Corporation Tax Act 2010 section 398A

Election out of qualifying change of ownership

Section 398A allows a company carrying on a plant or machinery leasing business to elect for an alternative treatment under the sales of lessors rules, avoiding a qualifying change of ownership while still being subject to certain restrictions on losses and artificial arrangements.

• A company leasing plant or machinery (not in partnership) that experienced a relevant change in its relationship with a principal company before 23 March 2011 could elect for this alternative treatment, which means no qualifying change of ownership is triggered on that day
• Despite the election removing the qualifying change of ownership, the company's accounting period is still brought to a close on the relevant day and a new one begins the following day, and restrictions on the use of losses under section 398D apply throughout the relevant period
• The relevant period runs from the day after the relevant day until the next relevant change in the relationship between the company and a principal company that would cause the unadjusted basic amount to be treated as a receipt of the leasing business — if no such change occurs, the period continues indefinitely
• If during the relevant period there is a further change in the relationship with a principal company that does not bring the relevant period to an end, that change is also disregarded for qualifying change of ownership purposes, and the effects of the original election continue