Capital Allowances Act 2001

[F1Finance leases and certain operating leases]U.K.

219 Meaning of “finance lease”U.K.

(1)In this Chapter “finance lease” means any arrangements—

(a)which provide for plant or machinery to be leased or otherwise made available by a person (“the lessor”) to another person (“the lessee”), and

(b)which, under [F2generally accepted accounting practice]—

(i)fall (or would fall) to be treated, in the accounts of the lessor or a person connected with the lessor, as a finance lease or a loan, or

(ii)are comprised in arrangements which fall (or would fall) to be so treated.

F3...

(2)F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)In this section “accounts”, in relation to a company, includes any accounts which—

(a)relate to two or more companies of which that company is one, and

[F5(b)are drawn up in accordance with generally accepted accounting practice.]

220 Allocation of expenditure to a chargeable periodU.K.

[F6(A1)Subsection (1) applies to a company for a chargeable period if—

(a)at the end of the [F7CTA] period of account which is the basis period for the chargeable period, the company is a member of a group, and

(b)the last day of that [F8CTA] period of account is not also the last day of [F9a CTA] period of account of the principal company of the group.]

(1)Subject to subsection (2), if [F10the company] incurs at any time in [F11the chargeable period] capital expenditure on the provision of plant or machinery for leasing under a finance lease [F12or under a qualifying operating lease (see subsection (4))] —

(a)the part of the expenditure which is proportional to the part of that chargeable period falling before that time is not to be taken into account in determining that [F13company's] available qualifying expenditure for that period, but

(b)this does not prevent that part of the expenditure being taken into account in determining that [F13company's] available qualifying expenditure for any subsequent chargeable period.

(2)Subsection (1)(a) does not apply to a chargeable period if a disposal event occurs in that period in respect of the plant or machinery.

[F14(3)The following provisions have effect for the interpretation of this section.

(4)A “qualifying operating lease” is a plant or machinery lease that meets the following conditions—

(a)it is not a finance lease,

(b)it is a funding lease,

(c)its term is longer than 4 years but not longer than [F157] years.

(5)[F16A CTA] period of account is the basis period for a chargeable period if the chargeable period coincides with, or falls within, the [F17CTA] period of account.

(6)[F18A “CTA] period of account” is a period of account as defined in [F19section 1119 of CTA 2010].

(7)The provisions of section 170(3) to (6) of TCGA 1992 apply to determine for the purposes of this section—

(a)whether a company is member of a group, and

(b)which company is the principal company of the group.

(8)But, in applying those provisions for the purposes of this section, a company (“the subsidiary company”) that does not have ordinary share capital is to be treated as being a qualifying 75% subsidiary of another company (“the parent company”) if the parent company—

(a)has control of the subsidiary companyF20..., and

(b)is beneficially entitled to the appropriate proportion of profits and assets.

(9)The parent company is beneficially entitled to the appropriate proportion of profits and assets if (and only if) it—

(a)is beneficially entitled to at least 75% of any profits available for distribution to equity holders of the subsidiary company, and

(b)would be beneficially entitled to at least 75% of any assets of the subsidiary company available for distribution to its equity holders on a winding-up.

(10)The provisions of [F21Chapter 6 of Part 5 of CTA 2010] (equity holders and profits or assets etc) also apply for the purposes of this section.

(11)In this section, the following expressions have the same meaning as in Chapter 6A of Part 2 (interpretation of provisions about long funding leases)—

• “funding lease”,

• “plant or machinery lease”,

• “term”, in relation to a lease.]