64 Case in which no disposal value need be brought into account
(1) A person is not required to bring a disposal value into account in a pool for a chargeable period in respect of plant or machinery if none of the qualifying expenditure is or has been taken into account in a claim in determining the person’s available qualifying expenditure in the pool for that or any previous chargeable period.
(2) Subsection (3) applies if—
(a) a person (“C”) has incurred qualifying expenditure on plant or machinery,
(b) C acquired the plant or machinery as a result of a transaction which was, or a series of transactions each of which was, between connected persons,
(c) any connected person (apart from C) who was a party to the transaction, or one of the series of transactions, is or has been required to bring a disposal value into account as a result of the transaction,
(d) a disposal event (“the relevant disposal event”) occurs in respect of the plant or machinery at a time when it is owned by C, and
(e) none of C’s qualifying expenditure is or has been taken into account in a claim in determining C’s available qualifying expenditure for the chargeable period in which the relevant disposal event occurs or any previous chargeable period.
(3) If this subsection applies—
(a) subsection (1) does not apply in relation to the relevant disposal event, and
(b) C’s qualifying expenditure is to be treated as allocated to the appropriate pool for the chargeable period in which the relevant disposal event occurs.
(4) In subsection (3)—
(a) “qualifying expenditure” means, if a first-year allowance has been made to C, the amount (including a nil amount) remaining after deducting the allowance, and
(b) “the appropriate pool” means whichever pool is applicable in relation to C under the provisions of this Part.
(5) A person takes expenditure into account in a claim if he takes it into account—
(a) in a tax return;
(b) by giving notice of an amendment of a tax return;
(c) in any other claim under this Part.
64A Leased assets: arrangements reducing disposal value of asset
(1) Where—
(a) plant or machinery (“the asset”) is subject to a lease,
(b) a disposal event occurs with the result that a disposal value in respect of the asset is to be brought into account under Item 1, 2 or 7 of the Table in section 61(2), and
(c) arrangements have been entered into that have the effect of reducing the disposal value of the asset in so far as it is attributable to rentals payable under the lease,
the disposal value is to be determined as if the arrangements had not been entered into.
(2) Subsection (1) does not apply if—
(a) the arrangements take the form of a transfer of relevant receipts within section 809AZA of ITA 2007 and the relevant amount has been treated as income under section 809AZB of that Act, or
(b) the arrangements take the form of a transfer of relevant receipts within section 752 of CTA 2010 and the relevant amount has been treated as income under section 753 of that Act.
(1) The final chargeable period for—
(a) the main pool, or
(b) a special rate pool,
is the chargeable period in which the qualifying activity is permanently discontinued.
(2) The final chargeable period for a single asset pool is the first chargeable period in which any disposal event given in section 61(1) occurs.
(3) Subsection (2) is subject to—
section 206(4) (no final chargeable period merely because plant or machinery begins to be used partly for purposes other than those of qualifying activity);
sections 86(2) and 87(2) (ending of short-life asset pool at relevant cut-off without final chargeable period);
section 132(2) (no final chargeable period for single ship pool).
(4) The final chargeable period for a class pool under section 107 (overseas leasing) is the chargeable period at the end of which the circumstances are such that there can be no more disposal receipts in any subsequent chargeable period.
66 List of provisions outside this Chapter about disposal values
The provisions of this Part referred to in section 60(1)(b) are—
section 68 | hire-purchase etc.: disposal value on cessation of notional ownership
section 70E | long funding leases: disposal events and disposal values
sections 72 and 73 | grant of new software right: disposal value
. . . | . . .
sections 88 and 89 | short-life assets: disposal at under-value or to connected person
section 104E | special rate expenditure: avoidance cases
sections 108, 111 and 114 | overseas leasing: disposal values in various cases
sections 132 and 143 | ships: ship used for overseas leasing etc.; attribution of amount where balancing charge deferred
section 171 | oil production sharing contracts: disposal values on cessation of ownership
sections 196 and 197 | fixtures: disposal values on cessation of notional ownership and in avoidance cases
section 208 | effect of significant reduction in use of plant or machinery for purposes of qualifying activity
section 208A | cars: disposal value in avoidance cases
section 211 | effect of payment of partial depreciation subsidy
. . . | . . .
section 218ZB | disposal of plant or machinery in avoidance cases
sections 228K to 228M | Disposal of plant or machinery subject to lease where income retained
section 229 | hire-purchase: disposal values in finance leasing and anti-avoidance cases
sections 238 and 239 | additional VAT rebates
(1) This section applies if—
(a) a person carrying on a trade, profession, vocation or property business (“the business”) leaves the cash basis in a chargeable period,
(b) the person has incurred expenditure at a time when the profits of the business are calculated on the cash basis,
(c) some or all of the expenditure was brought into account in calculating the profits of the business on the cash basis, and
(d) the expenditure would have been qualifying expenditure if the profits of the business had not been calculated on the cash basis at the time the expenditure was incurred.
(2) In this section—
(a) the “relieved portion” of the expenditure is the higher of the following—
(i) the amount of that expenditure for which a deduction was allowed in calculating the profits of the trade, profession, vocation or property business, or
(ii) the amount of that expenditure for which a deduction would have been so allowed if the expenditure had been incurred wholly and exclusively for the purposes of the trade, profession, vocation or property business;
(b) the “unrelieved portion” of the expenditure is any remaining amount of the expenditure.
(3) For the purposes of determining any entitlement of the person to an annual investment allowance or a first-year allowance, the person is to be treated as incurring the unrelieved portion of the expenditure in the chargeable period.
(4) For the purposes of determining the person's available qualifying expenditure in a pool for the chargeable period (see section 58)—
(a) the whole of the expenditure must be allocated to the appropriate pool (or pools) in that chargeable period, and
(b) the available qualifying expenditure in a pool to which the expenditure (or some of it) is allocated is reduced by the relieved portion of that expenditure.
(5) For the purposes of determining any disposal receipts (see section 60), the expenditure incurred by the person is to be regarded as qualifying expenditure.
(6) For the purposes of this section a person carrying on a trade, profession or vocation leaves the cash basis in a chargeable period if—
(a) immediately before the beginning of the chargeable period the cash basis applied in relation to the trade, profession or vocation, and
(b) the cash basis does not apply in relation to the trade, profession or vocation for the chargeable period.
(7) For the purposes of this section a person carrying on a property business leaves the cash basis in a chargeable period (“tax year X”) if the profits of the business are calculated—
(a) in accordance with GAAP (see section 271B of ITTOIA 2005) for tax year X, and
(b) on the cash basis (see section 271D of that Act) for the previous tax year.
(8) Subsection (11) of section 1A (capital allowances and charges: cash basis) applies for the purposes of this section as it applies for the purposes of that section.
66B SME company entering NI corporation tax regime
(1) This section applies if—
(a) in a chargeable period beginning after the commencement day (“the relevant period”) a company is an SME (Northern Ireland employer) company,
(b) the company was neither an SME (Northern Ireland employer) company nor a NIRE company in the previous chargeable period, and
(c) the company has not become an SME (Northern Ireland employer) company in the relevant period as a result of an election under section 357KB(2) of CTA 2010 (back-office activities of financial trades).
