What are the balance sheet amounts for plant or machinery under section 401 of the Corporation Tax Act 2010?

Under section 401, balance sheet amounts for plant or machinery comprise two elements: the net book value (or carrying amount) of the plant or machinery, and the net investment in respect of any finance leases of that plant or machinery. These figures are used in the section 400 calculation to determine whether the plant or machinery condition in section 399 is satisfied.

How does section 401 CTA 2010 treat fixtures in land and mixed finance leases?

Where plant or machinery is a fixture embedded in land, the land's net book value must be apportioned on a just and reasonable basis to separate the fixture's value. Similarly, where a single finance lease covers both plant or machinery and other assets, the net investment figure must be apportioned on a just and reasonable basis so only the plant or machinery element is used.

What accounting basis applies to balance sheet amounts under section 401?

Section 401 requires that references to amounts shown on a company's balance sheet mean the amounts that would appear if the balance sheet were drawn up in accordance with generally accepted accounting practice. This ensures a consistent and standardised basis of measurement across all companies performing the section 400 calculation.

How does section 401 handle plant or machinery acquired from a connected person?

Where plant or machinery was acquired from a connected person on or after 5 December 2005 and the relevant day falls on or after 22 March 2006, the plant or machinery is treated as having been acquired for its ascribed value on the relevant day rather than its actual purchase price. This anti-avoidance rule prevents companies from inflating balance sheet values through connected party transactions.

Corporation Tax Act 2010 section 401

Provisions supplementing section 400

Section 401 provides supplementary rules for determining the balance sheet amounts of plant or machinery used in the calculation under section 400, including how to handle fixtures in land, mixed finance leases, and acquisitions from connected persons.

Balance sheet amounts for plant or machinery comprise the net book value (or carrying amount) and the net investment in respect of finance leases of that plant or machinery.
Where plant or machinery is a fixture in land, or a finance lease covers both plant or machinery and other assets, the relevant amount must be split on a just and reasonable basis.
Balance sheets are assumed to be drawn up in accordance with generally accepted accounting practice.
Where plant or machinery was acquired from a connected person on or after 5 December 2005 and the relevant day falls on or after 22 March 2006, the acquisition cost is treated as the asset's ascribed value on the relevant day.

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