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Finance Bill
Schedule 31 — Sale of lessor companies etc: anti-avoidance

278

 

(b)   

for paragraph (a) substitute—

“(a)   

on the provision of which the company has not

incurred qualifying expenditure for the purposes

of Part 2 of CAA 2001,

(aa)   

of which the company is the lessor under a long

5

funding lease, or”.

      (3)  

For sub-paragraph (2) substitute—

    “(2)  

For the purposes of paragraph 16 “PM” is the aggregate of the

amounts in sub-paragraph (2A), but subject to paragraph 17A.

     (2A)  

The amounts are—

10

(a)   

the amounts (if any) which would be shown in respect of

plant or machinery in the appropriate balance sheet of the

relevant company drawn up as at the start of the relevant

day, and

(b)   

the amounts (if any) which would be shown in the

15

appropriate balance sheet of the relevant company drawn

up as at the end of the relevant day in respect of relevant

transferred plant or machinery.

     (2B)  

For the purposes of sub-paragraph (2A)(b) plant or machinery is

“relevant transferred plant or machinery” if an amount in respect

20

of it would be shown in the appropriate balance sheet of an

associated company drawn up as at the start of the relevant day.”

      (4)  

In sub-paragraph (3), for “this purpose” substitute “the purposes of this

paragraph”.

      (5)  

In sub-paragraph (7)(a), omit “as at the start of the relevant day”.

25

Paragraph 17A

6          

After paragraph 17 insert—

“17A  (1)  

Where this paragraph applies in relation to any plant or

machinery—

(a)   

any amount included in the aggregate mentioned in

30

paragraph 17(2) in respect of the plant or machinery is to

be deducted from that aggregate, and

(b)   

the market value of the plant or machinery as at the

relevant day is to be added to that aggregate (or, if that

aggregate is nil, is to constitute PM).

35

      (2)  

This paragraph applies in relation to plant or machinery if

condition A or B is met.

      (3)  

Condition A is that—

(a)   

the plant or machinery falls within sub-paragraph (4) at

the start of the relevant day, or

40

(b)   

the plant or machinery falls within that sub-paragraph at

the end of the relevant day, having been acquired by the

relevant company from an associated company on that

day.

 
 

Finance Bill
Schedule 31 — Sale of lessor companies etc: anti-avoidance

279

 

      (4)  

Plant or machinery falls within this sub-paragraph if the relevant

company—

(a)   

is the lessee of the plant or machinery under a long funding

finance lease, or

(b)   

is treated as the owner of the plant or machinery under

5

section 67 of CAA 2001 (hire purchase and similar

contracts).

      (5)  

Condition B is that—

(a)   

the relevant company is the lessee of the plant or

machinery under a long funding operating lease at the

10

start of the relevant day, or

(b)   

the relevant company is the lessee of the plant or

machinery under such a lease at the end of the relevant day

and the plant or machinery was acquired by the relevant

company from an associated company on that day.”

15

Paragraph 22

7          

In paragraph 22(2) (migration), for “owned by the company” substitute “in

respect of which an amount would be shown in a balance sheet of the

company drawn up immediately before the relevant day in accordance with

generally accepted accounting practice”.

20

Paragraph 40

8          

Omit paragraph 40 (relationship of Schedule with section 228K of CAA

2001).

Paragraph 41

9          

In paragraph 41 (definitions), after sub-paragraph (5) insert—

25

   “(5A)  

“Long funding finance lease”, “long funding lease” and “long

funding operating lease” have the same meaning as in Part 2 of

CAA 2001 (see section 70YI of that Act).”

Paragraph 42

10         

In paragraph 42 (index), in the table, after the entry relating to “fixture”

30

insert—

 

“long funding finance lease

paragraph 41

 
 

long funding lease

paragraph 41

 
 

long funding operating lease

paragraph 41”.

 

Consequential repeal

35

11         

In FA 2007, in Schedule 6, omit paragraph 2(3).

 
 

Finance Bill
Schedule 32 — Leases of plant or machinery

280

 

Commencement

12         

The amendments made by this Schedule have effect where the relevant day

is on or after 13 November 2008.

Schedule 32

Section 63

 

Leases of plant or machinery

5

Disposal values: commencement of long funding finance leases

1     (1)  

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

follows.

      (2)  

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

 

“5A.

Commencement of the

The greater of—

 

10

  

term of a long funding

(a)   

the market value

 
  

finance lease of the plant

of the plant or

 
  

or machinery.

machinery at the

 
   

commencement of

 
   

the term of the

 

15

   

lease, and

 
   

(b)   

the qualifying

 
   

lease payments.”

 

      (3)  

After subsection (5) insert—

“(5A)   

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

20

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

excluding the following—

(a)   

so much of any payment as, under generally accepted

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

gross return on investment in respect of the lease,

25

(b)   

so much of any payment as represents charges for services,

and

(c)   

so much of any payment as represents qualifying UK or

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

the lessor.”

30

      (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:

deemed disposals) is amended as follows.

      (2)  

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

35

substitute “the relevant disposal value”.

      (3)  

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

“(4)   

“Relevant disposal value” means—

 
 

Finance Bill
Schedule 32 — Leases of plant or machinery

281

 

(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.”

5

      (4)  

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

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

10

leases whose inception is on or after 22 April 2009.

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

 

15

  

events and disposal values”.

 

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.”

20

      (3)  

After that subsection insert—

“(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

25

(c)   

the qualifying activity is permanently discontinued.”

      (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]]

30

   

where—

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)).

35

(2B)   

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

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.

 
 

Finance Bill
Schedule 32 — Leases of plant or machinery

282

 

(2C)   

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

means the aggregate of—

(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

5

guarantee of any residual amount (as defined in section

70YE),

   

subject to subsection (2D).

(2D)   

The following are excluded from the “qualifying amount” under

subsection (2C)—

10

(a)   

so much of any payment as, in accordance with generally

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

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,

15

and

(c)   

so much of any payment as represents qualifying UK or

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

20

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

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

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

25

calculated by reference to the termination value that is

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

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

30

relevant event occurred, the lease had terminated and the

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

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

35

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

such a transaction.

(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”.

40

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.

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.

45

      (2)  

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

 
 

Finance Bill
Schedule 32 — Leases of plant or machinery

283

 

      (3)  

In subsection (9)—

(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—

5

(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

10

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

15

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)—

20

(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

25

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,

30

   

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.”

35

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

40

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

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

“relevant””.

 
 

Finance Bill
Schedule 32 — Leases of plant or machinery

284

 

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

12         

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

appropriate place—

   

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

annual investment allowance for lessee),”.

5

13         

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

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

10

appropriate place—

   

“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

15

(1)   

This section applies where—

(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

20

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

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.

25

(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

machinery under the long funding lease.

(5)   

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

30

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—

(a)   

the market value of the plant or machinery;

(b)   

if S incurred capital expenditure on the provision of the plant

35

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

the provision of the plant or machinery before that transfer,

the amount of that expenditure.

40

(7)   

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

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.”

 
 

 
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