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HMRC internal manual

Business Leasing Manual

From
HM Revenue & Customs
Updated
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Calculating the income amount: Quantifying the PM amount - transactions on or after 13 November 2008.

CTA2010/S400

This guidance applies to transactions where the relevant day falls on or after 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 leased out on a long funding lease or sold subject to hire purchase. In these circumstances the lessor is not entitled to capital allowances. Assets subject to long funding leases etc 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).
  • You must make adjustments for plant or machinery that is leased in under a long funding lease (BLM80527)

The amounts shown in the balance sheet could include

  • 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 would be shown if accounts were drawn up at the start of the day in accordance with generally accepted accounting practice.