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Finance Bill
Schedule 32 — Leases of plant or machinery

268

 

Schedule 32

Section 63

 

Leases of plant or machinery

Disposal values: commencement of long funding finance leases

1     (1)  

Section 61 of CAA 2001 (disposal events and disposal values) is amended as

follows.

5

      (2)  

In the Table in subsection (2), for item 5A substitute—

 

“5A.

Commencement of the

The greater of—

 
  

term of a long funding

(a)   

the market value

 
  

finance lease of the plant

of the plant or

 
  

or machinery.

machinery at the

 

10

   

commencement of

 
   

the term of the

 
   

lease, and

 
   

(b)   

the qualifying

 
   

lease payments.”

 

15

      (3)  

After subsection (5) insert—

“(5A)   

In item 5A of the Table “qualifying lease payments” means the

minimum payments under the lease (including any initial payment),

excluding the following—

(a)   

so much of any payment as, under generally accepted

20

accounting practice, falls (or would fall) to be treated as the

gross return on investment in respect of the lease,

(b)   

so much of any payment as represents charges for services,

and

(c)   

so much of any payment as represents qualifying UK or

25

foreign tax (within the meaning of section 70YE) to be paid by

the lessor.”

      (4)  

Omit subsections (6) to (9).

2          

Accordingly, in FA 2008, in Schedule 20, omit paragraph 4.

3     (1)  

Section 25A of TCGA 1992 (long funding leases of plant or machinery:

30

deemed disposals) is amended as follows.

      (2)  

In subsection (2)(a), for “the value described in subsection (4)(a) or (b)”

substitute “the relevant disposal value”.

      (3)  

For subsections (4) to (4D) substitute—

“(4)   

“Relevant disposal value” means—

35

(a)   

in relation to a long funding finance lease, the disposal value

described in item 5A of the table in section 61(2) of the Capital

Allowances Act (disposal values), and

(b)   

in relation to a long funding operating lease, the disposal

value described in item 5B of that table.”

40

      (4)  

In subsection (5), omit ““market value”,”.

 
 

Finance Bill
Schedule 32 — Leases of plant or machinery

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4          

Accordingly, in FA 2008, in Schedule 20, omit paragraph 5.

5     (1)  

The amendments made by paragraphs 1 and 2 have effect in relation to

leases whose inception is on or after 13 November 2008.

      (2)  

The amendments made by paragraphs 3 and 4 have effect in relation to

leases whose inception is on or after 22 April 2009.

5

Disposal values: termination etc of long funding leases

6          

In section 66 of CAA 2001 (list of provisions outside Chapter 5 of Part 2 of

that Act about disposal values), in the list, insert at the appropriate place—

 

“section 70E

long funding leases: disposal

 
  

events and disposal values”.

 

10

7     (1)  

Section 70E of CAA 2001 (long funding leases: disposal events and disposal

values) is amended as follows.

      (2)  

In subsection (1), for paragraph (c) substitute—

“(c)   

a relevant event occurs.”

      (3)  

After that subsection insert—

15

“(1A)   

A relevant event occurs if—

(a)   

the lease terminates,

(b)   

the plant or machinery begins to be used wholly or partly for

purposes other than those of the qualifying activity, or

(c)   

the qualifying activity is permanently discontinued.”

20

      (4)  

In subsection (2)(a), for “termination of the lease” substitute “relevant

event”.

      (5)  

For subsections (3) to (8) substitute—

“(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]]

   

where—

25

QE is the person’s qualifying expenditure on the provision of

the plant or machinery;

QA is the qualifying amount (see subsections (2B) to (2E));

R is any relevant rebate (see subsections (2F) and (2G)).

(2B)   

In the case of a long funding operating lease, “the qualifying

30

amount” means the aggregate amount of the reductions made under

section 502K of ICTA or section 148I of ITTOIA 2005 for periods of

account in which the person was the lessee.

