Part 9U.K.Leasing plant or machinery

Chapter 4U.K.Sales of lessors: leasing business carried on by a company in partnership

Qualifying changes of ownership in relation to partner companyU.K.

425Partner company's income and matching expense in different accounting periodsU.K.

(1)This section applies if on any day (“the relevant day”)—

(a)a company carries on a business of leasing plant or machinery in partnership with other persons (see sections 410 to 414),

(b)the company is within the charge to corporation tax in respect of the business, and

(c)there is a qualifying change of ownership in relation to the company.

(2)On the relevant day—

(a)the company is treated as receiving an amount of income, and

(b)the accounting period of the company ends.

(3)The income—

(a)is treated as a receipt of the company's notional business (see section 417(6)), and

(b)is brought into account in calculating for corporation tax purposes the profits of that business for that accounting period.

(4)On the day following the relevant day—

(a)the company is treated as incurring an expense, and

(b)a new accounting period of the company begins.

(5)The expense—

(a)is treated as an expense of the company's notional business, and

(b)is allowed as a deduction in calculating for corporation tax purposes the profits of that business for that new accounting period.

(6)This section is supplemented by sections 426 to 428.

426Amount of income and expenseU.K.

(1)The amount of the income under section 425 is calculated in accordance with section 429.

(2)The amount of the expense under section 425 is the same as the amount of the income.

427[F1No carry back of loss against the income]U.K.

(1)This section applies if the notional business carried on by the company is a trade carried on wholly or partly in the United Kingdom the profits of which are chargeable to corporation tax under Chapter 2 of Part 3 of CTA 2009 (trading income).

[F2(2)No part of a loss may be deducted under section 37(3)(b) (relief for trade losses against total profits of earlier accounting periods) from so much of the company's total profits as derive from the income.

(3)For the purpose of determining how much of those profits derive from the income, those profits are to be calculated on the basis that the income is the final amount to be added.]

428Relief for expense otherwise giving rise to carried forward lossU.K.

(1)This section applies if—

(a)there is a qualifying change of ownership in relation to a company on any day (“the relevant day”),

(b)on the following day the company is treated under section 425 as incurring an expense of a business and an accounting period of the company (“period 1”) begins,

(c)the company makes a loss in period 1 or a later accounting period,

(d)apart from this section some or all of that loss (“the carried forward loss”) would be carried forward to the next accounting period of the company after the accounting period in which the loss is made (“the subsequent period”),

(e)some or all of the carried forward loss (“the derived loss”) derives from—

(i)the expense under section 425, or

(ii)an expense treated as arising under subsection (2) and allowed as a deduction for the accounting period in which the loss is made, and

(f)the subsequent period starts within the period of 5 years beginning immediately after the relevant day and does not start as a result of section 383 or 425.

(2)Instead of being so carried forward, the derived loss is to be treated for corporation tax purposes as giving rise to an expense of an amount equal to—

(3)The amount of the expense under this section is allowed as a deduction in calculating for corporation tax purposes the profits of the business for the subsequent period.

(4)For the purpose of determining how much of the carried forward loss derives from the expense under section 425 or an expense within subsection (1)(e)(ii), the loss is to be calculated on the basis that that expense is the final amount to be deducted.

429The amount of the incomeU.K.

(1)This section determines the amount of the income under section 425 when a qualifying change of ownership in relation to a company carrying on a business of leasing plant or machinery in partnership with other persons occurs on any day (“the relevant day”).

(2)The amount of the income is found by first—

(a)applying the formula in section 421(3) to give the basic amount (as if the company were “the partner company” mentioned in section 421), and

(b)making any adjustment in accordance with any of sections 404 to 406 to the basic amount.

(3)The amount is then limited to the appropriate percentage of the amount given as a result of subsection (2).

(4)If there is no qualifying change in the company's interest in the business on the relevant day, the appropriate percentage is the percentage share of the company in the profits or loss of the business on the relevant day.

(5)If there is a qualifying change in the company's interest in the business on the relevant day, the appropriate percentage is the percentage share of the company in the profits or loss of the business at the end of the relevant day.