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Leases of plant or machinery |
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Disposal values: commencement of long funding finance leases |
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1 (1) | Section 61 of CAA 2001 (disposal events and disposal values) is amended as |
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(2) | In the Table in subsection (2), for item 5A substitute— |
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| | | | | | | | | | | | | | finance lease of the plant |
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(3) | After subsection (5) insert— |
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“(5A) | In item 5A of the Table “qualifying lease payments” means the |
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minimum payments under the lease (including any initial payment), |
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(a) | so much of any payment as, under generally accepted |
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accounting practice, falls (or would fall) to be treated as the |
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gross return on investment in respect of the lease, |
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(b) | so much of any payment as represents charges for services, |
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(c) | so much of any payment as represents qualifying UK or |
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foreign tax (within the meaning of section 70YE) to be paid by |
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(4) | Omit subsections (6) to (9). |
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2 | Accordingly, in FA 2008, in Schedule 20, omit paragraph 4. |
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3 (1) | Section 25A of TCGA 1992 (long funding leases of plant or machinery: |
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deemed disposals) is amended as follows. |
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(2) | In subsection (2)(a), for “the value described in subsection (4)(a) or (b)” |
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substitute “the relevant disposal value”. |
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(3) | For subsections (4) to (4D) substitute— |
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“(4) | “Relevant disposal value” means— |
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(a) | in relation to a long funding finance lease, the disposal value |
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described in item 5A of the table in section 61(2) of the Capital |
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Allowances Act (disposal values), and |
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(b) | in relation to a long funding operating lease, the disposal |
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value described in item 5B of that table.” |
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(4) | In subsection (5), omit ““market value”,”. |
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4 | Accordingly, in FA 2008, in Schedule 20, omit paragraph 5. |
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5 (1) | The amendments made by paragraphs 1 and 2 have effect in relation to |
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leases whose inception is on or after 13 November 2008. |
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(2) | The amendments made by paragraphs 3 and 4 have effect in relation to |
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leases whose inception is on or after 22 April 2009. |
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Disposal values: termination etc of long funding leases |
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6 | In section 66 of CAA 2001 (list of provisions outside Chapter 5 of Part 2 of |
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that Act about disposal values), in the list, insert at the appropriate place— |
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| | long funding leases: disposal |
| | | | | events and disposal values”. |
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7 (1) | Section 70E of CAA 2001 (long funding leases: disposal events and disposal |
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values) is amended as follows. |
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(2) | In subsection (1), for paragraph (c) substitute— |
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“(c) | a relevant event occurs.” |
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(3) | After that subsection insert— |
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“(1A) | A relevant event occurs if— |
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(a) | the lease terminates, |
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(b) | the plant or machinery begins to be used wholly or partly for |
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purposes other than those of the qualifying activity, or |
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(c) | the qualifying activity is permanently discontinued.” |
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(4) | In subsection (2)(a), for “termination of the lease” substitute “relevant |
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(5) | For subsections (3) to (8) substitute— |
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“(2A) | The amount of the disposal value is—![equation: plus[id[plus[times[char[Q],char[E]],minus[times[char[Q],char[A]]]]],char[R]]](missing.gif) |
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QE is the person’s qualifying expenditure on the provision of |
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QA is the qualifying amount (see subsections (2B) to (2E)); |
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R is any relevant rebate (see subsections (2F) and (2G)). |
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(2B) | In the case of a long funding operating lease, “the qualifying |
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amount” means the aggregate amount of the reductions made under |
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section 502K of ICTA or section 148I of ITTOIA 2005 for periods of |
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account in which the person was the lessee. |
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(2C) | In the case of a long funding finance lease, “the qualifying amount” |
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(a) | the payments made to the lessor by the person under the |
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lease (including any initial payment), and |
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(b) | the payments made to the lessor by the person under a |
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guarantee of any residual amount (as defined in section |
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| subject to subsection (2D). |
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(2D) | The following are excluded from the “qualifying amount” under |
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(a) | so much of any payment as, in accordance with generally |
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accepted accounting practice, falls (or would fall) to be |
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shown in the person’s accounts as finance charges in respect |
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(b) | so much of any payment as represents charges for services, |
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(c) | so much of any payment as represents qualifying UK or |
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foreign tax (within the meaning of section 70YE) to be paid by |
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(2E) | In the case of a long funding finance lease that is not a transaction at |
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arm’s length, “the qualifying amount” includes only so much of the |
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amounts described in subsection (2C) as would reasonably be |
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expected to have been paid if the lease had been such a transaction. |
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(2F) | “Relevant rebate” means— |
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(a) | in a case falling within subsection (1A)(a), any amount |
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calculated by reference to the termination value that is |
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payable for the benefit (directly or indirectly) of the person or |
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another person connected with that person, or |
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(b) | in a case falling within subsection (1A)(b) or (c), any such |
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amount that would have been so payable if, when the |
