Corporation Tax Act 2010

Part 10 U.K. Leasing plant or machinery

Disapplication of Chapter 2 of Part 9 U.K.

61 (1) Chapter 2 of Part 9 (long funding leases of plant or machinery)— U.K.

(a) does not apply to any lease in relation to which condition A, B or C is met,

(b) does not apply in the case of the relevant lessor (see sub-paragraph (6)) to any lease in relation to which condition D is met, and

(c) does not apply in the case of the relevant lessee (see sub-paragraph (7)) to any lease in relation to which condition E is met.

(2) But sub-paragraph (1) does not apply in relation to a lease in the case of a lessor (and accordingly Chapter 2 of Part 9 applies) if an election under regulations made under paragraph 16 of Schedule 8 to FA 2006 (election for lease to be treated as long funding lease for tax purposes)—

(a) is in force in the case of the lease, and

(b) has effect in the case of the lessor.

(3) Condition A is that—

(a) the lease was finalised before 21 July 2005, and

(b) on 17 May 2006 the lessor was within the charge to corporation tax.

(4) Condition B is that—

(a) the commencement of the term of the lease was before 1 April 2006, and

(b) the plant or machinery is brought into use for the purposes of a qualifying activity carried on by the person concerned before that date.

(5) Condition C is that—

(a) the lease is an excepted lease, and

(b) the commencement of the term of the lease is on or after 1 April 2006.

(6) Condition D is that—

(a) Chapter 2 of Part 9 and the amendments of CAA 2001 made by Schedule 8 to FA 2006 do not apply to a lease (“the old lease”) in the case of a lessor (“the old lessor”),

(b) there is a transfer of plant or machinery,

(c) immediately before the transfer the old lessor is within the charge to tax,

(d) the transfer is in such circumstances that, if the amendments of CAA 2001 made by Schedule 8 to FA 2006 did apply to the old lease, section 70W(4)(b) of CAA 2001 (transfers, assignments etc by lessor) would have effect, in relation to the person who would be the new lessor if that section applied (“P”), to treat the lease that would be the new lease in that case as a lease that is not a long funding lease;

and P is the relevant lessor for the purposes of sub-paragraph (1)(b).

(7) Condition E is that—

(a) Chapter 2 of Part 9 and the amendments of CAA 2001 made by Schedule 8 to FA 2006 do not apply to a lease (“the old lease”) in the case of a lessee (“the old lessee”),

(b) there is a transfer of plant or machinery,

(c) immediately before the transfer the old lessee is within the charge to tax,

(d) the transfer is in such circumstances that, if the amendments of CAA 2001 made by Schedule 8 to FA 2006 did apply to the old lease, section 70X(4)(b) of CAA 2001 (transfers, assignments etc made by lessee) would have effect, in relation to the person who would be the new lessee if that section applied (“Q”), to treat the lease that would be the new lease in that case as a lease that is not a long funding lease;

and Q is the relevant lessee for the purposes of sub-paragraph (1)(c).

(8) In the application of section 70W(4)(b) of CAA 2001 for the purposes of sub-paragraph (6)(d) and the application of section 70X(4)(b) of that Act for the purposes of sub-paragraph (7)(d), the old lease is to be treated as a lease that is not a long funding lease.

(9) Paragraphs 17 to 27 of Schedule 8 to FA 2006 (interpretational and supplemental provisions) apply for the purposes of this paragraph as they apply for the purposes of Part 4 of that Schedule.

(10) See, in particular—

(a) paragraphs 17 and 26 of that Schedule for the meaning of “excepted lease”,

(b) paragraph 23 of that Schedule for when a lease is “finalised”, and

(c) paragraph 27 of that Schedule for general interpretation.

(11) See also paragraph 21 of that Schedule, which—

(a) deems a separate long funding lease that is an excepted lease to exist in some cases where a person incurred expenditure before 19 July 2006 on the provision of plant or machinery for leasing under a long funding lease that is not itself excepted, and

(b) provides for rentals under the actual lease to be apportioned to the deemed lease.

Disapplication of sections 360 and 361 and modification of section 360 in some cases U.K.

62 (1) If at the beginning of 13 December 2007— U.K.

(a) a company carrying on a trade was the lessee of any plant or machinery under a lease that is not a long funding lease (“lease A”), and

(b) the company was the lessor of any of that plant or machinery under a lease that is a long funding finance lease (“lease B”),

sub-paragraphs (2) to (11) apply in respect of lease B.

(2) Section 360 (lessor under long funding finance lease: rental earnings) does not apply to a period of account within sub-paragraph (3).

(3) A period of account is within this sub-paragraph if—

(a) it begins on or after 13 December 2007, and

(b) no rentals that were due under lease B before 13 December 2007 are (wholly or in part) in respect of any part of the period.

