BLM80010 - Sale of lessor companies and similar arrangements: introduction and background: scope of sales of lessors legislation

The legislation in CTA 2010, Part 9, Chapter 3, 4 and 5, counters the advantage obtained on the sale of a lessor company when the timing benefits derived from capital allowances have been taken by the selling group and there is a risk that the deferred tax profits will fall out of taxation in the hands of a buying group. For an explanation of the background see BLM80105.

The legislation also deals with partnership arrangements designed to achieve a similar effect with the initial tax losses being used by a profitable partner and the subsequent profits being sheltered by a loss-making partner.

The legislation deals with the sale of a lessor company and similar partnership arrangements. Alternative means of avoiding the recovery of deferred tax are countered by the following provisions:

  • sections 887 to 889 CTA 2010; which restricts the use of losses by certain leasing partnerships
  • section 261A CAA 2001; which deals with partnerships involved in special leasing of plant or machinery, see CA29450
  • sections 228K to 228M CAA 2001; which deals with sales of leased plant or machinery where the income is retained, see CA23290
  • section 267A CAA 2001; which restricts the effect of elections under section 266 CAA 2001 in certain circumstances, see CA29040.