Finance (No.2) Bill

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Finance (No.2) Bill

Finance (No.2) Bill
Schedule 8 — Long funding leases of plant or machinery
Part 1 — Capital allowances
216

Transfers, assignments, novations, leaseback, variations etc
70W
Transfers, assignments etc by lessor
(1)
This section applies in any case where the following conditions are
met—
(a)
a person (the “old lessor”) is lessor of plant or machinery
5
under a plant or machinery lease (the “old lease”),
(b)
during the term of the lease, the old lessor transfers the plant
or machinery to another person (the “new lessor”),
(c)
the transfer is not the grant of a plant or machinery lease by
the old lessor,
10
(d)
immediately after the transfer, the new lessor is the lessor of
the plant or machinery under a lease (whether or not the
same lease as the old lease).
(2)
If it is not otherwise the case,—
(a)
the old lessor is to be treated as if the old lease terminated
15
immediately before the transfer, and
(b)
the new lessor is to be treated as if the new lease had been
entered into immediately after the transfer.
(3)
The new lessor is also to be treated as if the date of the transfer were
the date of both—
20
(a)
the inception of the new lease, and
(b)
the commencement of the term of the new lease,

if it is not otherwise the case.
(4)
If, immediately before the transfer, the old lease was (or was treated
by virtue of this subsection as being) in the case of the old lessor a
25
lease of either of the following descriptions—
(a)
a long funding lease, or
(b)
a lease which is not a long funding lease,

the new lease is to be treated in the case of the new lessor as being a
lease of the same description, if the conditions in subsection (5) are
30
met.
(5)
The conditions are that—
(a)
the term of the new lease is the unexpired portion of the term
of the old lease, and
(b)
the amounts receivable under the new lease are the same as
35
would have been receivable under the old lease, assuming it
to have continued in effect.
(6)
If—
(a)
it is not otherwise the case, and
(b)
the conditions in subsection (5) are met,
40

the lessee is to be treated as if the old lease and the new lease were
the same continuing lease.
(7)
Any reference in this section to a transfer of plant or machinery by a
person includes a reference to—
(a)
any kind of disposal of, or of the person’s interest in, the plant
45
or machinery,

Finance (No.2) Bill
Schedule 8 — Long funding leases of plant or machinery
Part 1 — Capital allowances
217

(b)
any arrangements under which the person’s interest in the
plant or machinery is terminated and another person
becomes lessor of the plant or machinery,
(c)
in a case where the plant or machinery is a fixture and the
person is treated under section 176 as the owner, any
5
cessation of ownership under section 188, 190, 191, 192 or
192A).
70X
Transfers, assignments etc by lessee
(1)
This section applies in any case where the following conditions are
met—
10
(a)
a person (the “old lessee”) is lessee of plant or machinery
under a plant or machinery lease (the “old lease”),
(b)
during the term of the lease, the old lessee transfers the plant
or machinery to another person (the “new lessee”),
(c)
the transfer is not the grant of a plant or machinery lease by
15
the old lessee,
(d)
immediately after the transfer, the new lessee is the lessee of
the plant or machinery under a lease (whether or not the
same lease as the old lease).
(2)
If it is not otherwise the case,—
20
(a)
the old lessee is to be treated as if the old lease terminated
immediately before the transfer, and
(b)
the new lessee is to be treated as if the new lease had been
entered into immediately after the transfer.
(3)
The new lessee is also to be treated as if the date of the transfer were
25
the date of both—
(a)
the inception of the new lease, and
(b)
the commencement of the term of the new lease,

if it is not otherwise the case.
(4)
If, immediately before the transfer, the old lease was (or was treated
30
by virtue of this subsection as being) in the case of the old lessee a
lease of one of the following descriptions—
(a)
a long funding lease, or
(b)
a lease which is not a long funding lease,

the new lease is to be treated in the case of the new lessee as being a
35
lease of the same description, if the conditions in subsection (5) are
met.
(5)
The conditions are that—
(a)
the term of the new lease is the unexpired portion of the term
of the old lease, and
40
(b)
the amounts payable under the new lease are the same as
would have been payable under the old lease, assuming it to
have continued in effect.
(6)
If—
(a)
it is not otherwise the case, and
45
(b)
the conditions in subsection (5) are met,

