Part 9Leasing plant or machinery

Chapter 5Sales of lessors: anti-avoidance provisions

435Disregard of increases and decreases in balance sheet amounts

1

This section applies if—

a

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

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.

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, or

c

the amount of any expense which any company is treated as incurring under any such provision would be increased.

3

For the purpose of determining the question as to the application of Chapter 3 or 4, the reduction or increase in the amount which falls (or would fall) to be shown in the balance sheet in respect of plant or machinery must be ignored.

4

In this section—

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

    1. a

      whether or not legally enforceable, and

    2. 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.