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Taxation of certain short-term leases plant and machinery.
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35.—(1) Chapter 5 of Part 4 of the Principal Act is amended by inserting the following after section 80:
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“80A.—(1) In this section—
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‘asset’ means machinery or plant;
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‘fair value’, in relation to a leased asset, means an amount equal to such consideration as might be expected to be paid for the asset at the inception of the lease on a sale negotiated on an arm's length basis, less any grants receivable by the lessor towards the purchase of the asset;
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‘inception of the lease’ means the date on which the leased asset is brought into use by the lessee or the date from which lease payments under the lease first accrue, whichever is the earlier;
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‘lease payments’ means the lease payments over the term of the lease to be paid to the lessor in relation to the leased asset, and includes any residual amount to be paid to the lessor at or after the end of the term of the lease and guaranteed by the lessee or by a person connected with the lessee or under the terms of any scheme or arrangement between the lessee and any other person;
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‘lessee’ and ‘lessor’ have the same meanings, respectively, as in section 403;
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‘normal accounting practice’ means normal accounting practice in relation to the accounts of companies incorporated in the State;
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‘predictable useful life’, in relation to an asset, means the useful life of the asset estimated at the inception of the lease, having regard to the purpose for which the asset was acquired and on the assumption that—
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(a) its life will end when it ceases to be useful for the purpose for which it was acquired, and
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(b) it will be used in the normal manner and to the normal extent throughout its life;
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‘relevant period’ means the period—
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(a) beginning at the inception of the lease, and
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(b) ending at the earliest time at which the aggregate of amounts of the discounted present value at the inception of the lease of lease payments under the terms of the lease which are payable at or before that time amounts to 90 per cent or more of the fair value of the leased asset, and, for the purposes of this definition, relevant lease payments shall be discounted at a rate which, when applied at the inception of the lease to the amount of the relevant lease payments, produces discounted present values the aggregate of which equals the amount of the fair value of the leased asset at the inception of the lease;
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‘relevant short-term asset’ in relation to a company means an asset—
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(a) the predictable useful life of which does not exceed 8 years, and
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(b) the expenditure on which is incurred by the company on or after the date referred to in subsection (3);
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‘relevant short-term lease’ means a lease—
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(a) of a relevant short-term asset, and
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(b) the relevant period in relation to which does not exceed 8 years.
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(2) Where a company makes a claim under this section—
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(a) the amount to be included in the trading income of the company in respect of all relevant short-term leases is the amount of income from such leases computed in accordance with normal accounting practice,
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(b) the company will not be entitled to any allowance in respect of expenditure incurred on assets which are the subject of relevant short-term leases under Part 9, section 670, Part 29 or any other provision of the Tax Acts relating to the making of allowances in accordance with Part 9, and
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(c) the income from relevant short-term leases will be treated for the purposes of section 403 as if it were not income from a trade of leasing.
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(3) A claim by a company under this section shall be made by the time by which a return under section 951 falls to be made for an accounting period of the company and shall apply as respects expenditure incurred on or after the date on which the accounting period begins.”.
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(2) This section applies as respects accounting periods ending on or after 4 February, 2004.
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