income or profits for that |
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period of account for the purpose of income tax or corporation tax. |
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(8) | Nothing in sub-paragraphs (3) to (5) prevents the inclusion of an amount in |
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the permitted threshold by virtue of section 228D(2). |
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(9) | This paragraph does not apply in relation to any period of account later than |
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a period of account for which the permitted threshold has been determined |
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in accordance with sub-paragraphs (3) to (5). |
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8 (1) | This paragraph applies where— |
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(a) | the existing leaseback terminates, and |
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(b) | in the period of account immediately following that in which it |
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terminates, paragraph 7(2)(b) or 7(3)(b) would apply were it not for |
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(2) | The permitted threshold for the period of account in which the leaseback |
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terminates shall also include an amount equal to the amount that the |
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untaxed portion of the lessor’s excess rentals would have been in the period |
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of account immediately following. |
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9 | Section 228E shall not apply where the existing leaseback terminates before |
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10 (1) | Sub-paragraph (2) applies where— |
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(a) | an existing leaseback is the leaseback in a lease and finance |
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(b) | the leaseback terminates, |
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(c) | on or after the termination there is a disposal, by the user, of the |
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whole or part of the plant and machinery subject to the leaseback, |
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(d) | a chargeable gain that accrues on that disposal (“the relevant |
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chargeable gain”) falls to be taken into account for the purposes of a |
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chargeable gains computation. |
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(2) | The following fraction of the relevant chargeable gain shall instead be taken |
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into account for the purposes of the chargeable gains computation—![equation: over[id[plus[times[char[N],char[e],char[t],string[" "],char[R],char[e],char[n],char[
t],char[a],char[l],char[s]],minus[times[char[T],char[e],char[r],char[m],char[i],
char[n],char[a],char[t],char[i],char[o],char[n],string[" "],char[C],char[h],arg[
char[e]]]]]],times[char[L],char[e],char[a],char[s],char[e],string[" "],char[P],char[
r],char[e],char[m],char[i],char[u],char[m]]]](missing.gif) |
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(a) | the total of the amounts deducted in calculating the user’s |
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income or profits, for the purpose of income tax or |
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corporation tax, in respect of amounts payable under the |
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|
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(b) | the total of the amounts shown in the user’s accounts in |
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respect of finance charges relating to the leaseback; |
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| “Termination Charge” means the amount by which the user’s income |
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or profits are to be increased by virtue of section 228C(2) of the CAA |
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2001 because of the termination; |
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| “Lease Premium” means the consideration relating to the leaseback |
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referred to in section 228F(6)(b) of the CAA 2001. |
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(3) | References in this paragraph to termination of the leaseback shall be |
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construed in accordance with section 228H(1) of the CAA 2001. |
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| 10 |
| “CAA 2001” means the Capital Allowances Act 2001; |
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| “chargeable gains computation” means the computation, for the |
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purposes of the TCGA 1992, of the total amount of chargeable gains |
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that accrue to the user in any chargeable period that ends on or after |
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| 15 |
| “disposal” shall be construed in accordance with the TCGA 1992; |
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| “lease and finance leaseback” has the same meaning as in section 228F |
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| “TCGA 1992” means the Taxation of Chargeable Gains Act 1992; |
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| “user” means the person who is the lessee under the leaseback. |
| 20 |
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| “existing leaseback” means a leaseback the term of which began |
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| “pre-commencement rentals”, in relation to an existing leaseback, |
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(a) | any amounts payable by the lessee to the lessor under the |
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leaseback before 17 March 2004, |
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(b) | any amounts so payable on or after 17 March 2004 in respect |
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of a period that ends before 17 March 2004, or |
| 30 |
(c) | where any amounts are so payable on or after 17 March 2004 |
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in respect of a period which begins before that date and |
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ends on or after that date, the appropriate fraction of each of |
| |
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| “transitional period of account” means a period of account that |
| 35 |
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(2) | In this Schedule the “appropriate fraction”, in respect of an amount that |
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relates to a particular period, means this fraction—![equation: over[(*s12.00s*)plus[(*n*)times[char[P],char[r],char[e]],minus[times[char[c],char[
o],char[m],char[m],char[e],char[n],char[c],char[e],char[m],char[e],char[n],char[
t],string[" "],char[P],char[e],char[r],char[i],char[o],char[d]]]],times[char[W],
char[h],char[o],char[l],char[e],string[" "],char[P],char[e],char[r],char[i],char[
o],char[d]]]](missing.gif) |
| |
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| “Pre-commencement Period” means the number of days in the part of |
| 40 |
the period that falls before 17 March 2004, and |
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| “Whole Period” means the number of days in the whole of the period. |
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|
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