Part 9Leasing plant or machinery
Chapter 2Long funding leases of plant or machinery
Lessees under long funding finance leases
377Lessee under long funding finance lease: limit on deductions
1
This section applies if a company is the lessee of any plant or machinery under a long funding finance lease for the whole or part of any period of account.
2
In calculating the company's profits for the period of account for corporation tax purposes, the amount deducted in respect of amounts payable under the lease must not exceed the finance charges.
3
In subsection (2) “the finance charges” means the amounts which, in accordance with generally accepted accounting practice, fall (or would fall) to be shown in the company's accounts as finance chargesF2, or interest expenses, in respect of the lease.
4
If the lease is one which, in accordance with such practice, falls (or would fall), to be treated as a loan, subsections (2) and (3) apply as if the lease were one which, in accordance with such practice, fell to be treated as a finance lease.
377AF1Lessee under long funding finance leases: right-of-use leases
1
This section applies if—
a
for the whole or part of any period of account, a company is the lessee of any plant or machinery under a right-of-use lease that is a long funding finance lease,
b
there is a change in the amounts payable under the lease, and
c
as a result of the change and in accordance with generally accepted accounting practice—
i
a remeasurement of the lease liability is shown in the person’s accounts for the period of account, or
ii
a deduction is shown in those accounts other than as an interest expense under the lease or an amount of depreciation, or an impairment, in respect of the right-of-use asset arising from the lease.
2
In calculating the company’s profits for the period of account, the amount deducted in respect of amounts payable under the lease (after taking account of any limitation as a result of section 377) is to be increased or decreased so as to take account of the remeasurement or deduction mentioned in subsection (1)(c).
3
No adjustment is to be made under subsection (2) if the remeasurement or deduction results in the company being treated by section 70D of CAA 2001 (long funding finance lease: additional expenditure: allowances for lessee) as having incurred further capital expenditure on the provision of the plant or machinery.
378Lessee under long funding finance lease: termination
1
This section applies if—
a
a company is or has been the lessee under a long funding finance lease, and
b
in connection with the termination of the lease, a payment calculated by reference to the termination value falls to be made to the company.
2
The payment is not to be brought into account in determining the profits of the company for any period of account for corporation tax purposes.
3
Subsection (2) does not affect the amount of any disposal value that falls to be brought into account by the company under CAA 2001.
4
For the meaning of “termination value”, see section 381(3)(m).