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Amendment of section 80A (taxation of certain short-term leases of plant and machinery) of Principal Act.
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52.— (1) Section 80A of the Principal Act is amended—
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(a) by inserting the following definition after the definition of “fair value”:
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“ ‘group limit’ means an amount determined by the formula—
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A + (B × (C — D)/C)
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where—
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A is the threshold amount,
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B is an aggregate amount computed in accordance with generally accepted accounting practice charged to the profit and loss account for all companies who are members of the group for the period of account which is the same as the specified period in respect of the amortisation or impairment of the cost of specified assets,
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C is the cost of specified assets owned by all companies who are members of the group at the end of the specified period, and
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D is the lesser of the cost of specified assets owned by all companies who are members of the group at the end of the threshold period or C;”,
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(b) by inserting the following definition after the definition of “predictable useful life”:
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“ ‘profit and loss account’, in relation to an accounting period of a company, has the meaning assigned to it by generally accepted accounting practice and includes an income and expenditure account where a company prepares accounts in accordance with international accounting standards;”,
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(c) in the definition of “relevant short-term lease” by substituting “8 years;” for “8 years.”,
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(d) by inserting the following definitions after the definition of “relevant short-term lease”:
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“ ‘specified assets’ means relevant short-term assets owned by a company which—
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(a) in respect of those assets, is entitled to any allowance under Part 9, section 670, Part 29 or any other provision of the Tax Acts relating to the making of allowances in accordance with Part 9, and
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(b) leases those assets, other than by means of a relevant short-term lease, for a period which does not exceed 8 years;
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‘specified period’ means—
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(a) in the case of companies which are members of a group the respective ends of the accounting periods of which coincide, the period of 12 months throughout which one or more members of the group carries on a trade of leasing specified assets and ending at the end of the first accounting period which commences on or after 1 January 2010, and
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(b) in the case of companies which are members of a group the respective ends of the accounting periods of which do not coincide, the period specified in a notice in writing made jointly by companies which are members of the group and given to the inspector on or before the specified return date for the chargeable period (within the meaning of section 950) which is the same as the period so specified, being a period of 12 months throughout which one or more members of the group carries on a trade of leasing specified assets and ending at the end of the first accounting period of a company which is a member of the group which accounting period commences on or after 1 January 2010,
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and each subsequent period of 12 months commencing immediately after the end of the relevant preceding specified period;
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‘threshold amount’ in relation to a group of companies means the aggregate of allowances granted to all companies which are members of that group in respect of expenditure incurred on specified assets under Part 9, section 670, Part 29 or any other provision of the Tax Acts relating to the making of allowances in accordance with Part 9 for the threshold period;
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‘ threshold period ’ in relation to a group of companies means an accounting period of one year ending on a date immediately preceding the date on which the first specified period commencing on or after 1 January 2010 begins.”,
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(e) in subsection (2) by substituting “under this subsection—” for “under this section—”, and
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(f) by inserting the following after subsection (2):
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“(2A) Where a company makes a claim under this subsection in respect of specified assets—
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(a) subject to paragraph (c), subsection (2) of section 284 shall be construed as if a reference in that section to an amount of wear and tear allowance to be made was a reference to an amount, computed in accordance with generally accepted accounting practice, charged to the profit and loss account of the company for the period of account which is the same as the specified period in respect of the amortisation or impairment of the cost of specified assets,
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(b) the income from specified assets will be treated for the purposes of section 403 as if it were not income from a trade of leasing,
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(c) the amount of the wear and tear allowance to be made to the company in accordance with paragraph (a) for any accounting period shall not exceed an amount to be determined by the formula—
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E × F/G
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where—
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E is the group limit,
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F is the cost of specified assets owned by the company at the end of the accounting period, and
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G is the cost of specified assets owned by all companies who are members of the group, at the end of the accounting period,
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(d) where the amount of wear and tear allowance, computed in accordance with generally accepted accounting practice, charged to the profit and loss account of the company for the period of account which is the same as the specified period in respect of the amortisation or impairment of the cost of specified assets, exceeds the amount of wear and tear to be made in accordance with paragraph (c), the amount of the excess shall be added to the amount of wear and tear due, in accordance with paragraph (a), for the following specified period, and deemed to be part of the amount so computed,
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(e) the amount of the wear and tear allowance to be made to the company in accordance with paragraph (a), attributable to each specified asset for any accounting period shall be such portion of the amount of the allowance to be made in accordance with paragraph (a) as bears to that amount the same proportion as the cost of the asset bears to the cost of all specified assets which belong to the company and are in use for the purposes of the trade at the end of that accounting period,
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(f) where in respect of a company, which is a member of a group of companies no accounting period coincides with the threshold period, there shall be made in relation to allowances granted to that company, in the calculation of the threshold amount, such apportionment as is just and reasonable, and
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(g) where, in respect of a group of companies, no specified period commences before 1 January 2011, the threshold amount shall be nil.
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(2B) For the purposes of a claim under subsection (2A)—
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(a) 2 companies shall be deemed to be members of a group if one company is a 51 per cent subsidiary of the other company or both companies are 51 per cent subsidiaries of a third company: but in determining whether one company is a 51 per cent subsidiary of another company, the other company shall be treated as not being the owner of—
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(i) any share capital which it owns directly in a company if a profit on a sale of the shares would be treated as a trading receipt of its trade, or
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(ii) any share capital which it owns indirectly and which is owned directly by a company for which a profit on a sale of the shares would be a trading receipt;
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(b) sections 412 to 418 shall apply for the purposes of this subsection as they would apply for the purposes of Chapter 5 of Part 12 if—
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(i) ‘51 per cent subsidiary’ were substituted for ‘75 per cent subsidiary’ in each place where it occurs in that Chapter, and
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(ii) paragraph (c) of section 411(1) were deleted;
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(c) a company and all its 51 per cent subsidiaries shall form a group and, where that company is a member of a group as being itself a 51 per cent subsidiary, that group shall comprise all its 51 per cent subsidiaries and the first-mentioned group shall be deemed not to be a group: but a company which is not a member of a group shall be treated as if it were a member of a group which consists of that company;
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(d) in determining whether a company is a member of a group of companies (in this paragraph referred to as the ‘threshold group’) for the purposes of determining the threshold amount in relation to a specified period of a group of companies (in this paragraph referred to as the ‘relevant group’), the threshold group shall be treated as the same group as the relevant group notwithstanding that one or more of the companies in the threshold group is not in the relevant group, or vice versa, where any person or group of persons which controlled the threshold group is the same as, or has a reasonable commonality of identity with, the person or group of persons which controls the relevant group.”.
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(2) This section applies as respects accounting periods commencing on or after 1 January 2010.
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