Corporation Tax Act 2010 section 368

Determination of remaining residual value resulting from lessor's further additional expenditure

Section 368 explains how to calculate the remaining residual value of leased plant or machinery when a lessor incurs further additional expenditure, having already incurred previous additional expenditure on the same asset.

• When a lessor incurs second or subsequent additional expenditure on leased plant or machinery, this section determines the remaining residual value (RRV) for the purposes of the section 366(4) deduction calculation.
• The calculation compares the expected residual value at the time the further expenditure is incurred (FARV) against the sum of the original expected residual value at lease commencement plus any amounts previously deducted as remaining residual value from earlier additional expenditure.
• If FARV exceeds that combined total, the RRV equals the portion of the excess attributable to the further additional expenditure; otherwise, the RRV is nil.
• The definition of residual value is found in section 381(4), and the original expected residual value is adjusted where section 365 applies to plant or machinery that was originally non-qualifying.