(2C)   

In the case of a long funding finance lease, “the qualifying amount”

means the aggregate of—

35

(a)   

the payments made to the lessor by the person under the

lease (including any initial payment), and

(b)   

the payments made to the lessor by the person under a

guarantee of any residual amount (as defined in section

70YE),

40

 
 

Finance Bill
Schedule 32 — Leases of plant or machinery

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subject to subsection (2D).

(2D)   

The following are excluded from the “qualifying amount” under

subsection (2C)—

(a)   

so much of any payment as, in accordance with generally

accepted accounting practice, falls (or would fall) to be

5

shown in the person’s accounts as finance charges in respect

of the lease,

(b)   

so much of any payment as represents charges for services,

and

(c)   

so much of any payment as represents qualifying UK or

10

foreign tax (within the meaning of section 70YE) to be paid by

the lessor.

(2E)   

In the case of a long funding finance lease that is not a transaction at

arm’s length, “the qualifying amount” includes only so much of the

amounts described in subsection (2C) as would reasonably be

15

expected to have been paid if the lease had been such a transaction.

(2F)   

“Relevant rebate” means—

(a)   

in a case falling within subsection (1A)(a), any amount

calculated by reference to the termination value that is

payable for the benefit (directly or indirectly) of the person or

20

another person connected with that person, or

(b)   

in a case falling within subsection (1A)(b) or (c), any such

amount that would have been so payable if, when the

relevant event occurred, the lease had terminated and the

plant or machinery had been sold for its market value at that

25

time.

(2G)   

In the case of a lease that is not a transaction at arm’s length,

“relevant rebate” includes any amount that would reasonably be

expected to have fallen within subsection (2F) if the lease had been

such a transaction.

30

(2H)   

The amount of the disposal value brought into account under this

section cannot be less than nil.”

      (6)  

In subsection (9), for “termination of the lease” substitute “relevant event”.

8          

The amendments made by paragraphs 6 and 7 have effect in relation to cases

where the relevant event occurs on or after 13 November 2008.

35

Capital receipts treated as income

9     (1)  

Section 785C of ICTA (plant and machinery leases: capital receipts to be

treated as income: interpretation) is amended as follows.

      (2)  

In subsection (6), for “subsection (9)” substitute “subsections (9) and (9A)”.

      (3)  

In subsection (9)—

40

(a)   

in paragraph (a), insert at the end “or”, and

(b)   

omit paragraph (c) (and the “or” before it).

      (4)  

After subsection (9) insert—

“(9A)   

Where—

 
 

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Schedule 32 — Leases of plant or machinery

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(a)   

a capital payment is an initial payment under a long-funding

lease, and

(b)   

under section 61 of the Capital Allowances Act (disposal

events and disposal values), the commencement of the term

of the lease is an event that requires the lessor to bring a

5

disposal value into account,

   

the capital payment is only “relevant” to the extent that it exceeds the

disposal value.”

(9B)   

“Commencement”, “disposal value”, “initial payment”, “long

funding lease” and “the term” have the same meaning as in Part 2 of

10

the Capital Allowances Act.”

10    (1)  

Section 809ZB of ITA 2007 (plant and machinery leases: capital receipts to be

treated as income: interpretation) is amended as follows.

      (2)  

In subsection (6), for “subsection (9)” substitute “subsections (9) and (9A)”.

      (3)  

In subsection (9)—

15

(a)   

in paragraph (a), insert at the end “or”, and

(b)   

omit paragraph (c) (and the “or” before it).

      (4)  

After subsection (9) insert—

“(9A)   

Where—

(a)   

a capital payment is an initial payment under a long-funding

20

lease, and

(b)   

under section 61 of CAA 2001 (disposal events and disposal

values), the commencement of the term of the lease is an

event that requires the lessor to bring a disposal value into

account,

25

   

the capital payment is only “relevant” to the extent that it exceeds the

disposal value.”

