Budget 2011 – Preventing Avoidance: Sale of Lessor Companies
Changes have been announced to the law that applies when a leasing company is sold in order to combat tax avoidance. The legislation has been drafted to ensure that the full amount of tax will be collected on the profits of the leasing business and are taxed over the lifetime of the lease.
Legislation will be introduced in Finance Bill 2011 to withdraw the option for a company with a leasing business to elect out of the charge (the “sale of lessor company charge”) that may arise on a change of ownership.
Changes will also be made to the sale of lessor company legislation charge to ensure that it continues to have the intended effect.
The changes will ensure that:
- The full value of the company’s interest in leased plant or machinery is taken into account in determining the scope of the sale of lessor company legislation; and
- That the right plant or machinery assets are reflected in the calculation of the income amount.
Where a company has elected out of the charge the changes will mean that whenever there is a disposal event involving plant or machinery assets the full value of the asset will be taken into consideration when calculating the disposal value.
The option to elect is withdrawn for changes of ownership on or after 23 March 2011.