BLM73001 - Schedule 12 FA 1997: capital allowances: introduction

FA97/Sch12/Para11 provides rules to ensure that lessors cannot avoid capital allowances disposal adjustments by indirect methods of exiting from leasing arrangements within Part I of Schedule 12. Examples of indirect disposal methods include:

• a sale of the shares in the lessor company, and
• the grant by the lessor of a subordinate interest in the leased asset on terms which extract all the value from the lessor's own interest even though they continue to hold it.

Paragraph 12 Schedule 12 does not apply to leases within Part II. You should make a report to CT & VAT (Technical) where a lessor exits from a lease within Part II Schedule 12 by indirect means which avoid ordinary disposal adjustments for capital allowances and which are not caught by the provisions introduced by FA06 ( BLM80000 onwards) or would have been caught had the transaction occurred after those provisions took effect.