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relevant event occurred, the lease had terminated and the |
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plant or machinery had been sold for its market value at that |
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(2G) | In the case of a lease that is not a transaction at arm’s length, |
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“relevant rebate” includes any amount that would reasonably be |
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expected to have fallen within subsection (2F) if the lease had been |
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(2H) | The amount of the disposal value brought into account under this |
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section cannot be less than nil.” |
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(6) | In subsection (9), for “termination of the lease” substitute “relevant event”. |
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8 | The amendments made by paragraphs 6 and 7 have effect in relation to cases |
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where the relevant event occurs on or after 13 November 2008. |
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Capital receipts treated as income |
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9 (1) | Section 785C of ICTA (plant and machinery leases: capital receipts to be |
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treated as income: interpretation) is amended as follows. |
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(2) | In subsection (6), for “subsection (9)” substitute “subsections (9) and (9A)”. |
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(a) | in paragraph (a), insert at the end “or”, and |
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(b) | omit paragraph (c) (and the “or” before it). |
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(4) | After subsection (9) insert— |
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(a) | a capital payment is an initial payment under a long-funding |
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(b) | under section 61 of the Capital Allowances Act (disposal |
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events and disposal values), the commencement of the term |
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of the lease is an event that requires the lessor to bring a |
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disposal value into account, |
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| the capital payment is only “relevant” to the extent that it exceeds the |
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(9B) | “Commencement”, “disposal value”, “initial payment”, “long |
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funding lease” and “the term” have the same meaning as in Part 2 of |
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the Capital Allowances Act.” |
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10 (1) | Section 809ZB of ITA 2007 (plant and machinery leases: capital receipts to be |
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treated as income: interpretation) is amended as follows. |
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(2) | In subsection (6), for “subsection (9)” substitute “subsections (9) and (9A)”. |
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(a) | in paragraph (a), insert at the end “or”, and |
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(b) | omit paragraph (c) (and the “or” before it). |
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(4) | After subsection (9) insert— |
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(a) | a capital payment is an initial payment under a long-funding |
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(b) | under section 61 of CAA 2001 (disposal events and disposal |
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values), the commencement of the term of the lease is an |
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event that requires the lessor to bring a disposal value into |
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| the capital payment is only “relevant” to the extent that it exceeds the |
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(9B) | “Commencement”, “disposal value”, “initial payment”, “long |
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funding lease” and “the term” have the same meaning as in Part 2 of |
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11 (1) | The amendments made by paragraphs 9 and 10 have effect in relation to |
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payments made under leases whose inception is on or after 13 November |
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2008 (subject to sub-paragraph (2)). |
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(2) | In relation to payments made under leases whose inception is before 22 |
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April 2009, section 785C(9A) of ICTA and section 809ZB(9A) of ITA 2007 |
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(inserted by this Schedule) have effect as if, for the words following |
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paragraph (b), there were substituted “the capital payment is not |
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Transfer and long funding leaseback: restrictions on lessee’s allowances |
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12 | In section 51A(10) of CAA 2001 (annual investment allowances), insert at the |
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| “section 70DA(2) (transfer and long funding leaseback: no |
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annual investment allowance for lessee),”. |
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13 | In section 52(5) of CAA 2001 (first-year allowances), insert at the appropriate |
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| “section 70DA(2) (transfer and long funding leaseback: no |
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first-year allowance for lessee),”. |
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14 | In section 57(3) of CAA 2001 (available qualifying expenditure), insert at the |
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| “section 70DA (transfer and long funding leaseback);”. |
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15 | In CAA 2001, after section 70D insert— |
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“70DA | Transfer and long funding leaseback: restrictions on lessee’s |
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(1) | This section applies where— |
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(a) | a person (“S”) transfers plant or machinery to another person |
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(b) | at any time after the date of the transfer, the plant or |
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machinery is available to be used by S, or a person (other than |
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B) who is connected with S (“CS”), under a plant or |
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(c) | that lease is a long funding lease. |
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(2) | No annual investment allowance or first-year allowance is to be |
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made in respect of the expenditure of S or CS under the lease. |
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(3) | The amount, if any, by which E exceeds D is to be left out of account |
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in determining the available qualifying expenditure of S or CS. |
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(4) | E is the capital expenditure of S or CS on the provision of the plant or |
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machinery under the long funding lease. |
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(5) | If S is required to bring a disposal value into account under this Part |
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because of the transfer referred to in subsection (1)(a), D is that |
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(6) | Otherwise, D is whichever of the following is the smallest— |
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(a) | the market value of the plant or machinery; |
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(b) | if S incurred capital expenditure on the provision of the plant |
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or machinery before the transfer referred to in subsection |
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(1)(a), the amount of that expenditure; |
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(c) | if a person connected with S incurred capital expenditure on |
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the provision of the plant or machinery before that transfer, |
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the amount of that expenditure. |
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(7) | Section 70Y(3) applies to references in this section to a transfer of |
