Application of long-life asset rules to jet aircraft 3

In their recent Tax Bulletin (issue 41, June 1999), the Inland Revenue outlined an agreement reached between The Large Business Offices and the British Air Transport Association on the application of the long-life asset rules to jet aircraft capable of a configuration of 60 or more seats and used primarily for the carriage of passengers or freight for profit ('jet aircraft'). An agreement has not yet been reached on the treatment of other types of aircraft. Main points on the agreement (which runs until 31 December 2003) are as follows: - individual airlines may enter into an arrangement with the Inland Revenue - the arrangement will apply to all jet aircraft acquired by the airline under contracts entered into between 26 November 1996 other than ones covered by certain transitional provisions) and 31 December 2003 - for jet aircraft within the arrangement, half of the total expenditure on the aircraft (in its ready for service configuration) will attract writing down allowances at 6% and the other half will attract allowances at the normal rate of 25% - disposal proceeds are to be apportioned in the same ratio - lessors may also enter into these arrangements with the Inland Revenue - airlines and lessors have until 20 September 1999 to enter into an arrangement, except where the airline or lessor does not incur expenditure to which the arrangement would apply until after that date, in which case the time-limit is the date on which it makes its first claim to allowances in respect of that expenditure - the Inland Revenue will consider any claim for allowances on jet aircraft not brought into an arrangement in the light of its particular facts, starting with the presumption that the aircraft will normally be a long-life asset. We are in the process of obtaining the text of the formal agreement and the Inland Revenue's explanatory statements and will provide a further update as soon as possible. For further information, please contact Paul Richardson on Tel: 0171 367 3000 or E-mail: [email protected].