CA23782 - PMA: Long life assets: Aircraft not within agreement
You should deal with any claim for capital allowances on a jet
aircraft not brought into an arrangement
CA23781 in the light of its particular
facts, starting with the presumption that the aircraft will
normally be a long-life asset. This is how you should deal with
particular types of aircraft.
Regional jets. The British Air Transport
Association (BATA) agreement covers jet airliners with a seating
capacity of 60 seats or more. There is a new class of jet aircraft
entering service with airlines that will have fewer than 60 seats.
These are commonly known as regional jets. Some later variants of
these new types of aircraft will automatically fall within the BATA
agreement as their seating configuration will exceed 60 seats.
Following further discussions with the airlines, the Revenue will
accept, in relation to irrevocable contracts entered into on or
before 31 December 2008, that regional jets with less than 60 seats
operated by commercial airlines are not long-life assets.
Turbo-prop airliners with a maximum take-off weight over
5700kgs operated by commercial airlines. These aircraft
have tended to survive only in a limited range of uses and are in
part being replaced by the regional jets referred to above.
Although in the past, some of these airliners have lasted more than
25 years, the change in the market and the move towards regional
jets does suggest that those acquired since the start of the
long-life asset rules are unlikely to have a life expectancy of
more than 25 years in commercial use. You should accept that they
are not long life assets and qualify in full for the 25% rate of
plant and machinery allowances.
Executive jet aircraft. In normal single corporate
ownership these aircraft will, in general, last well over 25 years,
although this is very dependent on the particular pattern of use.
There is a new development, particularly noticeable in the United
States but beginning to be seen in the UK, of fractional or shared
ownership of corporate jets, as well as a growing number of
companies operating corporate jet services as a business for a
variety of users. Accept that where annual usage is above 600
flying hours the aircraft can be treated in the same way as those
within the BATA agreement, namely 50:50 assets. These assets are
capable of refurbishment and often are upgraded to prolong their
lives over the 25-year period. Below 600 flying hours, the life
cycle of the aircraft is likely to exceed 25 years without such
major refurbishment and you should approach claims on the basis
that these are long-life assets attracting allowances only at the
long-life asset rate of 6%.
Fixed wing turboprops/piston driven aircraft in excess of
2730 kilograms maximum take-off weight. In general these smaller aircraft are
not subject to major refurbishment of components that might be
regarded as separate assets under FRS15. This class embraces many
types of aircraft in a wide variety of uses. Accept that where they
are flown for more than 600 hours per annum they will not be
long-life assets. This will generally mean that aircraft used
commercially, for example by flying schools, will attract the 25%
rate of writing-down allowance. For aircraft that are used at an
annual rate of below 600 hours per annum, the evidence is that they
will last more than 25 years and you should approach claims on the
basis that they are long life assets qualifying for the 6% rate of
writing-down allowance.
Fixed wing aircraft below 2730 kilograms maximum take-off
weight. These small aircraft are sometimes used in
business but more often in private use. Patterns of operation vary
enormously but there is little evidence to suggest that the life
expectancy is easily predictable at the outset of the aircraft's
life. Accept that they are not long-life assets and are thus
entitled to the 25% rate of writing-down allowance.
Helicopters. Accept that helicopters:
- in use for in excess of 1,000 hours per annum, or
- in use for more than 600 hours with 2,000 or more landings per annum, or
- which have a maximum take-off weight of less than 650kgs,
will not last for 25 years and will attract the 25% rate of
writing-down allowance. For those in less intensive use below that
figure you should approach any claims on the basis that the assets
will only attract the 6% long-life asset rate.
These guidelines run for the same period as the agreement
with BATA, that is until 31 December 2008, and will then be
reviewed.
