Section 53 | Leasing contracts and company reconstructions

(1)This section applies if—

(a)under a contract a company (“the leasing company”) incurs capital expenditure on the provision of plant or machinery,

(b)the leasing company lets that plant or machinery to another person under another contract (“the leasing contract”),

(c)a first-year allowance (within the meaning of Part 2 of CAA 2001) in relation to the capital expenditure is made to the leasing company for an accounting period (“the allowance period”),

(d)arrangements within subsection (3) are in place in the allowance period, and

(e)apart from this section, relief under section 37 , 45, 45A or 45B would be available to the leasing company in relation to losses made on the leasing contract.^F1

(2)In the allowance period and any subsequent accounting period, no relief is available to the leasing company as mentioned in subsection (1)(e) except against profits (if any) arising under the leasing contract.

(3)Arrangements are within this subsection if, as a result of them, a successor company will be able to carry on, at some time during or after the allowance period, any part of the leasing company's trade which includes the performance of all or any of the obligations which (apart from the arrangements) would be the leasing company's obligations under the leasing contract.

(4)A company (“company S”) is a successor company if—

(a)Chapter 1 of Part 22 applies in relation to the leasing company and company S as, respectively, the predecessor and the successor within the meaning of that Chapter, or

(b)the leasing company and company S are connected with each other.

(5)“Arrangements” means arrangements of any kind (whether or not in writing).

(6)For the purposes of this section, calculate losses made on the leasing contract and profits arising under that contract as if—

(a)the performance of that contract were a trade carried on by the leasing company separately from any other trade carried on by it, and

(b)the leasing company started carrying on that separate trade at the commencement of the letting under that contract.

(7)In determining if relief is available to the leasing company as mentioned in subsection (1)(e), any losses made on the leasing contract are treated as made in a trade carried on by the leasing company separately from any other trade carried on by it.