(2) The fact that assets which continue to be used in the relevant period for the purposes of the trade actually carried on by the company are as a result of section 15(2ZA) treated as ceasing to be used for the purposes of a main rate activity and beginning to be used for the purposes of an NI rate activity does not give rise to a disposal event within 61(1)(e) or (f).
(3) If during the relevant period the only qualifying activity carried on by the company is an NI rate activity, the amount of any unrelieved qualifying expenditure in any main pool or special rate pool falling to be carried forward to the relevant period is to be treated as relating to plant and machinery used for the purposes of the NI rate activity.
(4) If during the relevant period the company carries on both an NI rate activity and a main rate activity—
(a) the amount of any unrelieved qualifying expenditure in any main pool falling to be carried forward under section 59 to the relevant period is to be apportioned on a just and reasonable basis to become—
(i) a main pool that is to be treated as relating to plant and machinery used for the purposes of the NI rate activity, and
(ii) a main pool that is to be treated as relating to plant and machinery used for the purposes of the main rate activity, and
(b) the amount of any unrelieved qualifying expenditure in any special rate pool falling to be carried forward under section 59 to the relevant period is to be apportioned on a just and reasonable basis to become—
(i) a special rate pool that is to be treated as relating to plant and machinery used for the purposes of the NI rate activity, and
(ii) a special rate pool that is to be treated as relating to plant and machinery used for the purposes of the main rate activity.
(5) “Main rate activity” means the company's trade except so far as it is an NI rate activity.
(6) “The commencement day” has the meaning given by section 5(4) of the Corporation Tax (Northern Ireland) Act 2015.
66C SME partnership entering NI corporation tax regime
For the purposes of the corporate partner calculation, section 66B applies in relation to a partnership as if—
(a) references to a company were references to a partnership,
(b) references to an SME (Northern Ireland employer) company were references to a Northern Ireland Chapter 6 firm,
(c) the reference to a NIRE company were a reference to a Northern Ireland Chapter 7 firm,
(d) the reference to section 357KB(2) of CTA 2010 were a reference to section 357WB(2) of that Act, and
(e) the reference to section 15(2ZA) were a reference to section 15(2ZB).
(1) This section applies if—
(a) in a chargeable period beginning after the commencement day (“the relevant period”) a company is neither an SME (Northern Ireland employer) company nor a NIRE company,
(b) the company was an SME (Northern Ireland employer) company in the previous chargeable period, and
(c) during the relevant period the company carries on a qualifying activity.
(2) The fact that assets which continue to be used in the relevant period for the purposes of the trade actually carried on are as a result of section 15(2ZA) treated as ceasing to be used for the purposes of an NI rate activity and beginning to be used for the purposes of the qualifying activity mentioned in subsection (1)(c) does not give rise to a disposal event within 61(1)(e) or (f).
(3) Any unrelieved qualifying expenditure which—
(a) relates to plant or machinery used for the purposes of an NI activity, and
(b) falls to be carried forward to the relevant period,
is to be treated as relating to the qualifying activity that the company carries on in the relevant period.
(4) “The commencement day” has the meaning given by section 5(4) of the Corporation Tax (Northern Ireland) Act 2015.
66E SME partnership leaving NI corporation tax regime
For the purposes of the corporate partner calculation, section 66D applies in relation to a partnership as if—
(a) references to a company were references to a partnership,
(b) references to an SME (Northern Ireland employer) company were references to a Northern Ireland Chapter 6 firm,
(c) the reference to a NIRE company were a reference to a Northern Ireland Chapter 7 firm, and
(d) the reference to section 15(2ZA) were a reference to section 15(2ZB).
67 Plant or machinery treated as owned by person entitled to benefit of contract, etc.
(1) This section applies if—
(a) a person carrying on a qualifying activity or corresponding overseas activity incurs capital expenditure on the provision of plant or machinery for the purposes of the qualifying activity or corresponding overseas activity, and
(b) the expenditure is incurred under a contract providing that the person shall or may become the owner of the plant or machinery on the performance of the contract.
(2) The plant or machinery is to be treated for the purposes of this Part as owned by the person (and not by any other person) at any time when he is entitled to the benefit of the contract so far as it relates to the plant or machinery.
This subsection has effect subject to, and in accordance with, subsections (2A) to (2C).
(2A) If the contract is one which, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as a lease, subsection (2B) applies.
(2B) Where that is the case, the plant or machinery is to be treated under subsection (2) as owned by the person at any time only if the contract —
(a) falls (or would fall) to be treated by that person in accordance with generally accepted accounting practice as a finance lease, or
(b) if that person is a lessee under a right-of-use lease, would fall to be treated in that person's accounts as a finance lease were that person required under generally accepted accounting practice to determine whether the lease falls to be so treated.
(2C) Where at any time the plant or machinery—
(a) is not treated under subsection (2) as owned by the person, but
(b) would be treated under that subsection as owned by the person, but for subsection (2B),
the plant or machinery is nevertheless to be treated under subsection (2) as not owned by any other person at that time.
(3) At the time when the plant or machinery is brought into use for the purposes of the qualifying activity or corresponding overseas activity, the person is to be treated for the purposes of this Part as having incurred all capital expenditure in respect of the plant or machinery to be incurred by him under the contract after that time.
(4) If a person—
(a) is treated under subsection (2) as owning plant or machinery,
(b) ceases to be entitled to the benefit of the contract in question so far as it relates to that plant or machinery, and
(c) does not then in fact become the owner of the plant or machinery,
the person is to be treated as ceasing to own the plant or machinery at the time when he ceases to be entitled to the benefit of the contract.
(6) If—
(a) a person enters into two or more agreements, and
(b) those agreements are such that, if they together constituted a single contract, the condition in subsection (1)(b) would be met in relation to that person and that contract,
the agreements are to be treated for the purposes of this section as parts of a single contract.
In this subsection, any reference to an agreement includes a reference to an undertaking, whether or not legally enforceable.
(7) This section is subject to section 69 (hire-purchase and fixtures) and subsection (3) is subject to section 229 (anti-avoidance).
(8) In this section “corresponding overseas activity” means an activity that would be a qualifying activity if the person carrying it on were resident in the United Kingdom.
68 Disposal value on cessation of notional ownership
(1) This section applies if a person—
(a) is treated under section 67(4) as ceasing to own plant or machinery, and
(b) is required to bring a disposal value into account as a result.
(2) If the plant or machinery has been brought into use for the purposes of the qualifying activity before the person ceases to own the plant or machinery, the disposal value is the total of—
(a) any relevant capital sums, and
(b) any capital expenditure treated under section 67(3) as having been incurred when the plant or machinery was brought into use but which has not in fact been incurred.
(3) If the plant or machinery has not been brought into use for the purposes of the qualifying activity before the person ceases to own the plant or machinery, the disposal value is the total of any relevant capital sums.
