Corporation Tax Act 2010 (c. 4)

Part 9 U.K. Leasing plant or machinery

Chapter 5 U.K. Sales of lessors: anti-avoidance provisions

432 Restrictions on relief for Chapter 3 or 4 expenses: introduction U.K.

(1) [F1 Sections 433 and 433A apply] if—

(a) a company is treated as incurring an expense under any provision of Chapter 3 or 4,

(b) the expense arises directly or indirectly in consequence of, or otherwise in connection with, any arrangements,

(c) the main purpose, or one of the main purposes, of the arrangements is to secure that the company is treated as incurring the expense, and

(d) the company makes a loss that wholly or partly derives from the expense.

[F2 (1A) For the purposes of subsection (1), an expense is to be disregarded if, and to the extent that, section 730D(2) (disallowance of deductible amounts: profit transfers) applies to it.]

(2) The restrictions in section 433 apply in respect of so much of the loss as derives from the expense (in that section [F3 and section 433A] referred to as “the restricted loss amount”).

(3) For the purpose of determining how much of a loss derives from the expense, the loss is to be calculated on the basis that the expense is the final amount to be deducted.

(4) In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions—

(a) whether or not legally enforceable, and

(b) whether or not the company is a party to the arrangements.

Textual Amendments

F1 Words in s. 432(1) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 167(2)(a)

F2 S. 432(1A) inserted (with effect in accordance with Sch. 14 para. 3 of the amending Act) by Finance Act 2013 (c. 29), Sch. 14 para. 2(2)

F3 Words in s. 432(2) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 167(2)(b)

433 Restrictions applying to the restricted loss amount U.K.

(1) The restrictions in subsections (2), (5) and (6) apply to the restricted loss amount.

(2) Relief is not to be given to the company under any provision specified in subsection (3) in respect of the restricted loss amount, except by way of set off against any relevant leasing income (see subsection (4)).

(3) Those provisions are—

(a) section 45 (carry forward of [F4 pre-1 April 2017] trade loss against subsequent trade profits),

[F5 (ab) section 45B (carry forward of post-1 April 2017 trade loss against subsequent trade profits),]

(b) section 62 (relief for losses made in UK property business),

(c) section 63 (company with investment business ceasing to carry on UK property business),

(d) section 66 (relief for losses made in overseas property business), and

(e) section 91 (relief for losses from miscellaneous transactions).

(4) In subsection (2) “relevant leasing income” means any income deriving from any plant or machinery lease which—

(a) is not an excluded lease of background plant or machinery for a building (see section 437(3)), and

(b) is entered into before the day on which the company is treated as incurring the expense mentioned in section 432(1)(a).

(5) If the business carried on by the company is a trade, relief is not to be given to the company under section 37 (relief for trade losses against total profits) [F6 or section 45A (carry forward of trade loss against total profits)] in respect of the restricted loss amount.

(6) The restricted loss amount is not available for set off[F7 —

(a)] by way of group relief in accordance with Chapter 2 of Part 5 (surrender of company's losses etc for an accounting period)[F8 , or

(b) by way of group relief for carried-forward losses in accordance with Chapter 2 of Part 5A (surrender of company's carried forward losses)]

Textual Amendments

F4 Words in s. 433(3)(a) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 167(3)(a)(i)

F5 S. 433(3)(ab) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 167(3)(a)(ii)

F6 Words in s. 433(5) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 167(3)(b)

F7 Words in s. 433(6) renumbered as s. 433(6)(a) (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 167(3)(c)(i)

F8 S. 433(6)(b) and word inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 167(3)(c)(ii)

[F9 433A Restrictions not applying to the restricted loss amount U.K.

(1) Any deduction made under section 45 or 45B in respect of the restricted loss amount is to be ignored for the purposes of the restriction in section 269ZB (restriction on sum of deductions from trading profits).

(2) Any deduction made under section 62 or 63 in respect of the restricted loss amount is to be ignored for the purposes of the restriction in section 269ZD (restriction on sum of deductions from total profits).]

Textual Amendments

F9 S. 433A inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 167(4)

434 Introduction to sections 435 and 436 U.K.

(1) Sections 435 and 436 apply if a question arises as to the application of Chapter 3 or 4.

