Corporation Tax Bill

House of Commons

Session 2009 - 10
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Corporation Tax Bill

Corporation Tax Bill
Part 9 — Leasing plant or machinery
Chapter 3 — Sales of lessors: leasing business carried on by a company alone
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396
No qualifying change of ownership where principal company’s interest in
consortium company unchanged
(1)
This section applies if—
(a)
a company (“A”) is owned by a consortium, and
(b)
a relevant change in the relationship between A and a principal
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company of A occurs on any day,

but the principal company’s interest in A remains unchanged.
(2)
For the purposes of the sales of lessors Chapters, there is no qualifying change
of ownership in relation to A on that day as a result of that change in that
relationship.
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(3)
For the purposes of this section the principal company’s interest in A remains
unchanged if the percentage of the ordinary share capital of A that is
beneficially owned directly or indirectly by the principal company is the same
at the beginning and end of that day.
(4)
Sections 1155, 1156 and 1157 apply for construing subsection (3).
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397
Companies owned by consortiums and members of consortiums
(1)
This section defines what a company being owned by, or a member of, a
consortium means for the purposes of the sales of lessors Chapters.
(2)
A company is owned by a consortium if—
(a)
it is not a qualifying 75% subsidiary of any company,
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(b)
at least 75% of its ordinary share capital is beneficially owned between
them by other companies, and
(c)
none of those other companies owns less than 5% of that capital.
(3)
Those other companies are the members of the consortium.
398
“Qualifying 75% or 90% subsidiary” etc
25
(1)
For the purposes of the sales of lessors Chapters, a company (“the subsidiary
company”) is a qualifying 75% subsidiary of another company (“the parent
company”) if condition A or B is met and condition C is met.
(2)
Condition A is that—
(a)
the subsidiary company has ordinary share capital, and
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(b)
the subsidiary company is a 75% subsidiary of the parent company.
(3)
Condition B is that—
(a)
the subsidiary company does not have ordinary share capital, and
(b)
the parent company has control of the subsidiary company.
(4)
Condition C is that the parent company—
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(a)
is beneficially entitled to at least 75% of any profits available for
distribution to equity holders of the subsidiary company, and
(b)
would be beneficially entitled to at least 75% of any assets of the
subsidiary company available for distribution to its equity holders on a
winding up.
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Corporation Tax Bill
Part 9 — Leasing plant or machinery
Chapter 3 — Sales of lessors: leasing business carried on by a company alone
201

(5)
In the sales of lessors Chapters, references to a qualifying 90% subsidiary are to
be read in the same way as references to a qualifying 75% subsidiary, but as if
the references in subsections (1), (2) and (4) to 75% were to 90%.
(6)
A company (“S”) cannot be a qualifying 90% subsidiary of another company
for the purposes of the sales of lessors Chapters if S is a qualifying 75%
5
subsidiary of a third company.
(7)
Chapter 6 of Part 5 (equity holders and profits or assets available for
distribution)—
(a)
applies for the purposes of section 394(3)(b) and (c) (including that
section as applied for the purposes of section 406(5)) and of section
10
405(5)(b) and (c) as that Chapter applies for the purposes of section
143(3)(b) and (c) (condition 1: surrendering company owned by
consortium) and section 144(3)(b) and (c) (condition 1: claimant
company owned by consortium), and
(b)
applies for the purposes of subsection (4)(a) and (b) as that Chapter
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applies for the purposes of section 151(4)(a) and (b) (meaning of “75%
subsidiary” and “90% subsidiary”).
(8)
But in a case where the subsidiary company does not have ordinary share
capital, Chapter 6 of Part 5 applies for those purposes as if the members of that
company were equity holders of that company for the purposes of that
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Chapter.
The amount of the income
399
The amount of the income: the basic amount
(1)
This section determines the amount of the income under section 383 when a
qualifying change of ownership in relation to a company carrying on a
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business of leasing plant or machinery occurs on any day.
(2)
The amount of the income is found by—
(a)
applying the formula in subsection (3) to give the basic amount, and
(b)
making any adjustment in accordance with any of sections 404 to 406 to
the basic amount.
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(3)
The formula is—

