Section FA 11B — Income Tax Act 2007: Adjustments for certain operating leases

FA 11B Adjustments for certain operating leases When this section applies (1) This section applies when a lease is an operating lease that— (a) is entered into on or after 20 May 1999 and before 20 June 2007; and (b) is an arrangement, or part of an arrangement that, on 20 June 2007, meets the requirements of paragraph (c)(i) to (iii) of the definition of finance lease ; and (c) has a term of the lease ending after the end of the income year in which 20 June 2007 falls (the adjustment year ); and (d) does not meet the requirements of section FA 11(1) before the end of the income year after the adjustment year. Adjustment required (2) The lessor must adjust their income and expenditure calculated for the lease asset by including an adjustment in a return of income for the tax year corresponding to the income year after the adjustment year. Amount of adjustment (3) The amount of the adjustment is calculated using the formula— total depreciation losses 6. Definition of item in formula (4) In the formula, total depreciation losses is the total amount of depreciation loss for the lease asset for which the lessor is allowed a deduction in the period that begins with the start of the term of the lease and ends with the end of the adjustment year. Income (5) The amount of the adjustment is income of the lessor under the lease under section CH 6 (Adjustments for certain finance and operating leases) in the income year after the adjustment year. Adjusted tax value (6) The adjusted tax value of the lease asset at the beginning of the income year after the adjustment year is the total of the amount of the adjustment and the adjusted tax value that the lease asset would have in the absence of this section. Depreciation loss (7) For an income year beginning after 20 June 2007 in which the lease is an operating lease, the amount of depreciation loss allowed for the lease asset other than under section EE 48 (Effect of disposal or event) is five-sixths of the amount of depreciation loss that would be allowed for the lease asset in the absence of this subsection. Defined in this Act: adjusted tax value , amount , arrangement , deduction , depreciation loss , finance lease , income , income year , lease , lessee , lessor , operating lease , return of income , tax year , term of the lease Compare: 2004 No 35 s FC 8I Section FA 11B: inserted, on 1 April 2008, by section 406 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).