SolvedBLM80140 | Sale of lessor companies and similar arrangements: business of leasing plant or machinery: adjustments to the balance sheet figures: plant or machinery assets included in a lease of land
From HM Revenue & Customs · Business Leasing Manual
Section 389 CTA2010
If plant or machinery assets are fixtures and their value is reflected in the value of land on the balance sheet the company must make a just and reasonable apportionment of the land value to show the value of the plant or machinery. Similarly, where the land is subject to a finance lease the company must make a just and reasonable apportionment of the net investment in the lease of land figure. These calculations isolate the value of the plant or machinery so that it may be included in the accounting value of plant or machinery.
Example: Lease of background plant or machinery
The balance sheet of Propertyco Ltd shows the following fixed assets:
| Fixed Assets | £ |
|---|---|
| Investment property | 6,000,000 |
| Office equipment | 10,000 |
| Cars | 50,000 |
The investment property is a retail supermarket leased out under an operating lease, all other assets are not subject to leases.
The office equipment and the cars are plant or machinery but the value of the investment property is apportioned to extract the value of fixtures that are plant or machinery:
| Fixed assets | £ |
|---|---|
| Air conditioning and heating systems | 500,000 |
| Refrigeration plant | 200,000 |
| Bakery equipment | 100,000 |
| Total | 800,000 |
Total accounting value of plant or machinery for the purposes of condition A is therefore 860,000.
The air conditioning and heating systems are background plant or machinery (BLM21300). They have a value of £500,000 and this amount is not treated as qualifying leased plant or machinery.
Total leased out plant or machinery is therefore £300,000.
This is less than 50% of the accounting value of the plant or machinery owned and the company does not meet condition A.