Part 9Leasing plant or machinery

Chapter 4Sales of lessors: leasing business carried on by a company in partnership

“Business of leasing plant or machinery”

410“Business of leasing plant or machinery”

(1)

A business carried on by the partnership is a business of leasing plant or machinery on the relevant day if condition A or B is met.

(2)

Condition A is that at least half of the relevant plant or machinery value relates to F1 plant or machinery falling within subsection (6).

(3)

Subsection (2) is supplemented by section 411.

F2(4)

Condition B is that at least half of the partnership's income in the past 12 months derives from plant or machinery falling within subsection (6).

(5)

Subsection (4) is supplemented by section 414.

F3(6)

Plant or machinery falls within this subsection if—

(a)

it is or at any time in the past 12 months has been leased out by the partnership or a qualifying associate,

(b)

the lease under which it is or has been leased out is a plant or machinery lease but not an excluded lease of background plant or machinery for a building (see section 437(3)), and

(c)

if the plant or machinery satisfies paragraph (a) only because it is or has been leased out by a qualifying associate, the lessee under the lease is or was someone other than the partnership.

(7)

For the purposes of subsection (6)—

(a)

plant or machinery is “leased out” by a person if it is subject to a plant or machinery lease under which that person is a lessor,

(b)

“ associate ” means a person who is a partner in the partnership or connected with a partner in the partnership (see also subsection (8)), and

(c)

a person is a “qualifying associate” if the person is an associate at the start of the relevant day or at any earlier time in the past 12 months (whether or not a time when the plant or machinery was leased out by the person).

(8)

In relation to a corporate partner who is owned by a consortium or is a qualifying 75% subsidiary of a company owned by a consortium, the reference in subsection (7)(b) to a person connected with a partner also includes—

(a)

any member of the consortium, and

(b)

any person connected with such a member.

(9)

A reference in this section to the past 12 months is to the period of 12 months ending with the relevant day.

411“Relevant plant or machinery value” for condition A in section 410

(1)

This section applies for the purposes of condition A in section 410.

(2)

The relevant plant or machinery value is the sum of the amounts in subsection (3), but subject to section 413 (relevant plant or machinery value where partnership lessee under long funding lease).

(3)

The amounts are—

(a)

the amounts (if any) that would be shown in respect of plant or machinery in the appropriate balance sheet of the partnership drawn up as at the start of the relevant day, and

(b)

the amounts (if any) that would be shown in the appropriate balance sheet of the partnership drawn up as at the end of the relevant day in respect of relevant transferred plant or machinery.

(4)

For the purposes of subsection (3)(b) plant or machinery is “relevant transferred plant or machinery” if an amount in respect of it would be shown in the appropriate balance sheet of any company mentioned in subsection (5) drawn up as at the start of the relevant day.

(5)

Those companies are—

(a)

the partner company,

(b)

any company which is an associated company of the partner company on the relevant day (see section 430),

(c)

any other corporate partner in relation to whose interest in the business there is a qualifying change on the relevant day,

(d)

any other corporate partner in relation to which there is a qualifying change of ownership on the relevant day, and

(e)

any company which is an associated company of any other corporate partner mentioned in paragraph (c) or (d) on the relevant day.

(6)

For the purposes of subsection (5) “any other corporate partner” means a company which—

(a)

carries on the business at the start of the relevant day, and

(b)

is within the charge to corporation tax in respect of the business.

(7)

This section is supplemented by section 412.

412Provision supplementing section 411

(1)

For the purposes of section 411 and this section the amounts shown in the appropriate balance sheet of the partnership or, as the case may be, any company in respect of any plant or machinery are—

(a)

the amounts shown in that balance sheet as the net book value (or carrying amount) in respect of the plant or machinery, and

(b)

the amounts shown in that balance sheet as the net investment in respect of finance leases of the plant or machinery.

(2)

If—

(a)

any of the plant or machinery is a fixture in any land (see section 437(5)), and

(b)

the amount which falls (or would fall) to be shown in an appropriate balance sheet as the net book value (or carrying amount) of the land includes (or would include) an amount in respect of the fixture,

the amount of the net book value (or carrying amount) in respect of the fixture is determined on a just and reasonable basis.

(3)

If—

(a)

any of the plant or machinery is subject to a finance lease (see section 437(4)), and

(b)

any land or other asset which is not plant or machinery is subject to that lease,

the amount of the net investment in respect of the finance lease of that plant or machinery is determined on a just and reasonable basis.

(4)

In section 411 and this section any reference to any amount shown in the appropriate balance sheet of the partnership or a company is to the amount which, on the assumptions in subsection (5), falls (or would fall) to be shown in a balance sheet of the partnership or, as the case may be, the company.

(5)

The assumptions are that—

(a)

the balance sheet is drawn up in accordance with generally accepted accounting practice, and

(b)

if the partnership acquired any plant or machinery in circumstances in which this paragraph applies, the plant or machinery had been acquired for an amount equal to its F4ascribed value as at the relevant day.

(6)

Paragraph (b) of subsection (5) applies if—

(a)

the relevant day falls on or after 22 March 2006,

(b)

the plant or machinery was acquired directly or indirectly from a person who was connected with the partnership when the acquisition took place, and

(c)

either the acquisition took place on or after 5 December 2005 or the person from whom the plant or machinery was so acquired was also connected with the partnership on that date.

413Relevant plant or machinery value where partnership lessee under long funding lease etc

(1)

Any amount included in the amounts mentioned in section 411(2) in respect of plant or machinery to which this section applies is to be deducted from the sum mentioned in that section.

(2)

But the F5ascribed value as at the relevant day of any plant or machinery to which this section applies is to be added to that sum or, if that sum is nil, is the relevant plant or machinery value.

(3)

This section applies to plant or machinery if—

(a)

condition A or B is met at the start of the relevant day, or

(b)

the plant or machinery is acquired by the partnership from any company mentioned in section 411(5) on the relevant day and condition A or B is met at the end of that day.

(4)

Condition A is that the partnership is the lessee of the plant or machinery under a long funding finance lease or a long funding operating lease.

(5)

Condition B is that the partnership is treated as the owner of the plant or machinery under section 67 of CAA 2001 (hire purchase and similar contracts).

414Partnership's income for condition B in section 410

(1)

This section applies for the purposes of condition B in section 410.

(2)

The reference to the partnership's income is to its income as calculated for corporation tax purposes.

(3)

Any apportionment necessary to determine the amount of the partnership's income attributable to the period of 12 months ending with the relevant day is to be made on a time basis.

(4)

But—

(a)

that basis does not apply if it would work in an unjust or unreasonable way in relation to any person, and

(b)

in that case the apportionment is to be made instead on a just and reasonable basis.

(5)

The proportion of the income that derives from F6plant or machinery falling within section 410(6) is to be determined on a just and reasonable basis.