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Modifications etc. (not altering text)

C1 S. 45H(2) modified (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14) , Sch. 30 para. 7

Part 2U.K. Plant and machinery allowances

Modifications etc. (not altering text)

C2Pt. 2 modified (24.2.2003) by Proceeds of Crime Act 2002 (c. 29), s. 458(1), Sch. 10 para. 12 (with Sch. 10 para. 17(1)); S.I. 2003/120, art. 2, Sch. (with arts. 3 4) (as amended (20.2.2003) by S.I. 2003/333, art. 14)

C3 Pt. 2 restricted (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 paras. 10, 22 (with s. 38(2) ); S.I. 2004/2575 , art. 2(1) , Sch. 1

C4 Pt. 2 modified (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 paras. 9(2), 21(2) (with s. 38(2)); S.I. 2004/2575, art. 2(1) , Sch. 1

C5 Pt. 2 restricted (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 4 para. 4 ; S.I. 2004/2575 , art. 2(1) , Sch. 1

C6Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 19

C7Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 35

C8Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 paras. 36, 37

C9Pt. 2 modified (21.7.2009) by Finance Act 2009 (c. 10), s. 24

C10Pt. 2 modified (17.7.2013) by Finance Act 2013 (c. 29), s. 73(7)-(11) (with s. 73(6))

Chapter 17U.K.[F1Other anti-avoidance]

Textual Amendments

F1Pt. 2 Ch. 17 heading substituted (8.4.2010) (with effect in accordance with Sch. 4 para. 5 to the amending Act) by Finance Act 2010 (c. 13), Sch. 4 para. 3

[F2Finance leaseback: parties' income and profitsU.K.

Textual Amendments

F2Ss. 228A-228J and cross-heading inserted (with effect in accordance with s. 134(3) of the amending Act) by Finance Act 2004 (c. 12), s. 134

[F3228AApplication of sections 228B and 228CU.K.

(1)Sections 228B and 228C apply where plant or machinery is the subject of a lease and finance leaseback.

(2)Plant or machinery is the subject of a lease and finance leaseback if—

(a)a person (“S”) leases the plant or machinery to another (“B”),

(b)after the date of that transaction, the use of the plant or machinery falls within sub-paragraph (i), (ii) or (iii) of section 221(1)(b), and

(c)it is directly as a consequence of having been leased under a finance lease that the plant or machinery is available to be so used after that date.

(3)For the purposes of subsection (2), S leases the plant or machinery to B only if—

(a)S grants B rights over the plant or machinery,

(b)consideration is given for that grant, and

(c)S is not required to bring all of that consideration into account under this Part.]

Textual Amendments

F3S. 228A substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(2)

228B[F4S's income or profits [F5etc]: deductions]U.K.

(1)For the purpose of income tax or corporation tax, in calculating [F6S's] income or profits for a period of account the amount deducted in respect of amounts payable under the leaseback may not exceed the permitted maximum.

(2)The permitted maximum is [F7the amount of the finance charges shown in the accounts.]

(3)In relation to a period of account during which the leaseback terminates, the permitted maximum shall also include an amount calculated in accordance with subsection (4).

(4)The calculation is—

where—

  • Current Book Value” means the net book value of the leased plant or machinery immediately before the termination,

  • Original Consideration” means the consideration payable to S for [F8granting B rights over the plant or machinery], and

  • Original Book Value” means the net book value of the leased plant or machinery at the beginning of the leaseback.

[F9(5)If the use mentioned in section 228A(2)(b) includes use by a person (other than B) who is connected with S, this section applies in relation to that person as it applies in relation to S.]

Textual Amendments

F4S. 228B heading substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(3)(d)

F5Word in s. 228B heading inserted (with effect in accordance with Sch. 20 para. 13(4) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 13(3)

F6Word in s. 228B(1) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(3)(a)

F7Words in s. 228B(2) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(3)(b)

F8Words in s. 228B(4) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(3)(c)

F9S. 228B(5) inserted (with effect in accordance with Sch. 20 para. 13(4) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 13(2)

228C[F10S's income or profits: termination of leaseback]U.K.

