Office of Public Sector Information

47 Meaning of “finance lease”

(1) After section 82 of the [1990 c. 1.] Capital Allowances Act 1990 there shall be inserted the following section—

“82A Meaning of “finance lease”

(1) In this Part “finance lease” means any arrangements which—

(a) provide for machinery or plant to be leased or otherwise made available by a person (“the lessor”) to another (“the lessee”); and

(b) are such that, in cases where the lessor and persons connected with the lessor are all UK companies—

(i) the arrangements, or

(ii) arrangements in which they are comprised,

fall, in accordance with normal accountancy practice, to be treated in the accounts of one or more of those companies as a finance lease or as a loan.

(2) In this section—

• “accounts”, in relation to a company, includes any consolidated group accounts relating to two or more companies of which that company is one;

• “consolidated group accounts” means accounts prepared in accordance with—

  (a)

  section 227 of the [1985 c. 6.] Companies Act 1985, or

  (b)

  Article 235 of the [S.I. 1986/1032 (N.I. 6).] Companies (Northern Ireland) Order 1986;

  and

• “UK company” means a company incorporated in a part of the United Kingdom;

and references in this section to persons connected with each other shall be construed in accordance with section 839 of the principal Act.”

(2) This section has effect in relation to any case in relation to which the [1990 c. 1.] Capital Allowances Act 1990 has effect as amended by any of sections 44 to 46 above.

Films

48 Relief for expenditure on production and acquisition

(1) Subject to subsection (4) below, section 42 of the [1992 c. 48.] Finance (No. 2) Act 1992 shall have effect in relation to any expenditure to which this section applies as if the following subsection were substituted for subsections (4) and (5) (which for any period limit relief for film production and acquisition expenditure to a third, or a proportionately reduced fraction, of the relievable expenditure)—

“(4) The amount deducted for a relevant period under subsection (1) above shall not exceed so much of the total expenditure incurred by the claimant on—

(a) the production of the film concerned, or

(b) the acquisition of the master negative or any master tape or master disc of it,

as has not already been deducted by virtue of section 68(3) to (6) of the 1990 Act, section 41 above or this section.”

(2) Subject to subsection (3) below, this section applies to so much of any expenditure falling within paragraphs (a) and (b) of section 42(1) of the Finance (No. 2) Act 1992 as is expenditure in relation to which each of the following conditions is satisfied, that is to say—

(a) the expenditure is expenditure incurred on or after 2nd July 1997 and before 2nd July 2000;

(b) the film concerned is a film with a total production expenditure of £15 million or less; and

(c) the film concerned is a film completed on or after 2nd July 1997.

(3) This section does not apply to so much of any expenditure falling within section 42(3) of the [1992 c. 48.] Finance (No. 2) Act 1992 (acquisition expenditure) as exceeds the amount of the total production expenditure on the film concerned.

(4) Where this section applies to only part of any expenditure to which subsection (2) or (3) of section 42 of the [1992 c. 48.] Finance (No. 2) Act 1992 applies in the case of any film, the amount deducted by virtue of subsection (1) of that section for a relevant period shall not exceed the sum of the following amounts—

(a) the maximum amount of expenditure to which this section applies that is deductible for that period in accordance with subsection (1) above; and

(b) the maximum amount specified in subsection (5) below.

(5) The amount mentioned in subsection (4) above is the maximum amount which would be deductible for the relevant period in accordance with subsection (4) of section 42 of the Finance (No. 2) Act 1992 if—

(a) in paragraphs (a) and (b) of that subsection (but not in paragraph (c)) the references to expenditure incurred by the claimant did not include references to any expenditure to which this section applies; and

(b) the maximum amount mentioned in subsection (4)(a) above had already been deducted by virtue of that section.

(6) In this section “total production expenditure”, in relation to any claim for relief under section 42 of the Finance (No. 2) Act 1992 in the case of any film, means (subject to subsection (7) below) the total of all expenditure on the production of the film, whenever incurred and whether or not incurred by the claimant.

(7) For the purposes of this section where—

(a) any part of the expenditure incurred by any person on the production of a film is incurred under or by virtue of any transaction directly or indirectly between that person and a person connected with him, and

(b) that part of that expenditure might have been expected to have been of a greater amount (“the arm’s length amount”) if the transaction had been between independent persons dealing at arm’s length,

that part of that expenditure shall be deemed, for the purpose of determining the amount of the total production expenditure on the film, to have been expenditure of an amount equal to the arm’s length amount.

(8) Subsection (3) of section 43 of the Finance (No. 2) Act 1992 (time of completion of a film) shall apply for the purposes of this section as it applies for the purposes of sections 41 and 42 of that Act, but with the omission of paragraph (b) (completion on incurring acquisition expenditure) and the word “or” immediately preceding it.

(9) Subsections (3) to (6) of section 159 of the [1990 c. 1.] Capital Allowances Act 1990 (time when expenditure incurred) shall apply for determining when for the purposes of this section any expenditure is incurred as they apply for determining when for the purposes of that Act any capital expenditure is incurred, but as if, in subsection (6) of that section, the words “at a time” were substituted for the words “in a chargeable period”.

(10) Section 839 of the Taxes Act 1988 (meaning of “connected person”) applies for the purposes of this section.

(11) This section applies for the making of a deduction for any relevant period ending on or after 2nd July 1997.