Corporation Tax Act 2010 section 356N

Restriction on hire etc. of relevant assets to be brought into account

Section 356N limits the amount a contractor can deduct for lease payments on relevant assets (such as vessels) when calculating ring fence profits, by imposing a cap known as the "hire cap".

• Lease payments on relevant assets used in offshore services are capped at 7.5% of the asset's total cost (original cost plus subsequent capital expenditure), adjusted for the proportion of days the asset is used in relevant offshore services
• Where more than one company leases the same asset, the hire cap is shared between them on a just and reasonable basis, so the total deduction across all companies does not exceed what a single lessee would receive
• Original cost is based on the first acquisition cost to the associated group, or if the asset has never been owned by an associated person and is leased from a third party, on the arm's length value at the date the lease first began
• Both original cost and subsequent capital expenditure are time-apportioned if the asset is acquired or expenditure is incurred part way through an accounting period, and any element relating to components no longer part of the asset is excluded