Finance Act 2008

Plant and machinery allowances: anti-avoidance U.K.

12 (1) Chapter 17 of Part 2 of CAA 2001 (plant and machinery allowances: anti-avoidance) is amended as follows. U.K.

(2) For section 228A substitute—

“228A Application of sections 228B and 228C

(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.”

(3) In section 228B (lessee's income or profits: deductions)—

(a) in subsection (1), for “the lessee's” substitute “ S's ”,

(b) in subsection (2), for the words from “the total” to the end substitute “ the amount of the finance charges shown in the accounts. ”,

(c) in subsection (4), in the definition of “Original Consideration”, for “entering into the relevant transaction” substitute “ granting B rights over the plant or machinery ”, and

(d) the heading accordingly becomes “ S's income or profits: deductions ”.

(4) In section 228C (lessee's income or profits: termination of leaseback)—

(a) in subsection (2), for “the lessee” substitute “ S ”,

(b) in subsection (3), in the formula, for “Net” substitute “ Original ” and for the definition of “Net Consideration” substitute—

““Original Consideration” means the consideration payable to S for granting B rights over the plant or machinery,”,

(c) in subsection (6), for “the lessee's” substitute “ S's ” and for “the lessor” substitute “ B (or, where appropriate, an assignee of B) ”, and

(d) the heading accordingly becomes “ S's income or profits: termination of leaseback ”.

(5) Omit—

(a) section 228D (lessor's income or profits),

(b) section 228E (lessor's income or profits: termination of leaseback), and

(c) section 228F (lease and finance leaseback).

(6) In section 228G (leaseback not accounted for as finance lease in accounts of lessee)—

(a) in subsection (1), for “the lessee” substitute “ S ”,

(b) in subsection (2), for “the lessee” (in both places) substitute “ S ”,

(c) in subsection (3), for “the lessee's” substitute “ S's ”,

(d) in subsection (4), for “the lessee” substitute “ S ”,

(e) in subsection (6), for “the lessee” substitute “ S ” and for the words from “increased by—” to the end substitute “ increased by the consideration payable to S for granting B rights over the plant or machinery. ”, and

(f) the heading accordingly becomes “ Leaseback not accounted for as finance lease in S's accounts ”.

(7) Section 228H (sections 228A to 228G: supplementary) is amended as follows.

(8) In subsection (1)—

(a) insert (as the first defined term)—

““consideration” does not include rentals;”,

(b) omit the definition of “lessee”,

(c) in the definition of “net book value”, for “the lessee's” substitute “ S's ”,

(d) omit the definition of “restricted disposal value”,

(e) before the definition of “termination” insert—

““S” does not include an assignee of S;”, and

(f) in the definition of “termination”, omit “(except in section 228E)”, for “the lessee's” (in both places) substitute “ S's ” and for “the lessee” substitute “ S ”.

(9) After that subsection insert—

“(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 section 785B of ICTA 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.”

(10) In section 228J(8) (plant or machinery subject to further operating lease), in the definition of “lease and finance leaseback”, for “section 228F” substitute “ section 228A ”.

(11) In section 774E(5)(b) of ICTA (structured finance arrangements: exceptions), omit “with the modifications contained in section 228F of that Act”.

(12) The amendments made by this paragraph have effect in relation to transactions referred to in section 228A(2)(a) of CAA 2001 (as substituted by this paragraph) entered into on or after 9 October 2007.

13 (1) Section 228B of CAA 2001 (S's income or profits: deductions) is amended as follows. U.K.

(2) After subsection (4) insert—

“(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.”

(3) Accordingly, in the heading, after “profits” insert “ etc ”.

(4) The amendments made by this paragraph have effect in relation to transactions referred to in section 228A(2)(a) of CAA 2001 entered into on or after 12 March 2008.