Mercifully, despite the odd swipe by the Chancellor, Alistair
Darling, at lessors’ source of profits, the 2008 Budget was
something of a storm in a teacup, at least for asset finance
companies.
Paul Nash, a lease specialist tax partner at
PricewaterhouseCoopers, said the budget contained “a lot of
yesterday’s news”, while Tony Mitton, vice president of SMBC
Leasing (UK) Limited, described it as “nice and quiet”, referring
to its absence of comment on large ticket leasing.
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The key changes – to writing down allowances, long-funding
leases and firstyear allowances – are looked at below in the report
by KPMG, but other reforms will certainly have some impact too.
For instance, asset finance companies lending to small firms
will be celebrating the Chancellor’s decision to increase small
firm loans guarantees, which sit alongside lease finance, by 60 per
cent over the next year.
There were other clampdowns, however. In the Finance Act 2006,
sale and leaseback deals were deemed to be long-funding leases –
irrespective of their length – meaning lessors involved in such
transactions could not claim capital allowances. In last month’s
Budget, this rule was applied to so-called ‘lease and leasebacks’
where there is more than one lease involved.
Also, pre-Budget announcements in December included action
against deals structured with a capital premium being payable by an
equipment lessee in place of part of the periodic rentals, and
designed to be a tax-free receipt for the lessor. The new
legislation will ensure these premiums, when received after
December 13, are taxed as income of the lessor. As from Budget day,
the rule will be extended to non-fixture plant leased together with
a property, but not to fixtures within a realestate lease. Only
plant and machinery leased on its own had been caught within the
December announcement.
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By GlobalDataThe one completely new Budget day anti-avoidance announcement in
the leasing field brings a beefing-up of Section 785A Income and
Corporation Taxes Act 1988, which entered law in 2004.
So, was the Budget a storm in a tea cup? Perhaps, although
lessors, as ever after a budget speech, will be feeling the pinch
just a little more.
