[F1494AA Sale and lease-back.U.K.
(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)falls, in accordance with [F2generally accepted accounting practice], to be treated in the accounts of the lessee as a finance charge;F3. . . [F4or]
(b)F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[F5(c)falls, if the case is one where the lease is a long funding operating lease, to be deductible in computing the profits of the lessee for the purposes of corporation tax (after first making against any such expenditure any reductions falling to be made by virtue of section 502K).]
(3)The expenditure shall not be allowable in computing for the purposes of [F6Part 3 of CTA 2009] 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 [F7Part 3 of CTA 2009] 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 [F8Part 5 of CTA 2009] 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 [F9—
“long funding operating lease” means a long funding operating lease for the purposes of Part 2 of the Capital Allowances Act (see section 70YI(1) of that Act);]
“lease”, in relation to an asset, has the same meaning as in sections 781 to 784.]
Textual Amendments
F1S. 494AA inserted (with application in accordance with s. 100(2)(3) of the amending Act) by Finance Act 1999 (c. 16), s. 100(1)
F2Words in s. 494AA(2) substituted (24.7.2002) by Finance Act 2002 (c. 23), s. 103(4)(a)
F3S. 494AA(2)(b) and preceding word repealed (24.7.2002) by Finance Act 2002 (c. 23), Sch. 40 Pt. 3(16)
F4Word at the end of s. 494AA(2)(a) inserted (with effect in accordance with Sch. 9 para. 1(5) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 1(2)
F5S. 494AA(2)(c) inserted (with effect in accordance with Sch. 9 para. 1(5) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 1(3)
F6Words in s. 494AA(3) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 168(2) (with Sch. 2 Pts. 1, 2)
F7Words in s. 494AA(5)(a) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 168(3)(a) (with Sch. 2 Pts. 1, 2)
F8Words in s. 494AA(5) substituted (1.4.2009 with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), Sch. 1 para. 168(3)(b) (with Sch. 2 Pts. 1, 2)
F9S. 494AA(6): definition of "long funding operating lease" inserted (with effect in accordance with Sch. 9 para. 1(5) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 1(4)