(9B)   

“Commencement”, “disposal value”, “initial payment”, “long

funding lease” and “the term” have the same meaning as in Part 2 of

CAA 2001.”

30

11    (1)  

The amendments made by paragraphs 9 and 10 have effect in relation to

payments made under leases whose inception is on or after 13 November

2008 (subject to sub-paragraph (2)).

      (2)  

In relation to payments made under leases whose inception is before 22

April 2009, section 785C(9A) of ICTA and section 809ZB(9A) of ITA 2007

35

(inserted by this Schedule) have effect as if, for the words following

paragraph (b), there were substituted “the capital payment is not

“relevant””.

Transfer and long funding leaseback: restrictions on lessee’s allowances

12         

In section 51A(10) of CAA 2001 (annual investment allowances), insert at the

40

appropriate place—

   

“section 70DA(2) (transfer and long funding leaseback: no

annual investment allowance for lessee),”.

13         

In section 52(5) of CAA 2001 (first-year allowances), insert at the appropriate

 
 

Finance Bill
Schedule 32 — Leases of plant or machinery

272

 

place—

   

“section 70DA(2) (transfer and long funding leaseback: no

first-year allowance for lessee),”.

14         

In section 57(3) of CAA 2001 (available qualifying expenditure), insert at the

appropriate place—

5

   

“section 70DA (transfer and long funding leaseback);”.

15         

In CAA 2001, after section 70D insert—

“70DA   

 Transfer and long funding leaseback: restrictions on lessee’s

allowances

(1)   

This section applies where—

10

(a)   

a person (“S”) transfers plant or machinery to another person

(“B”),

(b)   

at any time after the date of the transfer, the plant or

machinery is available to be used by S, or a person (other than

B) who is connected with S (“CS”), under a plant or

15

machinery lease, and

(c)   

that lease is a long funding lease.

(2)   

No annual investment allowance or first-year allowance is to be

made in respect of the expenditure of S or CS under the lease.

(3)   

The amount, if any, by which E exceeds D is to be left out of account

20

in determining the available qualifying expenditure of S or CS.

(4)   

E is the capital expenditure of S or CS on the provision of the plant or

machinery under the long funding lease.

(5)   

If S is required to bring a disposal value into account under this Part

because of the transfer referred to in subsection (1)(a), D is that

25

disposal value.

(6)   

Otherwise, D is whichever of the following is the smallest—

(a)   

the market value of the plant or machinery;

(b)   

if S incurred capital expenditure on the provision of the plant

or machinery before the transfer referred to in subsection

30

(1)(a), the amount of that expenditure;

(c)   

if a person connected with S incurred capital expenditure on

the provision of the plant or machinery before that transfer,

the amount of that expenditure.

(7)   

Section 70Y(3) applies to references in this section to a transfer of

35

plant or machinery by a person.

(8)   

For the purposes of this section, a transfer involving the grant of a

lease takes place on the commencement of the term of the lease.”

16         

In section 70H of CAA 2001 (lessee: requirement for tax return treating lease

as long funding lease), after subsection (1B) insert—

40

“(1C)   

In a case in which paragraphs (a) and (b) of subsection (1) of section

70DA (leaseback of plant or machinery) are satisfied, subsection (1)

of this section does not apply to the lease referred to in section

70DA(1)(b).”

 
 

Finance Bill
Schedule 32 — Leases of plant or machinery

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17         

The amendments made by paragraphs 12 to 16 have effect in relation to

cases where the commencement of the term of the lease referred to in

subsection (1)(b) of section 70DA of CAA 2001 is on or after 13 November

2008.

Transfer followed by hire-purchase etc: restrictions on hirer’s allowances

5

18         

In section 51A(10) of CAA 2001 (annual investment allowances), after

“218A” insert “, 229A(2)”.

19         

In section 52(5) of CAA 2001 (first-year allowances), after “217” insert “,

229A(2)”.

