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HMRC internal manual

Business Leasing Manual

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HM Revenue & Customs
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Sale of lessor companies and similar arrangements: business of leasing plant or machinery: condition A - business of leasing plant or machinery - example - transactions before 13 November 2008

Thus guidance covers transactions where the relevant day is before 13 November 2008. See BLM80158 where the relevant day is on or after 13 November 2008 and before 23 March 2011 and BLM80155 where the relevant day is on or after 23 March 2011.

Trainco Ltd has the following assets on its balance sheet:

Fixed Assets £
   
Freehold property 1,000,000
Net investment in train leases 5,000,000
Office furniture 15,000
Computer equipment 100,000
Vehicles 80,000
Artworks 500,000
Total 6,695,000

Calculate the accounting value of plant or machinery

The freehold property is used as office premises by the company. The value will need to be apportioned to determine what element is attributable to plant or machinery. The building contains lifts and air conditioning systems; these items are plant or machinery. The value of this equipment is agreed to be £300,000.

Trains are plant or machinery; they qualify for plant or machinery allowances. The train leases are accounted for as finance leases and the value of the lease rather than the train itself is shown on the balance sheet. The net investment in the lease figure is included in the calculation of the net book value of plant or machinery. The total attributable to net investment in leases is £5,000,000.

The office furniture used in the building qualifies for plant or machinery allowances and this value is included.

The computer equipment qualifies for plant or machinery allowances and this value is included.

The vehicles qualify for plant or machinery allowances and this value is included.

The artworks do not qualify for plant or machinery allowance (unless it is part of the business to provide ambience - here it is not). This value is not included.

The total net book value attributable to plant or machinery is therefore £5,495,000.

Identifying the qualifying leased plant or machinery

You now need to determine how much of this plant or machinery is qualifying leased plant or machinery.

All assets except for the artworks and the land value qualify for plant or machinery allowances.

The fixtures in the building are not subject to a plant or machinery lease.

The trains are subject to a lease.

The office furniture is not subject to a plant or machinery lease.

The computer equipment includes a number of items which are leased along with the trains. The value of the leased assets is £60,000.

The vehicles are not subject to a plant or machinery lease. They are used by the employees of the company.

Total value of assets subject to plant or machinery leases: £5,060,000

More than 50% of the assets are subject to a qualifying lease and so the company is carrying on a business of leasing plant or machinery.