(4) “Relevant capital sums” means capital sums that the person receives or is entitled to receive by way of consideration, compensation, damages or insurance money in respect of—
(a) his rights under the contract, or
(b) the plant or machinery.
(5) This section is subject to section 229 (anti-avoidance).
(1) Section 67 does not—
(a) apply to expenditure incurred on plant or machinery which is a fixture, or
(b) prevent Chapter 14 (fixtures) applying in relation to expenditure on plant or machinery incurred under such a contract as is mentioned in section 67(1)(b).
(2) If—
(a) a person is treated under section 67(2) as owning plant or machinery,
(b) the plant or machinery becomes a fixture, and
(c) the person is not treated under Chapter 14 as being the owner of the plant or machinery,
the person is to be treated for the purposes of this Part as ceasing to own the plant or machinery at the time when it becomes a fixture.
(3) In this section “fixture” has the meaning given by section 173(1).
(1) This section applies if—
(a) under the terms of a lease, a lessee is required to provide plant or machinery,
(b) the lessee incurs capital expenditure on the provision of that plant or machinery for the purposes of a qualifying activity which the lessee carries on,
(c) the plant or machinery is not so installed or otherwise fixed in or to a building or any other description of land as to become, in law, part of that building or other land, and
(d) the lessee does not own the plant or machinery.
(2) The lessee—
(a) is to be treated as being the owner of the plant or machinery, as a result of incurring the capital expenditure, for so long as it continues to be used for the purposes of the qualifying activity, but
(b) is not required to bring a disposal value into account because the lease ends.
(3) Subsection (4) applies if—
(a) the plant or machinery continues to be used for the purposes of the lessee’s qualifying activity until the lease ends,
(b) the lessor holds the lease in the course of a qualifying activity, and
(c) on or after the ending of the lease, a disposal event occurs in respect of the plant or machinery at a time when the lessor owns the plant or machinery as a result of the requirement under the terms of the lease.
(4) The lessor is required to bring a disposal value into account in the appropriate pool for the chargeable period in which the disposal event occurs.
(5) “The appropriate pool” means the pool which would be applicable under this Part in relation to the lessor’s qualifying activity if—
(a) the expenditure incurred by the lessee had been qualifying expenditure incurred by the lessor, and
(b) that qualifying expenditure were being allocated to a pool for the chargeable period in which the disposal event occurs.
(6) In this section “lease” includes—
(a) an agreement for a lease if the term to be covered by the lease has begun, and
(b) any tenancy,
but does not include a mortgage (and “lessee” and “lessor” are to be read accordingly).
(1) This section applies if a person carrying on a qualifying activity incurs expenditure (whether or not of a capital nature) on the provision of plant or machinery for the purposes of the qualifying activity under a long funding lease.
(2) In the application of this Part in the case of that person, the plant or machinery is to be treated as owned by him at any time when he is the lessee under the long funding lease.
That is so whether or not the lease also falls to be regarded as a long funding lease in the application of this Part in the case of the lessor.
(3) The person is to be treated for the purposes of this Part as having incurred capital expenditure on the provision of the plant or machinery as follows.
(4) The capital expenditure is to be treated as incurred at the commencement of the term of the long funding lease.
(5) The amount of the capital expenditure varies, according to whether the long funding lease is—
(a) a long funding operating lease (subsection (6)), or
(b) a long funding finance lease (subsection (7)).
(6) If the long funding lease is a long funding operating lease, the amount of the capital expenditure is to be found in accordance with section 70B.
(7) If the long funding lease is a long funding finance lease, the amount of the capital expenditure is to be found in accordance with section 70C.
(8) See Chapter 6A for interpretation of this section.
70B Long funding operating lease: amount of capital expenditure
(1) This section applies by virtue of section 70A(6).
(2) If the long funding lease is a long funding operating lease, the amount of the capital expenditure is the market value of the plant or machinery at the later of—
(a) the commencement of the term of the lease;
(b) the date on which the plant or machinery is first brought into use for the purposes of the qualifying activity.
(3) This section is to be construed as one with section 70A.
70C Long funding finance lease: amount of capital expenditure
(1) This section has effect by virtue of section 70A(7) for the purpose of determining the amount of the capital expenditure in the case of a long funding finance lease.
(2) If the lease is one which, under generally accepted accounting practice, falls (or would fall) to be treated as a loan, this section applies as if the lease were one which, under generally accepted accounting practice, fell to be treated as a finance lease.
(3) The amount of the capital expenditure is the total of—
(a) commencement PVMLP (see subsection (4)), and
(b) if subsection (6) applies, the unrelievable pre-commencement rentals (“UPR”),
but subject, in a case falling within subsection (7), to the restriction imposed by subsection (8).
(4) Commencement PVMLP is the amount that would fall to be recognised as the present value, at the appropriate date, of the minimum lease payments (see section 70YE) if appropriate accounts were prepared by the person.
(4A) But where the minimum lease payments include a relievable amount, the present value of that amount must be excluded in determining the commencement PVMLP.
(4B) An amount (“amount X”) is a relievable amount if—
(a) an arrangement is in place under which all or part of any residual amount (as defined in section 70YE) is guaranteed by the lessee or a person connected with the lessee,
(b) amount X is within the minimum lease payments because of that arrangement (see subsection (1)(a) of that section), and
(c) it is reasonable to assume that, were amount X to be incurred under the arrangement, relief would be available as a result (beyond relief, by virtue of this section and section 70E, because amount X is within those minimum lease payments).
(4C) In deciding for the purposes of subsection (4B)(c) whether relief would be available as a result, no account is to be taken of—
(a) any part of the arrangement other than the part by virtue of which all or part of the residual amount is guaranteed, or
(b) any other arrangement connected with the arrangement or forming part of a set of arrangements that includes the arrangement.
(5) For the purposes of subsection (4)—
“appropriate accounts” are accounts prepared in accordance with generally accepted accounting practice on the date on which that amount is first recognised in the books or other financial records of the person;
“the appropriate date” is the later of—
the commencement of the term of the lease;
the date on which the plant or machinery is first brought into use for the purposes of the qualifying activity.
(6) This subsection applies if—
(a) the person has paid rentals under the lease before the commencement of the term of the lease, and
(b) in the case of some or all of those rentals, relief otherwise than by virtue of this subsection—
(i) is not available, and
(ii) if the case is one where the plant or machinery was not used for the purposes of a qualifying activity in the period before the commencement of the term of the lease, would not have been available had the plant or machinery been used in that period for the purposes of a qualifying activity,
and in any such case UPR is the amount of the rentals for which relief is not, and (in a case falling within paragraph (b)(ii)) would not have been, so available.
(7) Subsection (8) applies if the main purpose, or one of the main purposes, of entering into—
(a) the lease,
(b) a series of transactions of which the lease is one, or
(c) any of the transactions in such a series,
is to obtain allowances under this Part in respect of an amount of capital expenditure that materially exceeds the market value of the leased asset at the commencement of the term of the lease.
