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HMRC internal manual

Business Leasing Manual

Plant and machinery leasing - Anti-avoidance: Non-long funding lease rules: Finance leaseback - Transitional provisions - Introduction

Accounting periods ending on or after 17 March 2004

The legislation in sections S228A to 228J CAA 2001 applies for chargeable periods ending on or after 17 March 2004.

There are transitional provisions in Schedule 23 FA 2004 which apply to sections 228B to 228E CAA 2001, for both existing leasebacks and transitional periods of account. These transitional provisions preserve the lessee’s deductions for, and the lessor’s income from, pre-commencement rentals.

Paragraph 10 of Schedule 23 FA 2004 provides special rules for the calculation of chargeable gains where existing leasebacks in lease and finance leaseback arrangements are terminated.

These definitions within Schedule 23 apply to the transitional provisions:

* ‘Pre-commencement rentals’ are amounts payable before 17 March 2004, amounts payable after 17 March 2004 in respect of rental periods ending before that date, and an apportioned amount of rentals payable after 17 March 2004 in respect of a transitional period of account. 
* An ‘existing leaseback’ is a leaseback the term of which began before 17 March 2004. 
* A ‘transitional period of account’ is a period of account that includes 17 March 2004. 
* The ‘appropriate fraction’ for a period is the number of days in the period before 17 March 2004 divided by the number of days in the whole period.