Corporation Tax Act 2010 section 399

The amount of the income: the basic amount

Section 399 sets out the formula for calculating the basic amount of income that arises under section 383 when a qualifying change of ownership occurs in relation to a company carrying on a plant or machinery leasing business.

• The basic amount of income is calculated using the formula PM minus TWDV, where PM (defined in sections 400 to 402) broadly represents the value of the plant or machinery, and TWDV (defined in section 403) represents the tax written-down value.
• Once the basic amount has been calculated, it may need to be adjusted in accordance with sections 404 to 406 to arrive at the final income figure for section 383 purposes.
• The calculation is performed as at the day on which the qualifying change of ownership occurs (referred to as "the relevant day"), and the company undergoing the change is referred to as "the relevant company" in the related sections.
• In essence, the income charge captures the excess of the value of leased plant or machinery over its tax written-down value at the point of a change of ownership, ensuring that latent tax benefits embedded in the leasing business are accounted for.