Corporation Tax Act 2010 section 387

Business of leasing plant or machinery

Section 387 sets out the two alternative tests for determining whether a company carries on a business of leasing plant or machinery on any given day.

• A company is treated as carrying on a plant or machinery leasing business on a given day if it meets either an asset value test (Condition A) or an income test (Condition B)
• Condition A is met if at least half of the company's relevant plant or machinery value relates to qualifying leased plant or machinery — that is, items leased out by the company or a qualifying associate in the past 12 months under a plant or machinery lease (excluding background plant or machinery leases for buildings)
• Condition B is met if at least half of the company's income over the past 12 months derives from such qualifying leased plant or machinery
• Connected persons, including consortium members and their connected parties where the company is consortium-owned, count as qualifying associates if they were connected at any point in the 12-month period, and any plant or machinery they lease out is included — provided the lessee is not the company itself