Section 366 — Corporation Tax Act 2010: Long funding operating lease: lessor's additional expenditure

Long funding operating lease: lessor's additional expenditure 366 1 This section applies if in any period of account—

a a company is the lessor of any plant or machinery under a long funding operating lease, b the company incurs capital expenditure in relation to the plant or machinery (the “additional expenditure”),

and c the additional expenditure is not reflected in the market value of the plant or machinery at the commencement time (see subsection (7)).

2 An additional deduction is allowed in calculating the profits of the company for each period of account—

a which ends after the incurring of the additional expenditure, and b in which the company is the lessor of the plant or machinery under the lease.

3 The amount of the deduction is so much of the expected reduction in value of the additional expenditure (“the expected reduction”) as is attributable to the period of account.

4 The expected reduction is the amount of the additional expenditure, less the remaining residual value of the plant or machinery resulting from that expenditure.

5 For how to determine that remaining residual value, see—

a section 367 (determination of remaining residual value resulting from lessor's first additional expenditure),

and b section 368 (determination of remaining residual value resulting from lessor's further additional expenditure).

6 The amount of the expected reduction attributable to the period of account is found by apportioning that reduction on a time basis according to the proportion of the term of the lease that falls in the period of account.

7 In this section “ the commencement time ” means—

a except where section 365 applies, the commencement of the term of the lease, and b if that section applies, the time when the plant or machinery is first brought into use by the lessor for the purposes of the qualifying activity.