Finance Act 1997

Part II U.K. Other finance leases

Purpose of this Part of this Schedule U.K.

15 (1) This Part of this Schedule is concerned with arrangements (other than arrangements with which Part I of this Schedule is concerned)— U.K.

(a) which involve the lease of an asset;

(b) which are or have been entered into by companies or other persons; and

(c) which are of such a kind as F1 . . . falls F1 . . . to be treated in accordance with [F2 generally accepted accounting practice] as finance leases or loans.

(2) The principal purpose of this Part of this Schedule is, in the case of any such arrangements, to charge any person entitled to the lessor’s interest under the lease of the asset to tax from time to time on amounts of income determined by reference to those which fall for accounting purposes to be treated in accordance with [F2 generally accepted accounting practice] as the income return, on and after 26th November 1996, on investment in respect of the finance lease or loan (taking into account the substance of the matter as a whole, including in particular the state of affairs as between connected persons, or within a group of companies, as reflected or falling to be reflected in accounts of any of those persons or in consolidated group accounts).

Textual Amendments

F1 Words in Sch. 12 para. 15(1)(c) repealed (24.7.2002) by Finance Act 2002 (c. 23), s. 141, Sch. 40 Pt. 3(16)

F2 Words in Sch. 12 para. 15(1)(c)(2) substituted (24.7.2002) by Finance Act 2002 (c. 23), s. 103(4)(e)

Application of this Part of this Schedule U.K.

16 (1) This Part of this Schedule applies in any case where— U.K.

(a) a lease of an asset is or has been granted on or after 26th November 1996;

(b) the lease forms part of a new scheme;

(c) in the case of the lease, the condition in sub-paragraph (1) of paragraph 3 above is or has been satisfied at some time on or after 26th November 1996 in a period of account of the current lessor; and

(d) Part I of this Schedule does not apply in the case of the lease by reason of the conditions in sub-paragraphs (2) to (5) of that paragraph not all being, or having been, satisfied as mentioned in paragraph 2 above.

[F3 (1A) This Part of this Schedule does not apply if or to the extent that, in the case of the current lessor, the lease falls to be regarded in accordance with Chapter 6A of Part 2 of the Capital Allowances Act 2001 as a long funding lease for the purposes of that Part.]

(2) Where the condition in paragraph 3(1) above has been satisfied at any time on or after 26th November 1996 in a period of account of the person who was at that time the lessor, it shall be taken to continue to be satisfied unless and until—

(a) the asset ceases to be leased under the lease; or

(b) the lessor’s interest under the lease is assigned to a person who is not connected with any of the persons described in sub-paragraph (3) below.

(3) Those persons are—

(a) the assignor;

(b) any person who was the lessor at some time before the assignment; or

(c) any person who at some time after the assignment becomes the lessor pursuant to arrangements made by a person who was the lessor, or was connected with the lessor, at some time before the assignment.

(4) Nothing in sub-paragraph (2) above prevents this Part of this Schedule from again applying in the case of the lease if the conditions for its application are satisfied after the assignment.

Textual Amendments

F3 Sch. 12 para. 16(1A) inserted (with effect in accordance with Sch. 9 para. 7(4) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 7(3)

Application of provisions of Part I for purposes of Part II U.K.

17 U.K. Paragraphs 5 to 10 and 12 above shall apply for the purposes of this Part of this Schedule as they apply for the purposes of Part I of this Schedule.