Finance Bill Tracking Service 2010 | Budget 2010


Who is likely to be affected?

1. Companies carrying on a business of leasing plant or machinery.

General description of the measure

2. Legislation will be introduced in Finance Bill 2010 to offer an option to elect for an alternative treatment under Chapters 3 and 4 of Part 9 of the Corporation Tax Act 2010 (formerly Schedule 10 to the Finance Act (FA) 2006, the "Sale of Lessor Companies" legislation) when a lessor company is sold. Draft legislation to achieve this was published at the 2009 Pre-Budget Report (PBR). This draft legislation will now be amended to ensure that the election operates fairly and that the full amount of tax will be collected on the profits of the leasing business following the sale.

Operative date

3. The measure was brought into effect on and after 9 December 2009.

Changes that benefit the taxpayer will have effect on and after 9 December 2009, other changes will have effect on and after 24 March 2010.

Current law and proposed revisions

4. The Sale of Lessor Companies legislation prevents a loss of tax when a lessor company changes hands. It does this by calculating a charge and matching relief designed to recoup the tax timing benefit enjoyed by the selling group and returning it to the buying group.

5. Draft legislation published at PBR offers companies the opportunity to opt for an alternative treatment that recoups the tax timing benefit, by isolating the profits of the business following the sale of the company as an alternative to an immediate charge.

6. Following discussions with the industry, changes will be made to the draft legislation to preserve entitlement to capital allowances on expenditure in some circumstances, and to ensure that the legislation will operate fairly when the lessor company is a controlled foreign company or leases ships into tonnage tax.

7. A further change will address a flaw in the draft that allowed a lessor company owned by a consortium to contrive to end the period during which profits are isolated without the tax timing benefit being recouped in full.

Further advice

8. A revised draft of the legislation and an explanatory note have been published today on the HM Revenue & Customs website.

9. If you have any questions about this change, please contact Jo Brindley on 020 7147 2571 (email: Information about Budget measures is available on the HM Revenue & Customs website at