20         

In section 57(3) of CAA 2001 (available qualifying expenditure), after

10

“228(2)” insert “, 229A”.

21         

In CAA 2001, after section 229 insert—

“229A   

 Transfer followed by hire-purchase etc: restrictions on hirer’s

allowances

(1)   

This section applies where—

15

(a)   

a person (“S”) transfers plant or machinery to another person

(“B”),

(b)   

at any time after the date of the transfer, the plant or

machinery is available to be used by S, or a person (other than

B) who is connected with S (“CS”),

20

(c)   

it is available to be so used under a contract which provides

that S or CS is to or may become the owner of the plant or

machinery on the performance of the contract, and

(d)   

S or CS incurs capital expenditure on the provision of the

plant or machinery under that contract.

25

(2)   

No annual investment allowance or first-year allowance is to be

made in respect of the expenditure of S or CS under the contract.

(3)   

The amount, if any, by which E exceeds D is to be left out of account

in determining the available qualifying expenditure of S or CS.

(4)   

E is the capital expenditure of S or CS on the provision of the plant or

30

machinery under the contract referred to in subsection (1)(c).

(5)   

If S is required to bring a disposal value into account under this Part

because of the transfer referred to in subsection (1)(a), D is that

disposal value.

(6)   

Otherwise, D is whichever of the following is the smallest—

35

(a)   

the market value of the plant or machinery;

(b)   

if S incurred capital expenditure on the provision of the plant

or machinery before the transfer referred to in subsection

(1)(a), the amount of that expenditure;

(c)   

if a person connected with S incurred capital expenditure on

40

the provision of the plant or machinery before that transfer,

the amount of that expenditure.

(7)   

Sections 214 and 215 do not apply in relation to the contract referred

to in subsection (1)(c).

 
 

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Schedule 33 — Long funding leases of films

274

 

(8)   

Section 70Y(3) applies to references in this section to a transfer of

plant or machinery by a person.

(9)   

For the purposes of this section, a transfer involving the grant of a

lease takes place on the commencement of the term of the lease.”

22         

The amendments made by paragraphs 18 to 21 have effect in relation to

5

cases where the contract referred to in subsection (1)(c) of section 229A of

CAA 2001 is entered into on or after 13 November 2008.

Finance leaseback

23         

In section 216(1)(b)(i) of CAA 2001 (sale and leaseback etc), after “S” insert

“or by a person (other than B) who is connected with S”.

10

24         

In section 221(1)(b)(i) of CAA 2001 (meaning of “sale and finance

leaseback”), for “a qualifying activity carried on by S” substitute “an activity

carried on by S or by a person (other than B) who is connected with S,”.

25         

The amendment made by paragraph 23 has effect—

(a)   

where the date of the transaction referred to in section 216(1)(a) of

15

CAA 2001 is on or after 22 April 2009, and

(b)   

for the purposes of section 227 of that Act (which applies section

216(1)(b) of that Act), where the date of the transaction referred to in

section 227(1)(a) is on or after 22 April 2009.

26         

The amendment made by paragraph 24 has effect—

20

(a)   

where the date of the transaction referred to in section 221(1)(a) of

CAA 2001 is on or after 22 April 2009, and

(b)   

for the purposes of section 228A of that Act (which applies section

221(1)(b) of that Act), where the date of the transaction referred to in

section 228A(2)(a) is on or after 22 April 2009.

25

Interpretation

27         

In this Schedule “commencement” and “inception” have the meaning given

in section 70YI(1) of CAA 2001.

Schedule 33

Section 64

 

Long funding leases of films

30

1          

In ICTA, after section 502GC insert—

“502GD  

 Cases where ss 502B to 502G do not apply: films

(1)   

If a company is or has been a lessor under a long funding lease of a

film, sections 502B to 502G do not apply in respect of the lease.

(2)   

“Film” has the same meaning as in Part 15 of the Corporation Tax Act

35

2009 (see section 1181 of that Act).”

 
 

 
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