(8) In any such case, the amount of the capital expenditure described in subsection (3) is to be restricted to an amount equal to the market value of the asset at the commencement of the term of the lease.
(9) In this section “relief” means relief by way of—
(a) an allowance under this Act,
(b) a deduction in computing profits for the purposes of income tax or corporation tax,
(c) a deduction from total profits or total income for the purposes of either of those taxes.
(10) This section is to be construed as one with section 70A.
70D Long funding finance lease: additional expenditure: allowances for lessee
(1) This section applies where the following conditions are met—
(a) a person is the lessee of plant or machinery under a long funding finance lease,
(b) as a result of section 70A, the person falls to be regarded as having incurred qualifying expenditure on the provision of the plant or machinery, and
(c) the lessor incurs expenditure in relation to the plant or machinery,
(d) as a result of the lessor incurring the expenditure, there is in the case of the lessee an increase (the “relevant increase”) in the present value of the minimum lease payments.
(1A) Any increase attributable to a relievable amount is to be ignored for the purposes of subsection (1)(d).
(1B) Subsections (4B) and (4C) of section 70C apply (with any necessary modifications) for the purposes of this section as for the purposes of that section.
(2) If the lease is one which, under generally accepted accounting practice, falls (or would fall) to be treated as a loan, this section applies as if the lease were one which, under generally accepted accounting practice, fell to be treated as a finance lease.
(3) The person is to be treated for the purposes of this Part as having incurred further capital expenditure on the provision of the plant or machinery as follows.
(4) The person is to be treated as having incurred the expenditure on the date of first recognition.
(5) The amount of the expenditure is the amount that would fall to be recognised as the amount of the relevant increase if appropriate accounts were prepared by the person.
(6) For that purpose, “appropriate accounts” are accounts prepared in accordance with generally accepted accounting practice on the date of first recognition.
(7) For the purposes of this section, the “date of first recognition” is the date on which the relevant increase is first recognised in the books or other financial records of the person.
(8) This section is to be construed as one with section 70A.
70DA Transfer and long funding leaseback: restrictions on lessee's allowances
(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 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.
(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 because of the transfer referred to in subsection (1)(a), D is that disposal value.
(5A) D is nil if—
(a) S is not required to bring a disposal value into account under this Part because of the transfer referred to in subsection (1)(a), and
(b) at any time before that transfer S or a linked person became owner of the plant or machinery without incurring either capital expenditure or qualifying revenue expenditure on its provision.
(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 (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 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.
(9) “Linked person”, in relation to plant or machinery, means a person—
(a) who owned the plant or machinery at any time before the transfer referred to in subsection (1)(a), and
(b) who was connected with S at any time between—
(i) the time when the person became owner of the plant or machinery, and
(ii) the time of the transfer referred to in subsection (1)(a).
(10) Expenditure on the provision of plant or machinery is “qualifying revenue expenditure” if it is expenditure of a revenue nature—
(a) that is at least equal to the amount of expenditure that would reasonably be expected to have been incurred on the provision of the plant or machinery in a transaction between persons dealing with each other at arm's length in the open market, or
(b) that is incurred by the manufacturer of the plant or machinery and is at least equal to the amount that it would have been reasonable to expect to have been the normal cost of manufacturing the plant or machinery.
(1) This section applies where—
(a) a person is the lessee of plant or machinery under a long funding lease,
(b) as a result of section 70A, the person falls to be regarded as having incurred qualifying expenditure on the provision of the plant or machinery, and
(c) a relevant event occurs.
(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.
(2) In the case of that person—
(a) the relevant event is a disposal event, and
(b) the person is required to bring into account a disposal value for the chargeable period in which that disposal event occurs.
(2A) The amount of the disposal value is—
(QE-QA)+R
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)), and
R is the sum of—
any relevant rebate (see subsections (2F) and (2G)), and
any other relevant lease-related payment (see subsections (2FA) and (2G)).
(2B) In the case of a long funding operating lease, “the qualifying amount” means the aggregate amount of the reductions made under ... section 148I of ITTOIA 2005 or section 379 of CTA 2010 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—
(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) other than any relievable payment,
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 shown in the person's accounts as finance charges, or interest expenses, 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 foreign tax (within the meaning of section 70YE) to be paid by the lessor.
(2DA) A payment (“payment X”) is a relievable payment if—
(a) an arrangement is in place under which all or part of any residual amount (as defined in section 70YE) is guaranteed by the lessee or a person connected with the lessee,
(b) payment X is within the minimum lease payments because of that arrangement (see subsection (1)(a) of that section), and
(c) it is reasonable to assume that relief would be available as a result of making payment X (beyond relief, by virtue of section 70C or 70D and this section, because payment X is within those minimum lease payments).
(2DB) For the purposes of subsection (2DA)(c)—
(a) “relief” has the meaning given in section 70C, and
(b) subsection (4C) of that section applies as it applies for the purposes of subsection (4B)(c) of that section.
(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 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 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 time.
(2FA) Relevant lease-related payment” means any payment which—
(a) is payable at any time for the benefit (directly or indirectly) of the lessee or a person connected with the lessee,
(b) is connected with the long funding lease, or with any arrangement connected with that lease, and
(c) is not—
(i) an initial payment or any other payment made to the lessor by the lessee under the lease,
(ii) a payment made to the lessor by the lessee under a guarantee of any residual amount (as defined in section 70YE),
(iii) an initial payment or any other payment made under a relevant superior lease to the person who is the lessor under that lease by the person who is the lessee under that lease, or
(iv) a payment to the seller of the proceeds of a sale of the plant or machinery to which subsection (2FC) applies,
if, and to the extent that, the payment is not otherwise brought into account for tax purposes as income or a disposal receipt by the person for whom the benefit is payable (or would not be if that person were within the charge to tax).
(2FB) For the purposes of subsection (2FA)—
“payment” includes the provision of any benefit, the assumption of any liability and any other transfer of money's worth (and “payable” is to be construed accordingly);
“relevant superior lease” means any lease of the plant or machinery to which the long funding lease mentioned in subsection (1)(a) is inferior.
(2FC) This subsection applies to a sale of the plant or machinery if—
(a) a person has entered into a relevant transaction with another person in respect of the plant or machinery for the purposes of Chapter 17 of this Part (see section 213) and the sale is within section 213(1)(a),
(b) the plant or machinery is within section 216(1)(b) (sale and lease back), and
(c) the conditions in section 227(2) are met.
(2G) In the case of a lease that is not a transaction at arm's length, “relevant rebate” and “relevant lease-related payment” include any amount that would reasonably be expected to have fallen within subsection (2F) or, as the case may be, (2FA) 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.
(9) If the relevant event gives rise to a disposal event in the case of the person apart from this section, that disposal event is to be ignored.
(10) This section is to be construed as one with section 70A.
(1) A “long funding lease” is a funding lease (see section 70J) which meets the following conditions—
(a) it is not a short lease (see section 70I),
(b) it is not an excluded lease of background plant or machinery for a building (see section 70R),
(c) it not excluded by section 70U (plant or machinery leased with land: low percentage value).
