Schedule 23 - Finance leasebacks: transitional provision

Finance Bill – in a Public Bill Committee at 3:45 pm on 25th May 2004.

Alert me about debates like this

Amendments made: No. 170, in

schedule 23, page 391, line 5, after 'subject to' insert

'paragraphs 2 to 8 of'.

No. 171, in

schedule 23, page 391, line 6, at end insert—

'( ) Paragraph 8A of this Schedule makes provision in relation to the taxation of chargeable gains where an existing leaseback terminates.'.

No. 172, in

schedule 23, page 391, leave out line 28 and insert—

'Basic Amount x (Notional Rental Deduction Deductible Excess)

Notional Rental Deduction'.

No. 173, in

schedule 23, page 392, line 34, at end insert—

'(1) Section 228C applies subject to this paragraph where—

(a) the existing leaseback terminates otherwise than by expiry of its term, and

(b) the amount calculated in accordance with section 228C(3) exceeds the relevant cap.

(2) In determining the amount by which income or profits are to be increased under section 228C(2), the amount calculated in accordance with section 228C(3) shall be disregarded to the extent that it exceeds the relevant cap.

(3) The relevant cap is—

(Original Consideration Relevant Rentals) x Net Consideration

Original Consideration

where—

''Original Consideration'' has the same meaning as in section 228B;

''Relevant Rentals'' means—

(a) the pre-commencement rentals, minus

(b) the total of—

(i) finance charges shown in the accounts for periods that end before 17 March 2004, and

(ii) the appropriate proportion of finance charges shown in the accounts for the transitional period of account;

''Net Consideration'' has the same meaning as in section 228C.'.

No. 174, in

schedule 23, page 393, leave out lines 15 to 17 and insert—

'(4) For the purposes of sub-paragraphs (2) and (3) there is a taxable disposal if, during the period of six years beginning with the date of termination of the leaseback—

(a) the whole of the plant or machinery is the subject of a disposal event (within the meaning of Part 2), or

(b) part of the plant or machinery is the subject of such a disposal event.'.

No. 175, in

schedule 23, page 393, line 22, leave out from 'shall be' to ' ''Disposal' in line 26 and insert '—

(i) in a case falling within sub-paragraph (2)(b), the relevant fraction of the amount calculated in accordance with section 228C(3), or

(ii) in a case falling within sub-paragraph (3)(b), the relevant fraction of the section 226 restriction.

(6) In sub-paragraph (5)(b)(i) and (ii) ''relevant fraction'' means—

(Disposal Proceeds Restricted Qualifying Expenditure)

(Lessee Acquisition Expenditure Restricted Qualifying Expenditure)

where'.

No. 176, in

schedule 23, page 393, line 27, leave out from second 'the' to '; but' in line 29 and insert

'taxable disposal or, if higher, the market value of the plant or machinery at the time of the taxable disposal'.

No. 177, in

schedule 23, page 393, line 35, at end insert—

'(6A) Where there is a taxable disposal by virtue of sub-paragraph (4)(b), this paragraph applies in relation to that disposal with the following modifications—

(a) references in sub-paragraphs (5)(a) and (6) to the plant or machinery shall be taken to be references to the part of the plant or machinery comprised in the taxable disposal;

(b) the amount by which profits or income are to be increased by virtue of sub-paragraph (5)(b) shall be the partial disposal fraction of the amount given by sub-paragraph (5)(b)(i) or (ii);

(c) the partial disposal fraction of the restricted qualifying expenditure and of the lessee acquisition expenditure shall be used for the purposes of sub-paragraph (6) instead of those amounts of expenditure.

(6B) For the purposes of sub-paragraph (6A) the partial disposal fraction is—

Apportioned Lessee Acquisition Expenditure

Lessee Acquisition Expenditure

where ''Apportioned Lessee Acquisition Expenditure'' means so much of the lessee acquisition expenditure as was attributable to the acquisition of the part of the plant or machinery comprised in the taxable disposal.'.

No. 178, in

schedule 23, page 394, line 12, leave out 'rental deduction' and insert 'taxed rental'.

No. 179, in

schedule 23, page 394, line 14, leave out 'rental deduction' and insert 'taxed rental'.

No. 180, in

schedule 23, page 394, line 32, leave out 'deduction' and insert 'rental'.

No. 181, in

schedule 23, page 395, line 24, at end insert—

'Chargeable gains

8A (1) Sub-paragraph (2) applies where—

(a) an existing leaseback is the leaseback in a lease and finance leaseback,

(b) the leaseback terminates,

(c) on or after the termination there is a disposal, by the user, of the whole or part of the plant and machinery subject to the leaseback, and

(d) a chargeable gain that accrues on that disposal (''the relevant chargeable gain'') falls to be taken into account for the purposes of a chargeable gains computation.

(2) The following fraction of the relevant chargeable gain shall instead be taken into account for the purposes of the chargeable gains computation—

(Net Rentals Termination Charge)

Lease Premium

where—

''Net Rentals'' means—

(a) the total of the amounts deducted in calculating the user's income or profits, for the purpose of income tax or

corporation tax, in respect of amounts payable under the leaseback, minus

(b) the total of the amounts shown in the user's accounts in respect of finance charges relating to the leaseback;

''Termination Charge'' means the amount by which the user's income or profits are to be increased by virtue of section 228C(2) of the CAA 2001 because of the termination;

''Lease Premium'' means the consideration relating to the leaseback referred to in section 228F(6)(b) of the CAA 2001.

(3) References in this paragraph to termination of the leaseback shall be construed in accordance with section 228H(1) of the CAA 2001.

(4) In this paragraph—

''CAA 2001'' means the Capital Allowances Act 2001;

''chargeable gains computation'' means the computation, for the purposes of the TCGA 1992, of the total amount of chargeable gains that accrue to the user in any chargeable period that ends on or after 17 March 2004;

''disposal'' shall be construed in accordance with the TCGA 1992;

''lease and finance leaseback'' has the same meaning as in section 228F of the CAA 2001;

''TCGA 1992'' means the Taxation of Chargeable Gains Act 1992;

''user'' means the person who is the lessee under the leaseback.'.—[Ruth Kelly.]

Schedule 23, as amended, agreed to.