PART XII SPECIAL CLASSES OF COMPANIES AND BUSINESSES
Chapter 5ASpecial rules for long funding leases of plant or machinery: corporation tax
F2Lessors under long funding finance or operating leases: avoidance etc
F1502GCCases where ss. 502B to 502G do not apply: other avoidance
1
Sections 502B to 502G do not apply in the case of a company which is or has been the lessor of any plant or machinery under a long funding lease if conditions A to C are met.
2
Condition A is that the long funding lease forms part of any arrangement entered into by the company which includes one or more other transactions (whether the arrangement is entered into before or after or at the inception of the lease).
3
Condition B is that the main purpose, or one of the main purposes, of the arrangement is to secure that, over the relevant period, there would be a substantial difference between—
a
the total amount of the amounts under the arrangement which are, in accordance with generally accepted accounting practice, recognised in determining the company's profit or loss for any period or taken into account in calculating the amounts which are so recognised, and
b
the total amount of the amounts under the arrangement which are taken into account in calculating the profits or losses of the company for the purposes of corporation tax.
4
For the purposes of condition B “the relevant period” means the period which begins with the inception of the lease and ends with the end of the term of the lease.
5
Condition C is that the difference would be attributable (wholly or partly) to the application of any of sections 502B to 502G in relation to the company by reference to the plant or machinery under the lease.
6
The reference in this section to an amount being recognised in determining a company's profit or loss for a period is to an amount being recognised for accounting purposes—
a
in the company's profit and loss account or income statement,
b
in the company's statement of recognised gains and losses or statement of changes in equity, or
c
in any other statement of items brought into account in calculating the company's profits and losses for that period.
7
For the purposes of this section it does not matter whether the parties to any transaction which forms part of the arrangement differ from the parties to any of the other transactions.
8
For the purposes of this section the cases in which two or more transactions are to be taken as forming part of an arrangement include any case in which it would be reasonable to assume that one or more of them—
a
would not have been entered into independently of the other or others, or
b
if entered into independently of the other or others, would not have taken the same form or been on the same terms.
9
If—
a
at any time any of sections 502B to 502G has applied for determining the amounts to be taken into account in calculating the profits or losses of the company for the purposes of corporation tax, and
b
conditions A to C are met at any subsequent time,
those amounts, and any other amounts which (as a result of this section) are to be so taken into account, are subject to such adjustments as are just and reasonable.
10
All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (9).
Pt. 12 Ch. 5A (ss. 502A-502L) inserted (with effect in accordance with Sch. 8 para. 15 of the amending Act) by Finance Act 2006 (c. 25), Sch. 8 para. 11