148ELong funding operating lease: lessor's additional expenditure

1

This section applies if in any period of account—

a

a person carrying on a trade is the lessor of any plant or machinery under a long funding operating lease,

b

the person incurs capital expenditure in relation to the plant or machinery (the “additional expenditure”), and

c

the additional expenditure is not reflected in the market value of the plant or machinery at the commencement time (see subsection (7)).

2

An additional deduction is allowed in calculating the profits of the person for income tax purposes for each period of account—

a

which ends after the incurring of the additional expenditure, and

b

in which the person is the lessor of the plant or machinery under the lease.

3

The amount of the deduction is so much of the expected reduction in value of the additional expenditure (“the expected reduction”) as is attributable to the period of account.

4

The expected reduction is the amount of the additional expenditure, less the remaining residual value of the plant or machinery resulting from that expenditure.

5

For how to determine that remaining residual value, see—

a

section 148EA (determination of remaining residual value resulting from lessor's first additional expenditure), and

b

section 148EB (determination of remaining residual value resulting from lessor's further additional expenditure).

6

The amount of the expected reduction attributable to the period of account is found by apportioning that reduction on a time basis according to the proportion of the term of the lease that falls in the period of account.

7

In this section “the commencement time” means—

a

except where section 148DB applies, the commencement of the term of the lease, and

b

if that section applies, the time when the plant or machinery is first brought into use by the lessor for the purposes of the qualifying activity.