(4)
For this purpose—
“PM” has the meaning given by sections 400 to 402, and
“TWDV” has the meaning given by section 403.
(5)
In those sections references to the relevant company and the relevant day are
35
to the company and the day mentioned in subsection (1).
400
“PM” in section 399
(1)
For the purposes of this section and sections 401 and 402 references to plant or
machinery, in the case of any company, include all plant or machinery,
whether or not subject to a lease, except for plant or machinery within
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subsection (2).

Corporation Tax Bill
Part 9 — Leasing plant or machinery
Chapter 3 — Sales of lessors: leasing business carried on by a company alone
202

(2)
Plant or machinery is within this subsection if—
(a)
the company has not incurred expenditure on its provision that is
qualifying expenditure for the purposes of Part 2 of CAA 2001,
(b)
the company is a lessor of it under a long funding lease,
(c)
as a result of section 67 of that Act (hire-purchase and similar contracts)
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it is treated for the purposes of that Part as owned by a person other
than the company, or
(d)
it is to be ignored as a result of section 407(2) (migration).
(3)
For the purposes of section 399, “PM” is the sum of—
(a)
the amounts (if any) which would be shown in respect of plant or
10
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 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.
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(4)
For the purposes of subsection (3)(b), plant or machinery is “relevant
transferred plant or machinery” if an amount in respect of it would be shown
in the appropriate balance sheet of an associated company drawn up as at the
start of the relevant day.
(5)
This section is supplemented by section 401 and is subject to section 402 (“PM”
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where relevant company lessee under long funding lease etc).
401
Provisions supplementing section 400
(1)
For the purposes of section 400 and this section the amounts shown in the
appropriate balance sheet of any company in respect of any plant or machinery
are—
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(a)
the amounts shown in that balance sheet as the net book value (or
carrying amount) in respect of the plant or machinery, and
(b)
the amounts shown in that balance sheet as the net investment in
respect of finance leases of the plant or machinery.
(2)
If—
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(a)
any of the plant or machinery is a fixture in any land (see section
437(5)), and
(b)
the amount which falls (or would fall) to be shown in an appropriate
balance sheet as the net book value (or carrying amount) of the land
includes (or would include) an amount in respect of the fixture,
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the amount of the net book value (or carrying amount) in respect of the fixture
is determined on a just and reasonable basis.
(3)
If—
(a)
any of the plant or machinery is subject to a finance lease (see section
437(4)), and
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(b)
any land or asset which is not plant or machinery is subject to that lease,

the amount of the net investment in respect of the finance lease of that plant or
machinery is determined on a just and reasonable basis.
(4)
In section 400 and this section any reference to any amount shown in the
appropriate balance sheet of a company is to the amount which, on the
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assumptions in subsection (5), falls (or would fall) to be shown in a balance
sheet of the company.

Corporation Tax Bill
Part 9 — Leasing plant or machinery
Chapter 3 — Sales of lessors: leasing business carried on by a company alone
203