(4) For the purpose of calculating the profits of the lessor under lease B for a period of account ending on or after 13 December 2007 that is not within sub-paragraph (3), the lessor is treated as receiving for that period income attributable to lease B of an amount equal to the relevant amount.

(5) The relevant amount is an amount equal to so much of the rentals that—

(a) become due on or after 13 December 2007, and

(b) are wholly or partly in respect of the period of account,

as would not reasonably be regarded as reflected in the rental earnings for that period.

(6) For the purposes of sub-paragraph (5) the rental earnings for a period of account are determined in accordance with section 360(3) and (4).

(7) If any rental is paid for a period (“the rental period”) which begins before 13 December 2007 or is not wholly within the period of account, for the purposes of sub-paragraph (6) the amount of that rental is treated as equal to the amount apportioned (on a time basis) in respect of so much of the rental period as falls on or after 13 December 2007 and within the period of account.

(8) The income treated as received as a result of sub-paragraph (4) is in addition to any amount brought into account under section 360(2).

(9) Section 361 (lessor under long funding finance lease: exceptional items) does not apply to any profit or loss arising on or after 13 December 2007.

(10) If section 362 (lessor making termination payment) applies in respect of the termination of lease B on or after 13 December 2007, a deduction is allowed (in calculating the profits of the lessor) in respect of any sum calculated by reference to the sum paid to the lessee.

(11) The amount of the deduction is (if it would otherwise exceed that amount) limited to the total amount brought into account in respect of the lease as a result of sub-paragraph (2) or (4).

(12) If lease A becomes a long funding lease as a result of section 70H of CAA 2001 (and does not cease to be such a lease), this paragraph is treated as never having applied in relation to lease B.

(13) Chapter 6A of Part 2 of CAA 2001 (interpretation of provisions about long funding leases) applies for the purposes of this paragraph.

Disapplication of provisions about cases where sections 360 to 369 do not apply U.K.

63 (1) Sections 370 and 371 do not apply if— U.K.

(a) expenditure is incurred before 9 October 2007, or

(b) a company becomes entitled to a deduction in calculating its profits or losses for corporation tax purposes as a result of any plant or machinery forming part of its trading stock before that date.

(2) Section 372 does not apply if the lease referred to as “lease B” in subsection (1)(c) of that section is entered into before 13 December 2007.

(3) Sections 373 to 375 do not apply in relation to arrangements entered into before 9 October 2007.

64 (1) Section 376 (films) does not apply if the inception of the long funding lease is before 13 November 2008. U.K.

(2) Sub-paragraphs (3) to (10) apply in respect of a long funding finance lease of a film—

(a) whose inception is before that date, and

(b) which has not terminated before that date.

(3) Section 360 (lessor under long funding finance lease: rental earnings) does not apply to a period of account within sub-paragraph (4).

(4) A period of account is within this sub-paragraph if—

(a) it begins on or after 13 November 2008, and

(b) no rentals due (wholly or partly) in respect of any part of the period of account were due under the lease before that date.

(5) For the purpose of calculating the profits of the lessor under the lease for a period of account that—

(a) ends on or after 13 November 2008, and

(b) is not within sub-paragraph (4),

the lessor is treated as receiving for that period of account income attributable to the lease of an amount equal to the relevant amount (in addition to any amount brought into account under section 360(2)).

[F1 (6) The relevant amount is an amount equal to so much of the rentals that—

(a) become due on or after 13 November 2008, and

(b) are due wholly or partly in respect of the period of account,

as would not reasonably be regarded as reflected in the rental earnings for that period of account.]

(7) If any rental is paid for a period (“the rental period”) that—

(a) begins before 13 November 2008, or

(b) is not wholly within the period of account,

for the purposes of sub-paragraph (6) the amount of that rental is treated as equal to the amount apportioned (on a time basis) in respect of so much of the rental period as falls on or after 13 November 2008 and within the period of account.

(8) Section 361 (lessor under long funding finance lease: exceptional items) does not apply to any profit or loss arising on or after 13 November 2008.

(9) If section 362 (lessor making termination payment) applies in respect of the termination of the lease on or after 13 November 2008, a deduction is allowed (in calculating the profits of the lessor) in respect of any sum calculated by reference to the termination value paid to the lessee.

(10) The amount of the deduction is (if it would otherwise exceed that amount) limited to the total amount brought into account in respect of the lease as a result of sub-paragraph (3) or sub-paragraphs (5) to (7).

(11) For the purposes of this paragraph—

(a) “film” has the same meaning as in Part 15 of CTA 2009 (see section 1181 of that Act),

(b) the amount of the rental earnings for a period of account is determined in accordance with section 360(3) and (4), and

(c) Chapter 6A of Part 2 of CAA 2001 (interpretation of provisions about long funding leases) applies (see section 70YI(1), in particular, for the meaning of “inception”).

