When a lessor company changes hands Schedule 10 triggers both
an income and expense amount. The expense amount can create a
trading loss in the lessor company that is available to set
sideways against other profits of the same accounting period and to
surrender as group relief where appropriate to other group
companies. The benefits of the expense are normally
counter-balanced by the effect of the income amount in the hands of
the selling group and the exposure to tax on the income stream from
the lease in the future. Nevertheless, it is possible that
arrangements may be entered into to trigger the effect of Schedule
10 in order to get the benefit of the expense amount.
Where the main purpose or one of the main purposes of
arrangements entered into is to obtain the benefit of the expense
amount then paragraph 38 restricts the use of any loss derived from
the expense so that it is only available to be set off against
'relevant leasing income', see
BLM82010. The loss cannot be surrendered
as group relief nor set against other profits in the same
accounting period. The amount of the loss which is derived from the
expense is calculated by treating the expense amount as the last
amount to be deducted in computing the loss.
The provision is widely drawn to encompass 'any agreement,
understanding, scheme, transaction or series of transactions'. The
arrangements do not have to be legally enforceable and the company
that obtains the benefit of the expense amount does not have to be
a party to the arrangement. This recognises that the arrangement is
likely to be contrived so as to ensure, for example, that the
expense amount is tax effective while the income amount falls out
of charge.