(5)
The assumptions are—
(a)
that the balance sheet is drawn up in accordance with generally
accepted accounting practice, and
(b)
that, if the company acquired any plant or machinery in circumstances
in which this paragraph applies, the plant or machinery had been
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acquired for an amount equal to its market value as at the relevant day.
(6)
Paragraph (b) of subsection (5) applies if—
(a)
the relevant day falls on or after 22 March 2006,
(b)
the plant or machinery was acquired directly or indirectly from a
person who was connected with the company when the acquisition
10
took place, and
(c)
either the acquisition took place on or after 5 December 2005 or the
person from whom the plant or machinery was so acquired was also
connected with the company on that date.
402
“PM” where relevant company lessee under long funding lease etc
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(1)
Any amount included in the amounts mentioned in paragraph (a) or (b) of
section 400(3) in respect of plant or machinery to which this section applies is
to be deducted from the sum mentioned in that section.
(2)
But the market value as at the relevant day of any plant or machinery to which
this section applies is to be added to that sum or, if that sum is nil, is “PM”.
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(3)
This section applies to plant or machinery if—
(a)
condition A or B is met at the start of the relevant day, or
(b)
the plant or machinery is acquired by the relevant company from an
associated company on the relevant day and condition A or B is met at
the end of that day.
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(4)
Condition A is that the relevant company is the lessee of the plant or machinery
under a long funding finance lease or a long funding operating lease.
(5)
Condition B is that the relevant company is treated as the owner of the plant or
machinery under section 67 of CAA 2001 (hire purchase and similar contracts).
403
“TWDV” in section 399
30
(1)
For the purposes of section 399, “TWDV” means the sum of—
(a)
the total amount of unrelieved qualifying expenditure in single asset
pools for the new chargeable period that is carried forward in the pools
from the previous chargeable period under section 59 of CAA 2001,
(b)
the total amount of unrelieved qualifying expenditure in class pools for
35
the new chargeable period that is carried forward in the pools from the
previous chargeable period under that section, and
(c)
the amount of unrelieved qualifying expenditure in the main pool for
the new chargeable period that is carried forward in the pool from the
previous chargeable period under that section.
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(2)
For the purposes of this section—
(a)
“the new chargeable period” means the accounting period of the
relevant company that begins on the day following the relevant day
(see section 383(4)(b)), and

Corporation Tax Bill
Part 9 — Leasing plant or machinery
Chapter 3 — Sales of lessors: leasing business carried on by a company alone
204

(b)
expenditure incurred by the relevant company in acquiring plant or
machinery on the relevant day is to be left out of account unless it is
acquired from an associated company.
404
Amount to be nil if basic amount negative
If the basic amount given by the formula in section 399(3) is a negative amount,
5
the amount is taken instead to be nil.
405
Adjustment to the basic amount: qualifying 75% subsidiaries
(1)
This section applies if—
(a)
the qualifying change of ownership occurs on any day as a result of
section 393 (qualifying 75% subsidiaries),
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(b)
the change occurs by reference to a company (“A”) ceasing to be a
qualifying 75% subsidiary of another company (“B”) on that day, and
(c)
on that day A meets one of the conditions in subsection (2).
(2)
The conditions are—
(a)
that A becomes owned by a consortium of which B is a member, or
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(b)
that A becomes a qualifying 90% subsidiary of a company owned by a
consortium of which B is a member.
(3)
The basic amount is adjusted so that the amount of the income is limited to the
appropriate percentage of the basic amount.
(4)
The appropriate percentage is found by subtracting the ownership percentage
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at the end of the day from 100%.
(5)
For this purpose “the ownership percentage” is whichever is the lowest of the
following percentages—
(a)
the percentage of the ordinary share capital of A that is beneficially
owned by B,
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(b)
the percentage to which B is beneficially entitled of any profits available
for distribution to equity holders of A, and
(c)
the percentage to which B would be beneficially entitled of any assets
of A available for distribution to its equity holders on a winding up.
(6)
But if A becomes a qualifying 90% subsidiary of a company, subsection (5) is to
30
be read as if references to that company were substituted for references to A.
406
Adjustment to the basic amount: consortium relationships
(1)
This section applies if the qualifying change of ownership occurs as a result of
section 394 (consortium relationships).
(2)
In a case where that change arises only because the ownership proportion at
35
the end of the day on which the change occurs is less than the ownership
proportion at the start of the day, the amount of the income is limited to the
appropriate proportion of the basic amount.
(3)
The appropriate proportion is found by subtracting the ownership proportion
at the end of the day from the ownership proportion at the start of the day.
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Corporation Tax Bill
Part 9 — Leasing plant or machinery
Chapter 3 — Sales of lessors: leasing business carried on by a company alone
205

