PART XII SPECIAL CLASSES OF COMPANIES AND BUSINESSES
CHAPTER V
PETROLEUM EXTRACTION ACTIVITIES
F1494AA Sale and lease-back.
(1)
This section applies where—
(a)
a company (“the seller”) carrying on a trade has disposed of an asset which was used for the purposes of that trade, or an interest in such an asset;
(b)
the asset is used, under a lease, by the seller or a company associated with the seller (“the lessee”) for the purposes of a ring fence trade carried on by the lessee; and
(c)
the lessee uses the asset before the end of the period of two years beginning with the disposal.
(2)
Subject to subsection (4) below, subsection (3) below applies to so much (if any) of the expenditure incurred by the lessee under the lease as—
(a)
(b)
F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)
The expenditure shall not be allowable in computing for the purposes of Schedule D the profits of the ring fence trade.
(4)
Expenditure shall not be disallowed by virtue of subsection (3) above to the extent that the disposal referred to in subsection (1) above is made for a consideration which—
(a)
is used to meet expenditure incurred by the seller in carrying on oil extraction activities or in acquiring oil rights otherwise than from a company associated with the seller; or
(b)
is appropriated to meeting expenditure to be so incurred by the seller.
(5)
Where any expenditure—
(a)
would apart from subsection (3) above be allowable in computing for the purposes of Schedule D the profits of the ring fence trade for an accounting period, but
(b)
by virtue of that subsection is not so allowable,
that expenditure shall be brought into account for the purposes of Chapter II of Part IV of the M1Finance Act 1996 as if it were a non-trading debit in respect of a loan relationship of the lessee for that accounting period.
(6)
In this section, “lease”, in relation to an asset, has the same meaning as in sections 781 to 784.