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HMRC internal manual

Business Leasing Manual

Calculating the income amount: Quantifying the PM amount - transactions before 13 November 2008

FA06/SCH10/PARA17

This guidance applies to transactions where the relevant day falls before 13 November 2008.

PM means:

  • the amounts shown in the balance sheet of the lessor company in respect of all plant or machinery at the start of the relevant day; and
  • the amounts shown in the balance sheets of each associated company in respect of all plant or machinery transferred to the lessor company at the start of the relevant day.

But:

  • does not include plant or machinery subject to a long funding lease where the lessor is therefore not entitled to capital allowances.

Assets subject to long funding leases will not be reflected in the capital allowances figure and to include them in the formula would distort the result.

In addition:

  • you must make adjustments to ensure that the PM amount includes plant or machinery that is a fixture in land but which may not be shown on the balance sheet as plant or machinery (BLM80520); and
  • you must make adjustments for the value of plant or machinery transferred to the lessor company from connected parties at any time (BLM80525).

The PM amount includes

  • amounts shown as plant or machinery in fixed assets, and
  • amounts which reflect the value of a lease of plant or machinery - the net investment in the lease.

In most cases, accounts will not be drawn up on the relevant day. The values to use are the balance sheet amounts that should be shown if accounts were drawn up at the start of the day in accordance with generally accepted accounting practice.