(4)
In any other case, the amount of the income is limited to the ownership
proportion at the start of the day on which the change occurs of the basic
amount.
(5)
In this section “the ownership proportion” has the same meaning as in section
394 (see section 394(3) and (4)).
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407
Migration
(1)
This section applies if on any day (“the relevant day”)—
(a)
a company begins to be within the charge to corporation tax in respect
of a business of leasing plant or machinery which it carries on otherwise
than in partnership, and
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(b)
a qualifying change of ownership in relation to the company occurs.
(2)
For the purposes of this Chapter, any plant or machinery is to be ignored in
calculating the amount of the income treated as received on the relevant day if
an amount would be shown in respect of it in a balance sheet of the company
drawn up immediately before that day in accordance with generally accepted
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accounting practice.
“Associated company”
408
“Associated company”
(1)
This section gives the meaning of “associated company” for the purposes of
this Chapter.
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(2)
References to an associated company in any provision other than subsection
(6)(b) are to a company which is an associated company of the company that is
the relevant company for the purposes of that provision on the day that is the
relevant day for those purposes.
(3)
A company is an “associated company” of another company on any day if, at
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the start of that day—
(a)
one of the two has control of the other, or
(b)
both are under the control of the same person or persons,
(4)
Section 450 (meaning of “control” for the purposes of Part 10 (close
companies)) applies for the purposes of subsection (3).
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(5)
Subsection (6) applies if at the start of any day a company (“the consortium
company”)—
(a)
is owned by a consortium, or
(b)
is a qualifying 90% subsidiary of a company owned by a consortium.
(6)
On that day the following companies are also associated companies of the
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consortium company—
(a)
any relevant member of the consortium on that day, and
(b)
any company which is an associated company of any relevant member
of the consortium on that day.
(7)
For the purposes of subsection (6) a member of the consortium is a “relevant”
40
member on any day if—
(a)
it is a member of the consortium at the start of the day,

Corporation Tax Bill
Part 9 — Leasing plant or machinery
Chapter 4 — Sales of lessors: leasing business carried on by a company in partnership
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(b)
one or more qualifying changes of ownership occur in relation to the
consortium company on that day, and
(c)
any of those changes occur in a case where the member of the
consortium is regarded as “E” for the purposes of section 394
(consortium relationships).
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Chapter 4
Sales of lessors: leasing business carried on by a company in partnership
Introduction
409
Introduction to Chapter
(1)
This Chapter applies if, in the case of a company carrying on a business of
10
leasing plant or machinery in partnership with other persons—
(a)
there is a qualifying change in the company’s interest in the business,
(see sections 415 and 416), or
(b)
there is a qualifying change of ownership in relation to the company
(see sections 392 to 398).
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(2)
Sections 417 to 424 apply in the case mentioned in subsection (1)(a).
(3)
Sections 425 to 429 apply in the case mentioned in subsection (1)(b).
(4)
Sections 410 to 414 determine for the purposes of this Chapter whether on any
day a business carried on by a company in partnership with other persons is a
business of leasing plant or machinery.
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(5)
In sections 410 to 414—
(a)
that day is referred to as “the relevant day”,
(b)
that company is referred to as “the partner company”, and
(c)
that partnership is referred to as “the partnership”.
(6)
Elsewhere in this Chapter references to the partner company are to the
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company referred to in subsection (1)(a) or, as the case may be, subsection
(1)(b).
“Business of leasing plant or machinery”
410
“Business of leasing plant or machinery”
(1)
A business carried on by the partnership is a business of leasing plant or
30
machinery on the relevant day if condition A or B is met.
(2)
Condition A is that at least half of the relevant plant or machinery value relates
to qualifying leased plant or machinery.
(3)
Subsection (2) is supplemented by section 411.
(4)
Condition B is that at least half of the partnership’s income in the period of 12
35
months ending with the relevant day derives from qualifying leased plant or
machinery.
(5)
Subsection (4) is supplemented by section 414.