(1)Subsection (2) applies where the leaseback terminates.

(2)For the purpose of the calculation of income tax or corporation tax, the income or profits of [F11S] from the relevant qualifying activity for the period in which the termination occurs shall be increased by an amount calculated in accordance with subsection (3).

(3)The calculation is—

where—

  • [F12Original Consideration” means the consideration payable to S for granting B rights over the plant or machinery,]

  • Current Book Value” means the net book value of the leased plant or machinery immediately before the termination, and

  • Original Book Value” means the net book value of the leased plant or machinery at the beginning of the leaseback.

(4) In this section “relevant qualifying activity” means the qualifying activity for the purposes of which the leased plant or machinery was used immediately before the termination.

(5)Section 228B has no effect on the treatment for the purposes of income tax or corporation tax of amounts received by way of refund on the termination of a leaseback of amounts payable under it.

(6) In subsection (5), “amounts received by way of refund” includes any amount that would be so received in respect of [F13S's] interest under the leaseback if any amounts due to [F14B (or, where appropriate, an assignee of B)] under the leaseback were disregarded.

Textual Amendments

F10S. 228 heading substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(4)(d)

F11Word in s. 228C(2) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(4)(a)

F12Definition and word in formula in s. 228C(3) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(4)(b)

F13Word in s. 228C(6) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(4)(c)

F14Words in s. 228C(6) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(4)(c)

F15228DLessor’s income or profitsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F15S. 228D omitted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 20 para. 12(5)(a)

F16228ELessor’s income or profits: termination of leasebackU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F16S. 228E omitted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 20 para. 12(5)(b)

F17228FLease and finance leasebackU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F17S. 228F omitted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 20 para. 12(5)(c)

228G[F18Leaseback not accounted for as finance lease in S's accounts]U.K.

(1)Sections 228B and 228C are subject to this section in their application in relation to a leaseback that is not accounted for as a finance lease in the accounts of [F19S].

(2) Subsection (3) applies where the leaseback is accounted for as a finance lease in the accounts of a person connected with [F20S]; and in that subsection “ relevant calculation ” means the calculation of—

(a)the permitted maximum for the purposes of section 228B, or

(b)the amount by which the income or profits of [F20S] are to be increased in accordance with section 228C.

(3)Where an amount that falls to be used for the purposes of a relevant calculation—

(a)cannot be ascertained by reference to [F21S's] accounts because the leaseback is not accounted for as a finance lease in those accounts, but

(b)can be ascertained by reference to the connected person’s accounts for one or more periods,

that amount as ascertained by reference to the connected person’s accounts shall be used for the purposes of the relevant calculation.

(4)Subsections (5) and (6) apply in a case where the leaseback is not accounted for as a finance lease in the accounts of a person connected with [F22S].

(5)Sections 228B and 228C do not apply in relation to the leaseback.

(6)If the term of the leaseback begins on or after 18 May 2004 then, for the purposes of income tax or corporation tax, the income or profits of [F23S] from the relevant qualifying activity for the period of account during which the term of the leaseback begins shall be [F24increased by the consideration payable to S for granting B rights over the plant or machinery.]

(7)For the purposes of this section the leaseback is accounted for as a finance lease in a person’s accounts if—

(a)the leaseback falls, under generally accepted accounting practice, to be treated in that person’s accounts as a finance lease or loan, or

(b)in a case where the leaseback is comprised in other arrangements, those arrangements fall, under generally accepted accounting practice, to be so treated.

Textual Amendments

F18S. 228G heading substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(6)(f)

F19Word in s. 228G(1) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(6)(a)

F20Word in s. 228G(2) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(6)(b)

F21Word in s. 228G(3) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(6)(c)

F22Word in s. 228G(4) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(6)(d)

F23Word in s. 228G(6) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(6)(e)

F24Words in s. 228G(6) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(6)(e)

228HSections 228A to 228G: supplementaryU.K.

