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

Determination of remaining residual value resulting from lessor's further additional expenditure

Section 148EB explains how to work out the remaining residual value (RRV) of leased plant or machinery when a lessor incurs further additional expenditure, and section 148E has already been applied in relation to previous additional expenditure on the same asset.

• RRV is calculated by comparing the expected residual value of the asset at the time the further additional expenditure is incurred (called FARV) against a baseline figure made up of earlier residual value estimates and prior adjustments.
• The baseline figure is the sum of (a) the expected residual value at the start of the lease term and (b) any amounts previously subtracted under section 148E as the remaining residual value from earlier additional expenditure.
• If FARV exceeds the baseline total, RRV equals the portion of that excess attributable to the further additional expenditure.
• If FARV does not exceed the baseline total, RRV is nil — meaning no further deduction arises from the additional expenditure in this context.

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