Finance Act 2004

135Rent factoring of leases of plant or machinery

(1)After section 785 of the Taxes Act 1988 insert—

“785ARent factoring of leases of plant or machinery

(1)This section applies in any case where the following conditions are satisfied—

(a)a person (call him “P”) is entitled to receive rentals under a lease of plant or machinery,

(b)the rentals, so far as receivable by him, fall to be brought into account as income for the purpose of calculating his tax liability,

(c)P enters into arrangements for the transfer of his right to receive some or all of the rentals to another person,

(d)apart from this section, some or all of the amount or value of the consideration for the transfer (“the relevant portion of the consideration”) would fall to be brought into account neither—

(i)as income, nor

(ii)as a capital allowances disposal receipt,

for the purpose of calculating P’s tax liability.

(2)In any such case, the relevant portion of the consideration—

(a)shall be treated for tax purposes as income of P,

(b)shall be taxable as rentals receivable by P under the lease (apart from any transfer of his right to receive some or all of the rentals), and

(c)shall be brought into account in a period of account to the extent that it is receivable in that period of account.

(3)Any reference to the transfer from P to another person of a right to receive rentals includes a reference to any arrangement under which rental ceases to form part of the receipts taken into account as income for the purposes of calculating P’s tax liability.

(4)Where P is a partnership, any reference in this section to calculating P’s tax liability includes a reference to calculating the tax liability of the partners, notwithstanding that the partnership has legal personality.

(5)A partnership has legal personality for the purposes of subsection (4) above if it is regarded as a legal person, or as a body corporate, under the law of the country or territory under which it is formed.

(6)In this section—

• “capital allowances disposal receipt” means a disposal receipt within the meaning of Part 2 of the Capital Allowances Act 2001 (see section 60 of that Act);

• “lease” includes an underlease, sublease, tenancy or licence and an agreement for any of those things;

• “tax liability” means liability to income tax or corporation tax.”.

(2)The amendment made by this section has effect where arrangements for the transfer from one person to another of a right to receive rentals are entered into on or after 2nd July 2004.