(1)In sections 228A to 228G—

[F32(1A)For the purposes of sections 228A to 228G, references to consideration given (or payable to S) for the grant to B of rights over the plant or machinery do not include—

(a)rentals payable under that grant, or

(b)any relevant capital payment (within the meaning of [F33section 890 of CTA 2010] or section 809ZA of ITA 2007) to which either of those sections applies.

(1B)In relation to a case where some but not all of the consideration mentioned in subsection (1A) falls within paragraph (b) of that subsection, sections 228B to 228G or section 228J have effect subject to such modifications as are just and reasonable.]

(2)In a case where accounts drawn up are not correct accounts, or no accounts are drawn up—

(a)the provisions of sections 228A to 228G apply as if correct accounts had been drawn up, and

(b)amounts referred to in any of those sections as shown in accounts are those that would have been shown in correct accounts.

(3)In a case where accounts are drawn up in reliance upon amounts derived from an earlier period of account for which correct accounts were not drawn up, or no accounts were drawn up, amounts referred to in sections 228A to 228G as shown in the accounts for the later period are those that would have been shown if correct accounts had been drawn up for the earlier period.

(4) In subsections (2) and (3) “ correct accounts ” means accounts drawn up in accordance with generally accepted accounting practice.

Textual Amendments

F25Words in s. 228H(1) inserted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(8)(a)

F26Words in s. 228H(1) omitted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 20 para. 12(8)(b)

F27Word in s. 228H(1) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(8)(c)

F28Words in s. 228H(1) omitted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 20 para. 12(8)(d)

F29Words in s. 228H(1) inserted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(8)(e)

F30Words in s. 228H(1) omitted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 20 para. 12(8)(f)

F31Word in s. 228H(1) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(8)(f)

F32S. 228H(1A)(1B) inserted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(9)

F33Words in s. 228H(1A)(b) substituted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 345 (with Sch. 2)

228JPlant or machinery subject to further operating leaseU.K.

(1)This section applies where—

(a)plant or machinery is the subject of—

(i)a sale and finance leaseback, or

(ii)a lease and finance leaseback, and

(b)some or all of the plant or machinery becomes, while the subject of the leaseback, also the subject of a lease in relation to which the following conditions are met—

(i)the term of the lease begins on or after 18 May 2004;

(ii)S, or a person connected with S, is the lessee under the lease;

(iii)the lease is not accounted for as a finance lease in the accounts of the lessee.

(2)For the purpose of income tax or corporation tax, in calculating the lessee’s income or profits for a period of account the amount deducted in respect of amounts payable under the operating lease shall not exceed the relevant amount.

(3)Subsections (4) and (5) apply in relation to the calculation of the lessor’s income or profits for a period of account for the purpose of income tax or corporation tax.

(4)Where—

(a)an amount receivable in respect of the lessor’s interest under the operating lease falls to be taken into account in that calculation, and

(b)that amount is reduced by an amount due to the lessee under the operating lease,

that reduction shall be disregarded when taking the amount receivable into account.

(5)The amounts receivable in respect of the lessor’s interest under the operating lease that fall to be taken into account in that calculation may be disregarded to the extent that they exceed the relevant amount (whether or not subsection (4) applies).

(6)Where only some of the plant or machinery is the subject of the operating lease, subsections (2) to (5) shall apply subject to such apportionments as may be just and reasonable.

(7)For the purposes of this section a lease is accounted for as a finance lease in a person’s accounts if—

(a)the lease falls, under generally accepted accounting practice, to be treated in that person’s accounts as a finance lease or loan, or

(b)in a case where the lease is comprised in other arrangements, those arrangements fall, under generally accepted accounting practice, to be so treated.

(8)In this section—

Textual Amendments

F34Words in s. 228J(8) substituted (with effect in accordance with Sch. 20 para. 12(12) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 12(10)