Pre-Budget Report – Sale of Lessor Companies – alternative treatment
Lessor companies that provide leased plant and machinery will, in future, be able to elect for an alternative treatment when sold. This will remove the need to calculate an immediate charge to tax but ensure that tax is instead collected on the profits of the leasing business following the sale. This new option will be available from 9 December 2009.
HMRC are introducing new legislation in light of the current financial climate which has affected a number of transactions and has meant that lessor companies have been unable to utilise the full benefit of matching relief when calculating an immediate charge under Schedule 10 of Finance Act 2006.
The new legislation will allow lessor companies to elect for an alternative treatment which recoups the tax timing benefit. This will be done by isolating the profits of the business following the sale of the company rather than through the imposition of an immediate charge.