Corporation Tax Act 2010

Lessors under long funding finance leases U.K.

360 Lessor under long funding finance lease: rental earnings U.K.

(1) This section applies for any period of account of a company in which it is the lessor of any plant or machinery under a long funding finance lease.

(2) The amount to be brought into account as the lessor's income from the lease for the period is the amount of the rental earnings in respect of the lease for the period.

(3) The amount of those rental earnings is the amount which, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as the gross return on investment for that period in respect of the lease.

(4) If the lease is one which, in accordance with such practice, falls (or would fall) to be treated as a loan for the period of account, so much of the rentals under the lease as falls (or would fall) to be treated as interest is treated for the purposes of this section as rental earnings.

361 Lessor under long funding finance lease: exceptional items U.K.

(1) This section applies if—

(a) a company is or has been the lessor under a long funding finance lease, and

(b) an exceptional profit or loss arises to the company in connection with the lease.

(2) A profit or loss is exceptional for the purposes of subsection (1) if—

(a) in accordance with generally accepted accounting practice it falls (or would fall) to be recognised for accounting purposes in a period of account, but

(b) apart from this section, it would not be brought into account in calculating the profits of the company for corporation tax purposes.

(3) Such a profit is treated for corporation tax purposes as income of the company attributable to the lease.

(4) Such a loss is treated for corporation tax purposes as a revenue expense incurred by the company in connection with the lease.

(5) It does not matter for the purposes of this section whether the profit or loss is of an income or capital nature.

(6) The reference in subsection (2) to an amount falling to be recognised for accounting purposes in a period of account is a reference to an amount falling to be recognised for accounting purposes in—

(a) the company's profit and loss account, income statement or statement of comprehensive income for that period,

(b) the company's statement of total recognised gains and losses, statement of recognised income and expense, statement of changes in equity or statement of income and retained earnings for that period, or

(c) any other statement of items taken into account in calculating the company's profits or losses for that period.

362 Lessor under long funding finance lease making termination payment U.K.

(1) This section applies if—

(a) a company is or has been the lessor under a long funding finance lease,

(b) the lease terminates, and

(c) a sum calculated by reference to the termination value is paid to the lessee.

(2) No deduction in respect of the sum is allowed in calculating the profits of the company for corporation tax purposes.

(3) This section does not prevent a deduction in respect of a sum so far as it is brought into account in determining the company's rental earnings.

(4) For the meaning of “termination value”, see section 381(3)(m).