(2) Where, at the commencement of the term of a plant or machinery lease, the plant or machinery—
(a) is not being used for the purposes of a qualifying activity carried on by the person concerned, but
(b) subsequently begins to be used for the purposes of a qualifying activity carried on by that person,
the plant or machinery lease is a long funding lease if the condition in subsection (3) is met.
(3) The condition is that (apart from section 70H) the plant or machinery lease would have been a long funding lease at its inception had the plant or machinery been used at that time for the purposes of a qualifying activity carried on by the person concerned.
(4) This section is subject, in the case of the lessee, to—
(a) section 70H (requirement for tax return treating lease as long funding lease);
(b) section 70Q (leases excluded by right of lessor etc to claim capital allowances).
(5) See also paragraph 91A of Schedule 22 to FA 2000 (tonnage tax: certain leases to be treated as not being long funding leases).
70H Lessee: requirement for tax return treating lease as long funding lease
(1) A lease is not a long funding lease in the case of the lessee unless he makes a tax return for the initial period on the basis that he falls to be taxed in respect of the lease in accordance with the provisions of—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Chapter 10A of Part 2 of ITTOIA 2005 (long funding leases: income tax) or
(c) Chapter 2 of Part 9 of CTA 2010 (long funding leases of plant or machinery).
(1A) Subsection (1) does not apply in respect of a lease of plant or machinery (“lease A”) if, at any time in the relevant period—
(a) the lessee is the lessor of a lease of any of that plant or machinery (“lease B”), and
(b) lease B is a long funding lease.
(1B) In subsection (1A) “the relevant period” means the period—
(a) beginning with the inception of lease A, and
(b) ending with the making of the tax return for the initial period (or, if that return is amended, the making of the last amendment).
(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).
(2) Where, in the case of a lease, a person has made a tax return for the initial period—
(a) on the basis that he falls to be taxed in respect of the lease in accordance with those provisions, or
(b) on the basis that he does not fall to be so taxed,
he may not make a claim under the recovery provisions for relief in respect of an amount paid or liable to be paid that is excessive by reason of the tax return having been made on that basis.
(3) In this section—
“the recovery provisions” means—
Schedule 1AB to the Taxes Management Act 1970; or
paragraph 51 of Schedule 18 to FA 1998;
“the initial period” is the first accounting period or, as the case may be, tax year in which there is a difference in the amount of the profits or losses falling to be shown in the return, according to whether the lease is a long funding lease or not;
“tax return” means—
a company tax return under paragraph 3 of Schedule 18 to FA 1998, or
a return under section 8 of the Taxes Management Act 1970 (income tax: personal return).
(1) Construe “short lease” in accordance with this section.
(2) A lease whose term is 7 years or less is a short lease.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) Where—
(a) a person leases an asset to another (“S”) under a lease that would, apart from this subsection, be a short lease,
(b) the inception of that lease is on or after 7th April 2006,
(c) at or about the time of the inception of that lease, arrangements are entered into for the asset to be leased to one or more other persons under one or more other leases, and
(d) in the aggregate, the term of the lease to S and the terms of the leases to such of those other persons as are connected with S exceed 7 years,
the lease to S is not a short lease.
(9A) Where plant or machinery is the subject of a lease and finance leaseback (as defined in section 228A)—
(a) the finance lease mentioned in section 228A(2)(c), and
(b) any other finance lease forming part of the arrangements for the lease and finance leaseback (except the lease referred to in section 228A(2)(a)),
is not a short lease (if it otherwise would be).
(10) Where plant or machinery is the subject of a sale and finance leaseback (as defined in section 221), any finance lease of a kind mentioned in section 221(1)(c) is not a short lease (if it otherwise would be).
(11) But, if the conditions set out in section 227(2) are met, B and S (within the meaning of section 221) may make an election the effect of which is that—
(a) subsection (10) above does not apply,
(b) section 228(2) and (3) apply in relation to B (but this does not prevent section 225 from applying), and
(c) section 228(5) applies in relation to S.
(12) Subsections (4) to (6) of section 227 apply in relation to elections under this section as they apply in relation to elections under that section.
(1) A “funding lease” is a plant or machinery lease (see section 70K) which at its inception meets one or more of the following tests—
(a) the finance lease test (see section 70N),
(b) the lease payments test (see section 70O),
(c) the useful economic life test (see section 70P).
(1A) A plant or machinery lease is also a “funding lease” if the plant or machinery is cushion gas.
(2) Subsections (1) and (1A) are subject to the following provisions of this section.
(3) A plant or machinery lease is not a funding lease if—
(a) section 67 applies (plant or machinery treated as owned by person entitled to benefit of contract, etc), and
(b) the lease is the contract mentioned in that section.
(4) A plant or machinery lease is not a funding lease if—
(a) before the commencement of the term of the lease, the lessor has leased the plant or machinery under one or more other plant or machinery leases,
(b) in the aggregate, the terms of those other leases exceed 65% of the remaining useful economic life of the plant or machinery at the commencement of the term of the earliest of them, and
(c) none of those earlier leases was a funding lease.
(5) For the purposes of subsection (4), all persons who were lessors of the plant or machinery before 1st April 2006 are to be treated as if they were the same person as the first lessor of the plant or machinery on or after that date.
(6) A plant or machinery lease is not a funding lease in the case of the lessor if—
(a) before 1st April 2006, the plant or machinery had, for a period or periods totalling at least 10 years, been the subject of one or more leases, and
(b) the lessor under the plant or machinery lease was also lessor of the plant or machinery on the last day before 1st April 2006 on which the plant or machinery was the subject of a lease.
(7) In this section “cushion gas” means gas that functions or is intended to function as plant in a particular gas storage facility.
(1) A “plant or machinery lease” is any of the following—
(a) any agreement or arrangement to which subsection (2) applies,
(b) any other agreement or arrangement, to the extent that subsection (3) applies to it,
(c) where plant or machinery is the subject of a sale and finance leaseback, as defined in section 221, the finance lease mentioned in subsection (1)(c) of that section,
and “lease”, “lessor”, “lessee” and other related expressions are to be construed accordingly.
(2) This subsection applies to an agreement or arrangement—
(a) under which a person grants to another person the right to use plant or machinery for a period, and
(b) which, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as a lease.
(3) This subsection applies to an agreement or arrangement to the extent that—
(a) in accordance with generally accepted accounting practice, it falls (or would fall) to be treated as a lease, and
(b) it meets the conditions in subsection (4).
(4) The conditions are that, for the purposes of generally accepted accounting practice,—
(a) the agreement or arrangement conveys, or falls (or would fall) to be regarded as conveying, the right to use an asset, and
(b) the asset is plant or machinery.
(5) In the case of an agreement or arrangement that falls (or would fall) within subsection (2) or (3) immediately after the commencement of the term of the lease, the condition in subsection (2)(b) or (3)(a) (as the case may be) is to be taken to be met as respects any time in the pre-commencement period.