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plant or machinery by a person. |
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(8) | For the purposes of this section, a transfer involving the grant of a |
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lease takes place on the commencement of the term of the lease.” |
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16 | In section 70H of CAA 2001 (lessee: requirement for tax return treating lease |
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as long funding lease), after subsection (1B) insert— |
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“(1C) | In a case in which paragraphs (a) and (b) of subsection (1) of section |
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70DA (leaseback of plant or machinery) are satisfied, subsection (1) |
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of this section does not apply to the lease referred to in section |
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17 | The amendments made by paragraphs 12 to 16 have effect in relation to |
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cases where the commencement of the term of the lease referred to in |
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subsection (1)(b) of section 70DA of CAA 2001 is on or after 13 November |
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Transfer followed by hire-purchase etc: restrictions on hirer’s allowances |
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18 | In section 51A(10) of CAA 2001 (annual investment allowances), after |
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“218A” insert “, 229A(2)”. |
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19 | In section 52(5) of CAA 2001 (first-year allowances), after “217” insert “, |
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20 | In section 57(3) of CAA 2001 (available qualifying expenditure), after |
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“228(2)” insert “, 229A”. |
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21 | In CAA 2001, after section 229 insert— |
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“229A | Transfer followed by hire-purchase etc: restrictions on hirer’s |
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(1) | This section applies where— |
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(a) | a person (“S”) transfers plant or machinery to another person |
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(b) | at any time after the date of the transfer, the plant or |
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machinery is available to be used by S, or a person (other than |
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B) who is connected with S (“CS”), |
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(c) | it is available to be so used under a contract which provides |
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that S or CS is to or may become the owner of the plant or |
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machinery on the performance of the contract, and |
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(d) | S or CS incurs capital expenditure on the provision of the |
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plant or machinery under that contract. |
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(2) | No annual investment allowance or first-year allowance is to be |
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made in respect of the expenditure of S or CS under the contract. |
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(3) | The amount, if any, by which E exceeds D is to be left out of account |
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in determining the available qualifying expenditure of S or CS. |
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(4) | E is the capital expenditure of S or CS on the provision of the plant or |
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machinery under the contract referred to in subsection (1)(c). |
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(5) | If S is required to bring a disposal value into account under this Part |
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because of the transfer referred to in subsection (1)(a), D is that |
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(6) | Otherwise, D is whichever of the following is the smallest— |
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(a) | the market value of the plant or machinery; |
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(b) | if S incurred capital expenditure on the provision of the plant |
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or machinery before the transfer referred to in subsection |
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(1)(a), the amount of that expenditure; |
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(c) | if a person connected with S incurred capital expenditure on |
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the provision of the plant or machinery before that transfer, |
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the amount of that expenditure. |
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(7) | Sections 214 and 215 do not apply in relation to the contract referred |
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(8) | Section 70Y(3) applies to references in this section to a transfer of |
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plant or machinery by a person. |
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(9) | For the purposes of this section, a transfer involving the grant of a |
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lease takes place on the commencement of the term of the lease.” |
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22 | The amendments made by paragraphs 18 to 21 have effect in relation to |
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cases where the contract referred to in subsection (1)(c) of section 229A of |
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CAA 2001 is entered into on or after 13 November 2008. |
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23 | In section 216(1)(b)(i) of CAA 2001 (sale and leaseback etc), after “S” insert |
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“or by a person (other than B) who is connected with S”. |
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24 | In section 221(1)(b)(i) of CAA 2001 (meaning of “sale and finance |
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leaseback”), for “a qualifying activity carried on by S” substitute “an activity |
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carried on by S or by a person (other than B) who is connected with S,”. |
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25 | The amendment made by paragraph 23 has effect— |
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(a) | where the date of the transaction referred to in section 216(1)(a) of |
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CAA 2001 is on or after 22 April 2009, and |
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(b) | for the purposes of section 227 of that Act (which applies section |
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216(1)(b) of that Act), where the date of the transaction referred to in |
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section 227(1)(a) is on or after 22 April 2009. |
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26 | The amendment made by paragraph 24 has effect— |
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(a) | where the date of the transaction referred to in section 221(1)(a) of |
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CAA 2001 is on or after 22 April 2009, and |
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(b) | for the purposes of section 228A of that Act (which applies section |
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221(1)(b) of that Act), where the date of the transaction referred to in |
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section 228A(2)(a) is on or after 22 April 2009. |
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27 | In this Schedule “commencement” and “inception” have the meaning given |
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in section 70YI(1) of CAA 2001. |
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Long funding leases of films |
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1 | In ICTA, after section 502GC insert— |
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“502GD | Cases where ss 502B to 502G do not apply: films |
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(1) | If a company is or has been a lessor under a long funding lease of a |
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film, sections 502B to 502G do not apply in respect of the lease. |
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(2) | “Film” has the same meaning as in Part 15 of the Corporation Tax Act |
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2009 (see section 1181 of that Act).” |
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