There are rules in Section 228D about computing the
lessor’s profits in a sale and leaseback case or a lease and
leaseback case. They apply where the lease is a finance lease for
the lessor.
In a sale and finance leaseback the lessor’s qualifying
expenditure is limited to the restricted disposal value
CA28910. This may be less than the price
that the lessor actually pays. To take account of this you must
calculate the permitted threshold. You should leave the amounts
received under the sale and leaseback that are above the permitted
threshold out of account. For example, if the permitted threshold
is £8,000 and the lessor receives rents of £10,000 you
should ignore £2,000 of the £10,000 because that is the
amount of the rents that is above the permitted threshold.
The
permitted threshold is the gross earnings plus the
allowable proportion of the capital expenditure.
The
gross earnings are the amount shown in the
lessor’s accounts as the gross earnings under the leaseback.
The allowable proportion of the capital repayment is the
expenditure qualifying for capital allowances spread over the
length of the lease. It is given by this formula:
| Restricted disposal value x investment reduction for period |
| Net investment |
Investment reduction for period is the amount
shown in the lessor’s accounts in respect of the reduction of
net investment in the leaseback.
Net investment is the amount shown in the
lessor’s accounts as the lessor’s net investment in the
leaseback at the beginning of its term.
If you have a lease and finance leaseback there is no capital
repayment and so the permitted threshold is the gross earnings.
If the lessee assigned his, her or its interest under the
lease before 17 March 2004 these rules do not apply and the lessor
is taxable on the gross rents received.