(6) For the purposes of subsection (5), the “pre-commencement period” is the period that—
(a) begins with the inception of the lease, and
(b) ends with the commencement of the term of the lease.
70L Plant or machinery leased with other assets: separate derived leases
(1) This section applies in any case where an agreement or arrangement (the “mixed lease”) at any time relates, or is to relate, or has come to relate, to both—
(a) plant or machinery of any particular description (the “relevant plant or machinery”), and
(b) other assets (whether or not also plant or machinery).
(2) A mixed lease is an “eligible mixed lease” if—
(a) under generally accepted accounting practice, it falls (or would fall) to be treated as a lease, or
(b) the relevant plant or machinery is the subject of a sale and finance leaseback, as defined in section 221, and the mixed lease is or includes the finance lease mentioned in subsection (1)(c) of that section.
(3) In the case of an agreement or arrangement that falls (or would fall) within paragraph (a) of subsection (2) immediately after the commencement of the term of the lease, the condition in that paragraph is to be taken to be met as respects any time in the pre-commencement period.
(4) For the purposes of subsection (3), the “pre-commencement period” is the period that—
(a) begins with the inception of the lease, and
(b) ends with the commencement of the term of the lease.
(5) Where this section applies—
(a) the eligible mixed lease, so far as relating to the relevant plant or machinery, and
(b) the eligible mixed lease, so far as relating to other assets,
shall be treated for the purposes of this Part (other than this section) as if they were separate agreements or arrangements.
(6) Any such notional separate agreement or arrangement is referred to in this Part as a “derived lease”.
(7) Section 70M makes further provision with respect to derived leases of plant or machinery.
70M Derived leases of plant or machinery: term and rentals
(1) This section has effect in any case where, as a result of applying section 70L, there is a derived lease of the relevant plant or machinery.
(2) This section makes provision with respect to—
(a) determining whether the derived lease is a plant or machinery lease (see subsection (3)),
(b) the term of the derived lease (see subsection (4)),
(c) the rentals to be regarded as payable under the derived lease (see subsections (5) to (7)).
(3) Any question whether the derived lease—
(a) is a plant or machinery lease, or
(b) if it is such a lease, whether it is also a long funding lease,
is to be determined in accordance with the provisions of this Part.
(4) The term of the derived lease—
(a) is limited to the remaining useful economic life of the relevant plant or machinery at the commencement of the term of the derived lease, but
(b) subject to that, is to be determined in accordance with section 70YF (the “term” of a lease).
(5) The rentals that are to be regarded as payable under the derived lease shall be such rentals (the “deemed rentals”) as are just and reasonable in all the circumstances of the case.
(6) It shall be assumed that rentals under the derived lease are payable in equal instalments throughout the term of the lease, unless it is reasonable to draw a different conclusion from all the circumstances of the case.
(7) In determining the amount of any deemed rentals, regard shall be had to—
(a) all the provisions of the eligible mixed lease,
(b) the nature of the relevant plant or machinery,
(c) the value of the relevant plant or machinery at the commencement of the term of the derived lease,
(d) the amount which, at the commencement of the term of the derived lease, is expected to be the market value of the relevant plant or machinery at the end of the term of the derived lease,
(e) the remaining useful economic life of the relevant plant or machinery at the commencement of the term of the derived lease;
(f) the term of the derived lease.
(8) Expressions used in section 70L have the same meaning in this section.
(1) A lease meets the finance lease test in the case of any person if the lease is one which, under generally accepted accounting practice, falls (or would fall) to be treated as a finance lease or a loan in the accounts—
(a) of that person, or
(b) where that person is the lessor, of any person connected with him.
(2) In this section “accounts”, in relation to a company, includes any accounts which—
(a) relate to two or more companies of which that company is one, and
(b) are drawn up in accordance with generally accepted accounting practice.
(3) Where for any period—
(a) a person is not within the charge to income tax or corporation tax by reason of not being resident in the United Kingdom, and
(b) accounts are not prepared in accordance with international accounting standards or UK generally accepted accounting practice,
any question relating to generally accepted accounting practice is to be determined for the purposes of this section by reference to generally accepted accounting practice with respect to accounts prepared in accordance with international accounting standards.
(1) A lease meets the lease payments test if—
(a) the present value of the minimum lease payments (see section 70YE),
is equal to
(b) 80% or more of the fair value of the leased plant or machinery.
(2) The present value of the minimum lease payments is to be calculated by using the interest rate implicit in the lease.
(3) In this section “fair value” means—
(a) the market value of the leased plant or machinery,
less
(b) any grants receivable towards the purchase or use of that plant or machinery.
(4) For the purposes of this section—
(a) the interest rate implicit in the lease is the interest rate that would apply in accordance with normal commercial criteria, including, in particular, generally accepted accounting practice (where applicable), but
(b) if a rate cannot be determined in accordance with paragraph (a), the interest rate implicit in the lease is taken to be the incremental borrowing rate.
(5) For this purpose, the incremental borrowing rate has the same meaning as it has for accounting purposes.
(6) The Treasury may by regulations amend this section for the purpose of replacing references to the incremental borrowing rate with references to another rate.
A lease meets the useful economic life test if the term of the lease is more than 65% of the remaining useful economic life of the leased plant or machinery.
70Q Leases excluded by right of lessor etc to claim capital allowances
(1) A lease is not a long funding lease in the case of the lessee if it is excluded by virtue of subsection (2) (but see also subsection (5)).
(2) A lease is excluded if the lessor, or any superior lessor (see subsections (7) to (9)),—
(a) is entitled, at the commencement of the term of the lease, to claim a relevant allowance (see subsection (6)),
(b) would have been so entitled at that time, but for section 70V (tax avoidance involving international leasing),
(c) has at any earlier time been entitled to claim such an allowance, but has not been required to bring a disposal value into account in accordance with section 61(1)(ee), or
(d) would fall within any one or more of paragraphs (a) to (c), if he had been within the charge to income tax or corporation tax at the inception of the lease and any earlier times.
(3) Where for any period the lessor, or any superior lessor, is a person—
(a) who is not within the charge to income tax or corporation tax by reason of not being resident in the United Kingdom, and
(b) who does not prepare accounts in accordance with international accounting standards or UK generally accepted accounting practice,
subsection (4) applies.
(4) In determining whether the condition in subsection (2)(d) is met in any such case, any question relating to generally accepted accounting practice in relation to that person and that period is to be determined by reference to generally accepted accounting practice with respect to accounts prepared in accordance with international accounting standards.
(5) A lease is not excluded by virtue of subsection (2) if—
(a) the inception of the lease is before 28th June 2006, and
(b) by virtue only of section 70J(6), the lease is not a funding lease in the case of the lessor.
(6) A “relevant allowance” is an allowance under this Act in respect of the leased plant or machinery.
(7) There is a “superior lessor” only if the leased plant or machinery is the subject of a chain of superior leases.
