build up to possible sale
HSBC Rail is understood to have set up a unique offshore
structure to enable it to avoid repayment of deferred tax
liabilities in the event it were sold.
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The Rosco has been reestablished under a new Dublinbased
structure in a move believed to be part of preparations by the
Rosco for a sale, it is understood.
Without this structure, in the event of a sale of HSBC Rail,
HSBC would have to pay hundreds of millions of pounds of deferred
tax liabilities under Schedule 10 of the UK’s Finance Act 2006. It
would have to pass this expense onto any buyers via an increase in
the purchase price.
Schedule 10 rules, which were first introduced in November 2005
as part of the Finance Act 2006, made lessor companies liable for
their full deferred tax liabilities immediately on a sale of the
business.
The three main Roscos – HSBC Rail,Porterbrook and Angel Trains –
have all developed large deferred tax liabilities since
privatisation in 1995.This is because their trains have been
eligible for high writing down allowances – 25 per cent until 31
March 2008, 20 per cent thereafter – but have been depreciated over
20 or more years.
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By GlobalDataBefore Schedule 10 not only did the government lose revenue from
lessors selling portfolios before deferred tax liabilities had been
repaid, but also lost tax income as a result of purchasers moving
these portfolios out of UK tax registration.
“It turned from an interest free loan from the government to the
government giving you loads of money for free,” said one tax
expert.
Under Schedule 10 purchasers of portfolios can receive immediate
tax allowances based on the amounts of deferred tax liability paid
by the previous owner. However, a purchasers not making profits
cannot benefit from this tax break.
Brendan Malkin
