(1)The rules in subsection (3) apply to the calculation of the deduction by way of relevant corporation tax relief allowed in an accounting period—
(a)for the non-excluded element of the payment within section 864(2), or
(b)if there are two or more such payments, for the non-excluded elements of those payments.
(2)For the purposes of this section the non-excluded element of a payment is the element not excluded under section 866 (long funding finance leases).
(3)The rules are—
Rule 1 — meaning of amount E For any accounting period, amount E (which may be nil) is the expense or total expenses to be brought, in accordance with generally accepted accounting practice, into account in the period in respect of—
the non-excluded element of the payment, or
the non-excluded elements of the payments.
Rule 2 — calculation of amount E For every accounting period—
calculate the total of amount E for the period and amount E for every preceding accounting period ending on or after the date of the creation of the lease mentioned in section 864(2)(a),
calculate the total of the deductions by way of relevant corporation tax relief for every previous accounting period ending on or after that date, and
subtract the total at (b) from the total at (a) to give the cumulative unrelieved expenses for the period.
Rule 3 — meaning of post-spread period An accounting period is a post-spread period if for that accounting period, and every later accounting period, there are no payments within section 864(2).
Rule 4 — the deduction allowed in an accounting period If an accounting period is not a post-spread period, the deduction allowed for the period is equal to the cumulative unrelieved expenses for the period, but is the commercial rent for the period if that is less (see section 867).
Rule 5 — accounting periods in which no deduction allowed If an accounting period is a post-spread period, no deduction is allowed for the period.
(1)This section applies for the purposes of section 865.
(2)A payment must be excluded so far as, in the case of the lessee, it is to be regarded in accordance with Chapter 6A of Part 2 of CAA 2001 as a payment under a lease which is a long funding finance lease for the purposes of that Part.
(1)Subsection (3) applies for the purpose of making a comparison under rule 4 of section 865(3).
(2)In this section “the actual lease” means the lease mentioned in section 864(2)(a).
(3)The commercial rent is the rent which might at the relevant time be expected to be paid under a lease of the asset if—
(a)the lease were for the rest of the asset's expected normal working life,
(b)the rent were payable at uniform intervals and at a uniform rate, and
(c)the rent gave a reasonable return for the asset's market value at the relevant time, taking account of the actual lease's terms and conditions.
(4)The relevant time is the time when the actual lease was created.
(5)An asset's expected normal working life is the period which might be expected, when it is first put into use, to pass before it is finally put out of use as being unfit for further use.
(6)In applying subsection (5) it must be assumed that the asset will be used in the normal way, and to the normal extent, throughout the period.
(7)If the asset is used at the same time partly for the purposes of the trade mentioned in section 864(2)(b) and partly for other purposes, the commercial rent as defined in subsection (3) is to be determined by reference to what would be paid for such partial use.