(2) For the purposes of this section and sections 435 and 436 “a question as to the application of Chapter 3 or 4” means [F10 question A, B or C].

(3) Question A is whether any company carries on a business of leasing plant or machinery (whether alone or in partnership) for the purposes of any provision of the sales of lessors Chapters.

(4) Question B is the question of the amount (if any) of any income or expense which any company is treated as receiving or incurring under any provision of the sales of lessors Chapters.

[F11 (5) Question C is the question of the amount of any disposal value to be substituted by section 398G(3).]

Textual Amendments

F10 Words in s. 434(2) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 17(2)

F11 S. 434(5) inserted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 17(3)

435 Disregard of increases and decreases [F12 in certain amounts] U.K.

(1) This section applies if—

[F13 (a) an amount mentioned in subsection (1A) is to be ascertained for the purpose of determining a question as to the application of Chapter 3 or 4,]

(b) apart from this section, there would be a reduction or increase in any such amount,

(c) the reduction or increase arises directly or indirectly in consequence of, or otherwise in connection with, any arrangements, and

(d) the main purpose, or one of the main purposes, of the arrangements is to secure that there is a relevant tax advantage.

[F14 (1A) The amounts are—

(a) the relevant plant or machinery value,

(b) the value of plant or machinery falling within section 387(7) or 410(6),

(c) the relevant company's or partnership's income in the period of 12 months ending with the relevant day,

(d) the amount of PM,

(e) the amount of TWDV,

(f) the amount of any disposal value to be substituted by section 398G(3), and

(g) any underlying amount required to calculate or verify an amount mentioned in any of the preceding paragraphs.]

(2) There is a relevant tax advantage if (apart from this section)—

(a) any company would not be regarded for the purposes of any provision of Chapter 3 or 4 as carrying on a business of leasing plant or machinery (whether alone or in partnership),

(b) the amount of any income which any company is treated as receiving under any such provision would be reduced, F15 ...

(c) the amount of any expense which any company is treated as incurring under any such provision would be increased [F16 , or

(d) the amount of any disposal value to be substituted by section 398G(3) would be reduced.]

(3) For the purpose of determining the question as to the application of Chapter 3 or 4, the reduction or increase in the amount [F17 to be ascertained] must be ignored.

(4) In this section—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions—

  (a)

  whether or not legally enforceable, and

  (b)

  whether or not the company for which the relevant tax advantage is intended to be secured is a party to the arrangements,

• “increase” includes an increase from nil, and

• “reduction” includes a reduction to nil.

Textual Amendments

F12 Words in s. 435 heading substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 18(6)

F13 S. 435(1)(a) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 18(2)

F14 S. 435(1A) inserted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 18(3)

F15 Word in s. 435(2)(b) omitted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 6 para. 18(4)(a)

F16 S. 435(2)(d) and word inserted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 18(4)(b)

F17 Words in s. 435(3) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 18(5)

436 Balance sheet amounts determined on assumption company has no liabilities U.K.

(1) This section applies if—

(a) a company owns any plant or machinery at any time on any day (“the relevant day”),

(b) for the purpose of determining a question as to the application of Chapter 3 or 4 regard must be had to the amount (if any) which falls (or would fall) to be shown in any balance sheet of the company in respect of the plant or machinery, and

(c) condition A or B is met.

(2) Condition A is met if, apart from this section, there would be no amount which would fall to be shown in the balance sheet of the company in respect of the plant or machinery.

(3) Condition B is met if the amount which, apart from this section, would fall to be shown in the balance sheet of the company in respect of the plant or machinery is less than the amount which would fall to be so shown on the assumption in subsection (4).

(4) The assumption is that the company has no liabilities of any kind at any time on the relevant day.

(5) For the purpose of determining the question as to the application of Chapter 3 or 4, the amount which falls (or would fall) to be shown in any balance sheet of the company in respect of the plant or machinery is to be determined on the assumption in subsection (4) (as well as on the other assumptions applicable under other provisions of those Chapters).

(6) In this section “liabilities” includes any share capital issued by the company which falls to be treated for accounting purposes as a liability.

[F18 (7) Except for subsection (6), this section applies to a partnership as it applies to a company, and references to “company” are to be read accordingly.]

Textual Amendments

F18 S. 436(7) inserted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 19