Introduction Relevant finance leases
2.Paragraph 3 of the Schedule removes the limitation in section 371ED(1) that excludes non-trading finance profits arising from a relevant finance lease from the scope of section 371ED. This ensures that all non-trading finance profits that arise from either arrangements made as an alternative to paying dividends, or from relevant finance leases are within the scope of Chapter 5 of Part 9A TIOPA.
3.Paragraph 4 amends section 371EE(2)(b) so that the alternative scenario considered is both the purchase (directly or indirectly) of an asset, and an arrangement falling within new section 371EE(3). That section deals with an arrangement whereby a UK company purchases rights to use an asset (such as a licence to use a patent). It provides for two counterfactuals:
	An arrangement that involves purchasing the rights to use the relevant asset from a person other than the CFC (and so the arrangement could involve a relevant finance lease provided the CFC was not the lessor); or
	An arrangement that involves purchasing the rights to use the asset, but not by way of a relevant finance lease (and so the counterfactual could be an arrangement such as a licence granted by the CFC).
4.Paragraphs 5 and 6 refer to the new definition of “relevant finance lease” in new section 371VIA.
5.Paragraph 7 amends the definition of finance profits in section 371VG.
6.Paragraph 8 amends section 371VH(9) and inserts new section 371IH(10A) to make clear that in determining whether a person has an interest in a CFC by virtue of a loan relationship with embedded derivatives, in a situation where accounts have not been prepared in accordance with generally accepted accounting standards, then that issue will be determined on the assumption that accounts have been prepared in accordance with international accounting standards.
7.Paragraph 9 inserts new section 371VIA (relevant finance leases). The new section has the effect of including all finance leases over assets and arrangements that are of a similar character, within the definition of relevant finance lease.
8.New section 371VIA(1) provides that relevant finance leases are the arrangements that fall within new subsections (2) and (3) and specifies that loan relationships of any company are not included within the definition of relevant finance lease.
9.New section 371VIA(2) identifies arrangements where a lessor provides an asset to be leased, or otherwise made available, to another person. These arrangements are relevant finance leases for the purposes of Part 9A TIOPA where, in accordance with generally accepted accounting practice, they are treated in the accounts of the lessor, or a person connected with the lessor, as a finance lease or loan.
10.New section 371VIA(3) provides that the term relevant finance lease shall also include certain hire-purchase, conditional sale or other arrangements. These arrangements are included where they do not fall within new section 371VIA(2), but are of a similar character to the arrangements that would fall within new section 371VIA(2).
11.New section 371VIA(4) stipulates for the purposes of new section 371VIA, that where the accounts of a person are not drawn up in accordance with generally accepted accounting practice (which is specified as either UK GAAP or international accounting standards), any question that has to be considered by reference to generally accepted accounting practice is determined by assuming that the accounts of the person are prepared in accordance with international accounting standards.
12.New section 371VIA(5) makes clear that for the purposes of this section the “accounts” of a company include accounts that relate to two or more companies of which that company is one and so includes consolidated accounts.