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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

196

 

389     

Provision supplementing section 388

(1)   

For the purposes of section 388 and this section the amounts shown in the

appropriate balance sheet of any company in respect of any plant or machinery

are—

(a)   

the amounts shown in that balance sheet as the net book value (or

5

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—

(a)   

any of the plant or machinery is a fixture in any land (see section

10

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,

   

the amount of the net book value (or carrying amount) in respect of the fixture

15

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

(b)   

any land or other asset which is not plant or machinery is subject to that

20

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 388 and this section any reference to any amount shown in the

appropriate balance sheet of a company is to the amount which, on the

25

assumptions in subsection (5), falls (or would fall) to be shown in a balance

sheet of the company.

(5)   

The assumptions are—

(a)   

that the balance sheet is drawn up in accordance with generally

accepted accounting practice, and

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(b)   

that, if the company acquired any plant or machinery in circumstances

in which this paragraph applies, the plant or machinery had been

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,

35

(b)   

the plant or machinery was acquired directly or indirectly from a

person who was connected with the company when the acquisition

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

40

connected with the company on that date.

390     

Relevant plant or machinery value where relevant company lessee under long

funding lease etc

(1)   

Any amount included in the amounts mentioned in section 388(2) in respect of

plant or machinery to which this section applies is to be deducted from the sum

45

mentioned in that section.

 
 

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

197

 

(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 the

relevant plant or machinery value.

(3)   

This section applies to plant or machinery if—

(a)   

condition A or B is met at the start of the relevant day, or

5

(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.

(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.

10

(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).

391     

Relevant company’s income for condition B in section 387

(1)   

This section applies for the purposes of condition B in section 387.

(2)   

The reference to the relevant company’s income is to its income as calculated

15

for corporation tax purposes.

(3)   

Any apportionment necessary to determine the amount of the relevant

company’s income attributable to the period of 12 months ending with the

relevant day is to be made on a time basis.

(4)   

But—

20

(a)   

that basis does not apply if it would work in an unjust or unreasonable

way in relation to any person, and

(b)   

in that case the apportionment is to be made instead on a just and

reasonable basis.

(5)   

The proportion of the income that derives from qualifying leased plant or

25

machinery is to be determined on a just and reasonable basis.

“Qualifying change of ownership”

392     

“Qualifying change of ownership”

(1)   

This section defines when there is a qualifying change of ownership in relation

to a company (“A”) for the purposes of the sales of lessors Chapters.

30

(2)   

There is a qualifying change of ownership in relation to A on any day if there

is a relevant change in the relationship on that day between—

(a)   

A, and

(b)   

a principal company of A.

(3)   

For an exception to subsection (2) see section 395 (no qualifying change of

35

ownership in certain intra-group reorganisations).

(4)   

There is a relevant change in the relationship between A and a principal

company of A on any day in any of the circumstances in section 393 or 394

(qualifying 75% subsidiaries and consortium relationships).

 
 

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

198

 

(5)   

For an exception to subsection (4) see section 396 (no qualifying change of

ownership where principal company’s interest in consortium company

unchanged).

393     

Qualifying 75% subsidiaries

(1)   

A company (“B”) is a principal company of A if—

5

(a)   

A is a qualifying 75% subsidiary of B, and

(b)   

B is not a qualifying 75% subsidiary of another company.

(2)   

There is a relevant change in the relationship between A and B (as a principal

company) on any day if A ceases to be a qualifying 75% subsidiary of B on that

day.

10

(3)   

A company (“C”) is a principal company of A if—

(a)   

A is a qualifying 75% subsidiary of B,

(b)   

B is a qualifying 75% subsidiary of C, and

(c)   

C is not a qualifying 75% subsidiary of another company.

(4)   

There is a relevant change in the relationship between A and C (as a principal

15

company) on any day if—

(a)   

A ceases to be a qualifying 75% subsidiary of B on that day, or

(b)   

B ceases to be a qualifying 75% subsidiary of C on that day.

(5)   

If C is a qualifying 75% subsidiary of another company (“D”), D is a principal

company of A unless D is a qualifying 75% subsidiary of another company, and

20

so on.

(6)   

Accordingly, there is a relevant change in the relationship between A and a

principal company of A on any day if—

(a)   

in determining which company is a principal company, regard is had

to any company which is a qualifying 75% subsidiary of another, and

25

(b)   

that company ceases to be a qualifying 75% subsidiary of the other on

that day.

(7)   

This section is supplemented by section 398 (“qualifying 75% or 90%

subsidiary” etc).

394     

Consortium relationships

30

(1)   

A company (“E”) is a principal company of A if—

(a)   

A is owned by a consortium of which E is a member, or

(b)   

A is a qualifying 90% subsidiary of a company owned by a consortium

of which E is a member,

   

and E is not a qualifying 75% subsidiary of another company.

35

(2)   

There is a relevant change in the relationship between A and E (as a principal

company) on any day if the ownership proportion at the end of the day is less

than the ownership proportion at the start of the day.

(3)   

In this section “the ownership proportion” is whichever is the lowest of the

following percentages—

40

(a)   

the percentage of the ordinary share capital of A that is beneficially

owned by E,

 
 

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

199

 

(b)   

the percentage to which E is beneficially entitled of any profits available

for distribution to equity holders of A, and

(c)   

the percentage to which E would be beneficially entitled of any assets

of A available for distribution to its equity holders on a winding up.

(4)   

But if A is a qualifying 90% subsidiary of a company, subsection (3) is to be read

5

as if references to that company were substituted for references to A.

(5)   

A company (“F”) is a principal company of A if, in a case where E is a

qualifying 75% subsidiary of F but F is not a qualifying 75% subsidiary of

another company—

(a)   

A is owned by a consortium of which E is a member, or

10

(b)   

A is a qualifying 90% subsidiary of a company owned by a consortium

of which E is a member.

(6)   

There is a relevant change in the relationship between A and F (as a principal

company) on any day if—

(a)   

the ownership proportion at the end of the day is less than the

15

ownership proportion at the start of the day, or

(b)   

E ceases to be a qualifying 75% subsidiary of F on that day.

(7)   

If F is a qualifying 75% subsidiary of another company (“G”), G is a principal

company of A unless G is a qualifying 75% subsidiary of another company, and

so on.

20

(8)   

Accordingly, there is a relevant change in the relationship between A and a

principal company of A on any day if—

(a)   

in determining which company is a principal company, regard is had

to any company which is a qualifying 75% subsidiary of another, and

(b)   

that company ceases to be a qualifying 75% subsidiary of the other on

25

that day,

   

(as well as if the ownership proportion at the end of the day is less than the

ownership proportion at the start of the day).

(9)   

This section is supplemented by—

(a)   

section 397 (companies owned by consortiums and members of

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consortiums), and

(b)   

section 398 (“qualifying 75% or 90% subsidiary” etc).

395     

No qualifying change of ownership in certain intra-group reorganisations

(1)   

This section applies if—

(a)   

a relevant change in the relationship between a company (“A”) and a

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principal company of A occurs on any day,

(b)   

that change occurs by reference to A or any other company ceasing to

be a qualifying 75% subsidiary on that day, and

(c)   

A, and every company by reference to which that change occurs, are

qualifying 75% subsidiaries of the principal company concerned at the

40

start and end of that day.

(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 the

relationship.

 
 

 
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