Chapter 1: Restrictions on use of losses in leasing partnerships
Overview
2626.This Chapter rewritessections 785ZA and 785ZB of ICTA, which were introduced by FA 2006 as an adjunct to the provisions of Schedule 10 to FA 2006 (sale etc of lessor companies etc) rewritten in Chapters 3 to 6 of Part 9.
2627.These sections of ICTA address an alternative arrangement designed to achieve a similar effect to a disposal of an interest in a leasing business carried on in partnership, throughdiffering allocations of profits and lossesand of capital allowances in the leasing business.
Section 887: When restrictions on leasing partnership losses under this Chapter apply
2628.This section sets out the circumstances in which the restrictions on the use of losses in section 888 apply. It is based on sections 785ZA(1) to (4) and 785ZB(1) and (2) of ICTA.
2629.The restrictions apply where a company carries on a “business of leasing plant or machinery” in partnership and the company’s profit sharing arrangements are unusual. Subsection (1)(e) achieves this by providing that the restrictions only apply if the profit sharing arrangements are not determined “on an allowable basis” as defined in subsections (2)to (4).
2630.“Business of leasing plant or machinery” has the same meaning as it has for the purposes of Chapter 4 of Part 9 (see subsection (5)).
Section 888: Restrictions on leasing partnership losses
2631.This section restricts the use of losses incurred by a company in the partnership leasing business. It is based on sections 785ZA(5) to (9) and 785ZB(1), (7) and (8) of ICTA.
2632.A loss which derives from capital allowances on the leased plant or machinery may only be set off against the company’s income from leases of plant or machinery entered into by the partnership no later than the end of the accounting period in which the loss is incurred. It can be carried forward, but only against such leasing income (see subsection (2)). It cannot be set sideways (see subsection(3)) or surrendered as group relief (see subsection (4)).
Section 889: Interpretation of Chapter
2633.This defines certain terms used in the Chapter. It is based on section 785ZB(1) and (3) to (6) of ICTA.