(8) Leased plant or machinery is the subject of a chain of superior leases if—
(a) the lessor has his interest in relation to the plant or machinery under or by virtue of a lease from a third person (P), or
(b) the circumstances are as in paragraph (a), but P has his interest in relation to the plant or machinery under or by virtue of a lease from a fourth person (Q), or
(c) the circumstances are as in paragraph (b), but Q has his interest in relation to the plant or machinery under or by virtue of a lease from a fifth person (R),
and so on, where there is more than a fifth person involved.
(9) Where any leased plant or machinery is the subject of a chain of superior leases, the superior lessors are the persons described in subsection (8) as P, Q, R, and so on.
(10) Subsections (6) to (9) have effect for the interpretation of this section.
70R Excluded leases of background plant or machinery for a building
(1) Construe references to an excluded lease of background plant or machinery for a building in accordance with this section.
(2) This section applies where—
(a) plant or machinery is affixed to, or otherwise installed in or on, any land which consists of or includes a building,
(b) the plant or machinery is background plant or machinery for the building (see subsections (4) and (5)),
(c) the plant or machinery is leased with the land under a mixed lease, and
(d) none of the disqualifications set out in section 70S applies.
(3) In any such case, the derived lease of the plant or machinery is an excluded lease of background plant or machinery for a building.
(4) The background plant or machinery for a building is any plant or machinery—
(a) which is of such a description that plant or machinery of that description might reasonably be expected to be installed in, or in or on the sites of, a variety of buildings of different descriptions, and
(b) whose sole or main purpose is to contribute to the functionality of the building or its site as an environment within which activities can be carried on.
(5) Subsection (4) has effect subject to the provisions of any order under section 70T.
(1) This section sets out the disqualifications mentioned in subsection (2)(d) of section 70R and is to be construed as one with that section.
(2) Disqualification A is that the amounts payable—
(a) under the mixed lease, or
(b) under any other arrangement,
vary, or may be varied, by reference to the value from time to time to the lessor of allowances under this Act in respect of expenditure incurred by him in the provision of the background plant or machinery for the building.
(3) Disqualification B is that the main purpose, or one of the main purposes, of entering into—
(a) the mixed lease,
(b) a series of transactions of which the mixed lease is one, or
(c) any of the transactions in such a series,
is to secure that allowances under this Act are available to the lessor in respect of expenditure incurred in the provision of background plant or machinery for a building.
70T Orders relating to background plant or machinery for a building
(1) This section supplements section 70R and is to be construed as one with it.
(2) The Treasury may by order prescribe—
(a) descriptions of plant or machinery to be used as examples of the kinds of plant or machinery that may be regarded as falling within the definition of background plant or machinery for a building in determining whether any particular plant or machinery does or does not fall within that definition;
(b) descriptions of plant or machinery to be deemed to be background plant or machinery for a building;
(c) descriptions of plant or machinery to be deemed not to be background plant or machinery for a building.
(3) An order under this section—
(a) may make different provision for different cases (including different descriptions of building),
(b) may contain incidental, consequential, supplemental, or transitional provision or savings.
(4) The first order made under this section may include provisions having effect in relation to times before the making of the order (but not times earlier than 1st April 2006).
70U Plant or machinery leased with land: low percentage value
(1) This section applies where—
(a) any plant or machinery (the “relevant plant or machinery”) is affixed to, or otherwise installed, in or on any land,
(b) the plant or machinery is not background plant or machinery for any building situated in or on the land,
(c) the plant or machinery is leased with the land under a mixed lease, and
(d) none of the relevant disqualifications applies.
(2) For the purposes of this section the “relevant disqualifications” are the disqualifications set out in section 70S, but for this purpose—
(a) take the reference in subsection (1) of that section to subsection (2)(d) of section 70R as a reference to this subsection (and, accordingly, construe the second reference to that section as a reference to this section), and
(b) take references in section 70S to background plant or machinery for a building as references to relevant plant or machinery.
(3) Where this section applies, the derived lease of the relevant plant or machinery is excluded by this section if the condition in subsection (4) is met at the commencement of the term of that lease.
(4) The condition is that AMV does not exceed both—
(a) 10% of BMV; and
(b) 5% of LMV.
(5) For that purpose—
AMV is the aggregate of—
the market value of the relevant plant or machinery, and
the market value of any other plant or machinery that falls within subsection (1) in the case of the leased land;
BMV is the aggregate market value of all the background plant or machinery leased with the land;
LMV is the market value of the land (including buildings and fixtures).
(6) For this purpose the market value of any land at any time is to be determined on the assumption of a sale by an absolute owner of the land free from all leases and other encumbrances.
(1) This section applies where matters are so arranged that there are plant or machinery leases such that—
(a) under a lease by a non-resident, an asset is provided directly or indirectly to a resident,
(b) the direct provision of the asset to the resident is by a lease which, in the case of the resident, is a long funding lease or a lease to which section 67 (hire purchase etc) applies,
(c) the asset is used by the resident for the purpose of leasing it under a lease (the “relevant lease”) that would not (apart from this section) be a long funding lease in the case of the resident, and
(d) under the relevant lease, the asset is provided directly or indirectly (but by a lease) to a non-resident.
(2) Subsection (3) applies if the sole or main purpose of arranging matters in that way is to obtain a tax advantage by securing that allowances under this Part are available to a resident by virtue of—
(a) section 67 (hire purchase), or
(b) section 70A (long funding leases).
(3) In any such case, the relevant lease is deemed to be a long funding lease in the case of the resident who is the lessor under it.
(4) The reference in this section to a person obtaining a tax advantage (see section 577(4)) also includes a reference to a person obtaining a tax advantage within the meaning of section 1139 of CTA 2010.
(5) In this section—
“non-resident” means a person who—
is not resident in the United Kingdom, and
does not use the plant or machinery exclusively for earning profits chargeable to tax;
“resident” means a person who—
is resident in the United Kingdom, or
uses the plant or machinery exclusively for earning profits chargeable to tax.
(1) This section applies in any case where the following conditions are met—
(a) a person (the “old lessor”) is lessor of plant or machinery under a plant or machinery lease (the “old lease”),
(b) during the term of the lease, the old lessor transfers the plant or machinery to another person (the “new lessor”),
(c) the transfer is not the grant of a plant or machinery lease by the old lessor,
(d) immediately after the transfer, the new lessor is the lessor of the plant or machinery under a lease (“the new lease”) (whether or not the same lease as the old lease).
(2) If it is not otherwise the case,—
(a) the old lessor is to be treated as if the old lease terminated immediately before the transfer, and
(b) the new lessor is to be treated as if the new lease had been entered into immediately after the transfer.
(3) The new lessor is also to be treated as if the date of the transfer were the date of both—
(a) the inception of the new lease, and
(b) the commencement of the term of the new lease,
if it is not otherwise the case.
(4) If, immediately before the transfer, the old lease was (or was treated by virtue of this subsection as being) in the case of the old lessor a lease of either of the following descriptions—
(a) a long funding lease, or
(b) a lease which is not a long funding lease,
the new lease is to be treated in the case of the new lessor as being a lease of the same description, if the conditions in subsection (5) are met.
