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HMRC internal manual

Business Leasing Manual

Sale of lessor companies and similar arrangements: business of leasing plant or machinery: the accounting value of plant or machinery - transactions on or after 13 November 2008 and before 23 March 2011

This guidance covers transactions where the relevant day is on or after 13 November 2008 but before 23 March 2011. Where the relevant day is before 13 November see BLM80122. Where the relevant day is on or after 23 March 2011, see BLM80120.

The accounting value of the plant or machinery owned by the company is

  • the net book value of all plant or machinery assets; plus
  • the amount of the net investment in finance leases of all plant or machinery that is shown on the balance sheet.

Plant or machinery has the same meaning as it does in Part 2 of CAA 2001. So an asset is plant or machinery if expenditure on its provision would qualify for plant or machinery allowances.

Finance lease means a lease which under generally accepted accounting practice falls or would fall to be treated as a finance lease or loan in the accounts.

Both figures are calculated at the start of the relevant day. That is as if a balance sheet had been drawn up at the start of the day in accordance with generally accepted accounting practice.

The figure is adjusted if

  • plant or machinery assets are acquired during the relevant day from associated companies. See BLM80145.
  • plant or machinery assets are included in a lease of land, see BLM80140 
  • plant or machinery assets were acquired from connected parties at any time, see BLM80145.

Where, at the start of the day, the lessor company is:

  • the lessee of the plant or machinery under a long funding finance lease; or
  • the lessee of the plant or machinery under a long funding operating lease; or
  • is treated as the owner of the plant or machinery under a hire purchase or similar contract

any amount included in the total figure is removed and the market value of the plant or machinery is instead substituted. The market value is determined as if the asset were unencumbered by a lease.