Income Tax (Trading and Other Income) Act 2005 section 148DB

"Starting value" where plant or machinery originally unqualifying

Section 148DB explains how to determine the "starting value" of plant or machinery for the purposes of calculating the periodic deduction under a long funding operating lease, where the asset was originally acquired for purposes other than a qualifying activity.

• This section applies where a lessor originally acquired plant or machinery for non-qualifying purposes, then brought it into use for leasing under a long funding operating lease on or after 1 April 2006
• The starting value for the periodic deduction calculation is the lower of the asset's market value at the date it enters qualifying use, and its amortised value at that same date
• The amortised value is calculated by assuming the original acquisition cost (and any further capital expenditure) had been written off on a straight-line basis over the asset's remaining useful economic life
• By taking the lower of market value and amortised value, the provision prevents an inflated starting value from generating excessive deductions over the lease term

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