(5) The conditions are that—
(a) the term of the new lease is the unexpired portion of the term of the old lease, and
(b) the amounts receivable under the new lease are the same as would have been receivable under the old lease, assuming it to have continued in effect.
(6) If—
(a) it is not otherwise the case, and
(b) the conditions in subsection (5) are met,
the lessee is to be treated as if the old lease and the new lease were the same continuing lease.
(7) Any reference in this section to a transfer of plant or machinery by a person includes a reference to—
(a) any kind of disposal of, or of the person's interest in, the plant or machinery,
(b) any arrangements under which the person's interest in the plant or machinery is terminated and another person becomes lessor of the plant or machinery,
(c) in a case where the plant or machinery is a fixture and the person is treated under section 176 as the owner, any cessation of ownership under section 188, 190, 191, 192 or 192A.
(1) This section applies in any case where the following conditions are met—
(a) a person (the “old lessee”) is lessee of plant or machinery under a plant or machinery lease (the “old lease”),
(b) during the term of the lease, the old lessee transfers the plant or machinery to another person (the “new lessee”),
(c) the transfer is not the grant of a plant or machinery lease by the old lessee,
(d) immediately after the transfer, the new lessee is the lessee of the plant or machinery under a lease (“the new lease”) (whether or not the same lease as the old lease).
(2) If it is not otherwise the case,—
(a) the old lessee is to be treated as if the old lease terminated immediately before the transfer, and
(b) the new lessee is to be treated as if the new lease had been entered into immediately after the transfer.
(3) The new lessee is also to be treated as if the date of the transfer were the date of both—
(a) the inception of the new lease, and
(b) the commencement of the term of the new lease,
if it is not otherwise the case.
(4) If, immediately before the transfer, the old lease was (or was treated by virtue of this subsection as being) in the case of the old lessee a lease of one of the following descriptions—
(a) a long funding lease, or
(b) a lease which is not a long funding lease,
the new lease is to be treated in the case of the new lessee as being a lease of the same description, if the conditions in subsection (5) are met.
(5) The conditions are that—
(a) the term of the new lease is the unexpired portion of the term of the old lease, and
(b) the amounts payable under the new lease are the same as would have been payable under the old lease, assuming it to have continued in effect.
(6) If—
(a) it is not otherwise the case, and
(b) the conditions in subsection (5) are met,
the lessor is to be treated as if the old lease and the new lease were the same continuing lease.
(7) Any reference in this section to a transfer of plant or machinery by a person includes a reference to—
(a) any kind of disposal of, or of the person's interest in, the plant or machinery,
(b) any arrangements under which the person's interest in the plant or machinery is terminated and another person becomes lessee of the plant or machinery,
(c) in a case where the plant or machinery is a fixture and the person is treated under section 176 as the owner, any cessation of ownership under section 188, 190, 191, 192 or 192A.
70Y Sale and leaseback, lease and leaseback etc: lessors
(1) Where—
(a) a person (B) transfers plant or machinery to another person (A),
(b) the plant or machinery is directly or indirectly leased back to B, and
(c) immediately before the commencement of the term of the lease back to B, B is the lessor of the plant or machinery to another person under a lease which is, in B's case, a long funding lease,
the lease back to B is, in the case of both A and B, a long funding lease.
(2) If, in any such case, the plant or machinery is leased back from A to B indirectly, any leases by means of which the indirect lease back from A to B is effected are also long funding leases in the case of each of the parties to them.
(3) Any reference in this section to a transfer of plant or machinery by a person includes a reference to—
(a) any kind of disposal of, or of the person's interest in, the plant or machinery (including the grant of a lease),
(b) any arrangements under which the person's interest in the plant or machinery is terminated and another person becomes entitled to, or to an interest in, the plant or machinery,
(c) in a case where the plant or machinery is a fixture and the person is treated under section 176 as the owner, any cessation of ownership under section 188, 190, 191, 192 or 192A.
70YA Change in accountancy classification of long funding lease
(1) This section applies in any case where—
(a) a person is lessor or lessee under a long funding lease, and
(b) at any time after the inception of the lease, the accountancy classification of the lease as a finance lease, an operating lease or a right-of-use lease changes in the relevant accounts.
(2) The person is to be treated as if—
(a) the lease had terminated immediately before the time of the change,
(b) another lease (the “new lease”) had been entered into immediately after the time of the change, and
(c) the new lease were a long funding lease in the case of the lessor.
(3) The person is also to be treated as if the date on which the change occurs were the date of both—
(a) the inception of the new lease, and
(b) the commencement of the term of the new lease.
(4) The cases where the accountancy classification of a long funding lease as a finance lease, an operating lease or a right-of-use lease changes at any time (the “relevant time”) in the relevant accounts are those set out in subsections (5) to (6A).
(5) Case 1 is where—
(a) immediately before the relevant time, the lease is one that falls (or would fall) to be treated in the relevant accounts in accordance with generally accepted accounting practice as a finance lease for accounting purposes, ...
(b) at the relevant time the lease becomes one that falls (or would fall) to be treated in the relevant accounts in accordance with generally accepted accounting practice as not being a finance lease for accounting purposes and
(c) the change of classification is not a relevant change of classification.
(6) Case 2 is where—
(a) immediately before the relevant time, the lease is one that falls (or would fall) to be treated in the relevant accounts in accordance with generally accepted accounting practice as not being a finance lease for accounting purposes, ...
(b) at the relevant time the lease becomes one that falls (or would fall) to be treated in the relevant accounts in accordance with generally accepted accounting practice as a finance lease for accounting purposes and
(c) the change of classification is not a relevant change of classification.
(6A) Case 3 is where—
(a) immediately before the relevant time, the lease is a right-of-use lease which is a long funding finance lease, and
(b) at the relevant time, the lease becomes one which—
(i) is not a right-of use lease, and
(ii) falls (or would fall) to be treated in the relevant accounts in accordance with generally accepted accounting practice as not being a finance lease.
(7) The Treasury may by regulations make provision for or in connection with restricting the application or operation of this section.
(8) In this section, any reference to a finance lease includes a reference to a loan.
(9) In the application of this section in relation to any person, the “relevant accounts” are the accounts—
(a) of that person, or
(b) where that person is the lessor, of any person connected with that person,
but only to the extent that the treatment of the lease in those accounts as a finance lease or otherwise falls (or would fall) to be determined by reference to that person as the lessor or lessee under the lease.
(10) Subsections (2) and (3) of section 70N (finance lease test: group accounts, and generally accepted accounting practice for persons outside the charge to tax) also apply for the purposes of this section.
(11) In this section—
“relevant change of classification” means a change of accountancy classification as a result of the person adopting a different accounting standard or a change to an accounting standard, and
“accounting standard” means any accounting standard issued or recognised by—
the Accounting Standards Board (or successor body), or
the International Accounting Standards Board (or successor body).