Long funding leases

Produced by Tolley in association with and

Owner-Managed Businesses

Guidance

Background

The concept underlying the capital allowances treatment of a long funding finance lease is that the lessor (the legal owner of the plant and machinery) is effectively lending money to the lessee (the person using the asset) to enable the lessee to buy the plant and machinery. The most significant feature of the rules is that, provided certain conditions are met, capital allowances are available to the lessee rather than the lessor. However, there are extensive exceptions to the long funding lease rules, notably affecting fixtures and other plant included in, or sold with, property.

A lessee does not have to come within the regime if they do not want to, but can instead claim a deduction for lease rentals in the usual way.

There is provision for a lessor to elect that all new leases entered into by it shall be treated as long funding leases (if they would not otherwise be so). This does not apply to leases of cars or of assets which cost more than £10m.

For

Access this article and thousands of others like it
free for 7 days with a trial of Tolley+™ Guidance.

TAKE A FREE TRIAL

Martin Wilson

Martin Wilson, specialised in capital allowances for 25 years before retirement. He is the author of numerous published works on the subject, including Bloomsbury's Capital Allowances: Transactions & Planning, and the capital allowances content of LexisPSL, Tolley's Tax Guidance, Tolley's Tax Planning and Simon's Tax Planning.

Steven Bone

Director at Gateley Capitus

Steven is a tax-qualified Chartered Surveyor who has specialised in tax incentives, including capital allowances and land remediation relief for over 20 years. Previously he held senior specialist positions in 'Big 4' and national mid-tier accountancy firms. Capital allowances underpin income tax and corporation tax calculations by giving tax relief for money spent to buy, build or alter commercial property. Steven works with owner-occupiers, investors and their advisers to provide capital allowances opinions, transaction support and specialist valuations for all types of property. This includes resolving HM Revenue capital allowances enquiries and giving expert evidence to tribunals and courts. Steven has contributed to many articles and books, including: Bloomsbury Professional's Capital Allowances, Tolley's Tax Planning, RICS's official Guidance Note for surveyors on Capital Allowances and Land Remediation Relief, and Practical Law Company's Practice Note on Commercial Property Standard Enquiry 32 dealing with capital allowances.

Popular Articles

Corporation Tax

Substantial shareholding exemption ― overview

Substantial shareholding exemption ― overviewThe substantial shareholdings exemption (SSE) provides a complete exemption from the liability to corporation tax on the gains generated from qualifying disposals of shares and interests in shares by qualifying companies. No claim is required. Provided

14 Jul 2020 13:44 | Produced by Tolley Read more

Value Added Tax

Exporting goods ― proof of export

Exporting goods ― proof of exportIn addition to the requirements laid down in the Exporting goods ― overview guidance note, businesses intending to zero-rate exported goods must hold satisfactory evidence that the goods have been delivered to a destination outside of the UK. If satisfactory evidence

15 Dec 2020 14:02 | Produced by Tolley Read more

Owner-Managed Businesses

Trade or hobby

Trade or hobbyInteraction of hobby farming rules and commercialityFarming has its own set of ‘hobby farming rules’, which historically have stated that a profit must be made every six years. This is known as ‘the five-year rule’, in that there can be five years of losses but there must be a profit

14 Jul 2020 13:50 | Produced by Tolley Read more

UU��ֱ��