BLM80140 - Sale of lessor companies and similar arrangements: business of leasing plant or machinery: adjustments to the balance sheet figures: plant or machinery assets included in a lease of land

Section 389 CTA2010

If plant or machinery assets are fixtures and their value is reflected in the value of land on the balance sheet the company must make a just and reasonable apportionment of the land value to show the value of the plant or machinery. Similarly, where the land is subject to a finance lease the company must make a just and reasonable apportionment of the net investment in the lease of land figure. These calculations isolate the value of the plant or machinery so that it may be included in the accounting value of plant or machinery.

Example: Lease of background plant or machinery

The balance sheet of Propertyco Ltd shows the following fixed assets:

Fixed Assets £
Investment property 6,000,000
Office equipment 10,000
Cars 50,000

The investment property is a retail supermarket leased out under an operating lease, all other assets are not subject to leases.

The office equipment and the cars are plant or machinery but the value of the investment property is apportioned to extract the value of fixtures that are plant or machinery:

Fixed assets £
Air conditioning and heating systems 500,000
Refrigeration plant 200,000
Bakery equipment 100,000
Total 800,000

Total accounting value of plant or machinery for the purposes of condition A is therefore 860,000.

The air conditioning and heating systems are background plant or machinery (BLM21300). They have a value of £500,000 and this amount is not treated as qualifying leased plant or machinery.

Total leased out plant or machinery is therefore £300,000.

This is less than 50% of the accounting value of the plant or machinery owned and the company does not meet condition A.