Finance (No.2) Bill
Schedule 8 — Long funding leases of plant or machinery
Part 1 — Capital allowances
218


the lessor is to be treated as if the old lease and the new lease were
the same continuing lease.
(7)
Any reference in this section to a transfer of plant or machinery by a
person includes a reference to—
(a)
any kind of disposal of, or of the person’s interest in, the plant
5
or machinery,
(b)
any arrangements under which the person’s interest in the
plant or machinery is terminated and another person
becomes lessee of the plant or machinery,
(c)
in a case where the plant or machinery is a fixture and the
10
person is treated under section 176 as the owner, any
cessation of ownership under section 188, 190, 191, 192 or
192A).
70Y
Sale and leaseback, lease and leaseback etc: lessors
(1)
Where—
15
(a)
a person (B) transfers plant or machinery to another person
(A),
(b)
the plant or machinery is directly or indirectly leased back to
B,
(c)
immediately before the commencement of the term of the
20
lease back to B, B is the lessor of the plant or machinery to
another person under a lease which is, in B’s case, a long
funding lease,

the lease back to B is, in the case of both A and B, a long funding lease.
(2)
If, in any such case, the plant or machinery is leased back from A to
25
B indirectly, any leases by means of which the indirect lease back
from A to B is effected are also long funding leases in the case of each
of the parties to them.
(3)
Any reference in this section to a transfer of plant or machinery by a
person includes a reference to—
30
(a)
any kind of disposal of, or of the person’s interest in, the plant
or machinery (including the grant of a lease),
(b)
any arrangements under which the person’s interest in the
plant or machinery is terminated and another person
becomes entitled to, or to an interest in, the plant or
35
machinery,
(c)
in a case where the plant or machinery is a fixture and the
person is treated under section 176 as the owner, any
cessation of ownership under section 188, 190, 191, 192 or
192A).
40
70YA
Change in accountancy classification of long funding lease
(1)
This section applies in any case where—
(a)
a person is lessor or lessee under a long funding lease, and
(b)
at any time after the inception of the lease, the accountancy
classification of the lease as a finance lease or an operating
45
lease changes in the relevant accounts.
(2)
The person is to be treated as if—

Finance (No.2) Bill
Schedule 8 — Long funding leases of plant or machinery
Part 1 — Capital allowances
219

(a)
the lease had terminated immediately before the time of the
change,
(b)
another lease (the “new lease”) had been entered into
immediately after the time of the change, and
(c)
the new lease were a long funding lease in the case of the
5
lessor.
(3)
The person is also to be treated as if the date on which the change
occurs were the date of both—
(a)
the inception of the new lease, and
(b)
the commencement of the term of the new lease.
10
(4)
The cases where the accountancy classification of a long funding
lease as a finance lease or an operating lease changes at any time (the
“relevant time”) in the relevant accounts are those set out in
subsections (5) and (6).
(5)
Case 1 is where—
15
(a)
immediately before the relevant time, the lease is one that
falls (or would fall) to be treated in the relevant accounts in
accordance with generally accepted accounting practice as a
finance lease for accounting purposes, and
(b)
at the relevant time the lease becomes one that falls (or would
20
fall) to be treated in the relevant accounts in accordance with
generally accepted accounting practice as not being a finance
lease for accounting purposes.
(6)
Case 2 is where—
(a)
immediately before the relevant time, the lease is one that
25
falls (or would fall) to be treated in the relevant accounts in
accordance with generally accepted accounting practice as
not being a finance lease for accounting purposes, and
(b)
at the relevant time the lease becomes one that falls (or would
fall) to be treated in the relevant accounts in accordance with
30
generally accepted accounting practice as a finance lease for
accounting purposes.
(7)
The Treasury may by regulations make provision for or in
connection with restricting the application or operation of this
section.
35
(8)
In this section, any reference to a finance lease includes a reference to
a loan.
(9)
In the application of this section in relation to any person, the
“relevant accounts” are the accounts—
(a)
of that person, or
40
(b)
where that person is the lessor, of any person connected with
that person,

but only to the extent that the treatment of the lease in those accounts
as a finance lease or otherwise falls (or would fall) to be determined
by reference to that person as the lessor or lessee under the lease.
45
(10)
Subsections (2) and (3) of section 70N (finance lease test: group
accounts, and generally accepted accounting practice for persons
outside the charge to tax) also apply for the purposes of this section.