Corporation Tax Act 2010 section 887

When restrictions on leasing partnership losses under this Chapter apply

Section 887 sets out the conditions under which restrictions apply to losses arising from a company's participation in a partnership that carries on a plant or machinery leasing business, particularly where the company's profit-sharing arrangements are unusual or not based on a single consistent percentage.

• The restrictions target companies within the charge to corporation tax that carry on a plant or machinery leasing business in partnership and incur losses in that business.
• Restrictions only bite where the company's share of profits, losses and capital allowances is not determined by a single uniform percentage — that is, the profit-sharing arrangement is not on an "allowable basis."
• An allowable basis means the company's share of both the partnership's profits or losses and any relevant capital allowances for the period are each calculated by reference to the same single percentage, with "profits" excluding chargeable gains.
• Where the profit-sharing arrangements are on an allowable basis — a straightforward, consistent percentage split — the restrictions do not apply.