Textual Amendments

F1 Sch. 2 para. 64(6) substituted (retrospective and with effect in accordance with art. 1(2) of the amending S.I.) by Corporation Tax Act 2010 (Amendment) Order 2010 (S.I. 2010/2902), arts. 1(1), 4

Relief for expenses otherwise carried forward: losses incurred in accounting periods ending before 22 April 2009 U.K.

65 (1) In relation to losses incurred in accounting periods ending before 22 April 2009, section 386 (relief for expense under section 383 otherwise giving rise to carried forward loss) applies with the following modifications. U.K.

(2) In subsection (1)—

(a) in paragraph (c) omit “or a later accounting period”,

(b) in paragraph (d) omit “after the accounting period in which the loss is made”,

(c) omit paragraph (e), and

(d) in paragraph (f) for “5 years beginning immediately after” substitute “ 12 months beginning with ”.

(3) For subsection (2) substitute—

“(2) So much of the carried forward loss as derives from the expense under section 383 is instead of being carried forward to be treated for corporation tax purposes as an expense.”

(4) In subsection (4) omit “or an expense within subsection (1)(e)(ii)”.

66 (1) In relation to losses incurred in accounting periods ending before 22 April 2009, section 419 (relief for expense under section 417(5) otherwise giving rise to carried forward loss) applies with the following modifications. U.K.

(2) In subsection (1)—

(a) in paragraph (b) omit “or a later accounting period”,

(b) in paragraph (c) omit “after the accounting period in which the loss is made”,

(c) omit paragraph (d), and

(d) in paragraph (e) for “5 years” substitute “ 12 months ”.

(3) For subsection (2) substitute—

“(2) So much of the carried forward loss as derives from the expense under section 417(5) is instead of being carried forward to be treated for corporation tax purposes as an expense.”

(4) In subsection (4) omit “or an expense within subsection (1)(d)(ii)”.

67 (1) In relation to losses incurred in accounting periods ending before 22 April 2009, section 428 (relief for expense under section 425 otherwise giving rise to carried forward loss) applies with the following modifications. U.K.

(2) In subsection (1)—

(a) in paragraph (c) omit “or a later accounting period”,

(b) in paragraph (d) omit “after the accounting period in which the loss is made”,

(c) omit paragraph (e), and

(d) in paragraph (f) for “5 years beginning immediately after” substitute “ 12 months beginning with ”.

(3) For subsection (2) substitute—

“(2) So much of the carried forward loss as derives from the expense under section 425 is instead of being carried forward to be treated for corporation tax purposes as an expense.”

(4) In subsection (4) omit “or an expense within subsection (1)(e)(ii)”.

Modifications of sales of lessors Chapters in Part 9 where the relevant date is before 22 April 2009 U.K.

68 (1) If the relevant date for the purposes of any provision in Chapter 3, 4 or 5 of Part 9 is before 22 April 2009, that Part applies for the purposes of that provision with the following modifications. U.K.

(2) In section 389 (provision supplementing section 388)—

(a) in subsection (5)(b) for “acquired any plant or machinery in circumstances in which this paragraph applies” substitute “ acquires any plant or machinery directly or indirectly from a person who is connected with the company ”, and

(b) omit subsection (6).

(3) In section 392 (“qualifying change of ownership”) omit subsection (5).

(4) Omit section 396 (no qualifying change of ownership where principal company's interest in consortium company unchanged).

(5) In section 401 (provisions supplementing section 400)—

(a) in subsection (5)(b) for “acquired any plant or machinery in circumstances in which this paragraph applies” substitute “ acquires any plant or machinery directly or indirectly from a person who is connected with the company ”, and

(b) omit subsection (6).

(6) In section 412 (provision supplementing section 411)—

(a) in subsection (5)(b) for “acquired any plant or machinery in circumstances in which this paragraph applies” substitute “ acquires any plant or machinery directly or indirectly from a person who is connected with the partnership ”, and

(b) omit subsection (6).

(7) In section 417 (partner company's income and other companies' matching expense) omit subsection (8).

(8) Omit section 420 (exception: companies carrying on business ceasing to share in its profits).

(9) In section 424 (the amount of expense)—

(a) in subsection (1)(c) for “is greater at the end than at the start of” substitute “ increases at any time on ”,

(b) in subsection (1)(d) after “the increase”, in both places, insert “ at any time ”, and

(c) for subsection (3) substitute—

“(3) The appropriate percentage is the percentage of the other company's percentage share in the profits or loss of the business immediately after the change that is wholly attributable to the change.”