Amendments to leasing anti-avoidance legislation
Published 28 October 2026
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This publication is available at https://www.gov.uk/government/publications/updating-the-tax-treatment-of-certain-lease-and-leaseback-arrangements/amendments-to-leasing-anti-avoidance-legislation
Who is likely to be affected
Businesses using lease and leaseback arrangements for plant and machinery.
General description of the measure
This measure updates the tax treatment of certain lease and leaseback arrangements.
The amendment will make sure that arrangements which would previously have been treated as finance leasebacks continue to be treated in that way following changes to accounting standards. For those arrangements, deductions for rental payments will generally be limited to the finance charge over the life of the leaseback. Other lease and leaseback arrangements will continue to be subject to an upfront tax charge, with deductions available for rental payments.
Policy objective
The measure restores the intended tax treatment of certain lease and leaseback arrangements following changes to accounting standards.
Background to the measure
Section 228G of the Capital Allowances Act 2001 is an anti-avoidance provision that addresses the risk under lease and leaseback arrangements that the asset owner may get double tax relief. It applies differently depending on whether the leaseback is accounted for as a finance lease or a non-finance lease.
Newer accounting standards no longer differentiate between finance and non-finance leases, leaving some lessees subject to unintended tax treatment. The amendment made by the measure restores the intended differentiation and thus the previous treatment.
Detailed proposal
Operative date
The measure will have effect for qualifying expenditure incurred from 28 October 2026 for both Corporation Tax and Income Tax purposes. Where a chargeable period straddles that date, the relevant amounts will be apportioned between the periods before and the periods on or after 28 October 2026.
Current law
Current law is contained in sections 228A to 228C and 228G of the Capital Allowances Act 2001.
Proposed revisions
Legislation will be introduced in Finance Bill 2026-27 to restore the intended effect of section 228G. This will be achieved by amending the section to treat a right-of-use leaseback as a finance leaseback where the leaseback would have been treated as a finance lease under previous accounting standards. As a result, such leaseback arrangements will again be subject to the same treatment as before the standards changed.
Summary of impacts
Exchequer impact (£million)
| 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 | 2031 to 2032 |
|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There is no impact on individuals as this measure only affects businesses. The impacts for individuals acting in a business capacity as sole traders are included in the section for Administrative impact on business including civil society organisations.
Equalities impacts
This measure may apply to individuals regardless of their protected characteristics. HMRC does not hold data that it can use to assess whether there are any disproportionate impacts to protected groups.
Administrative impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses who use lease and leaseback arrangements with plant and machinery.
One-off costs will include familiarisation with this change.
Ongoing savings are expected to be nil, as the measure restores the original policy intention, and the timing advantage of restricted deductions over the life of the leaseback, any benefits of which would have been accounted for when the anti-avoidance statute was introduced.
This measure is not expected to impact civil society organisations.
This measure is expected overall to have no impact on businesses’ experience of dealing with HMRC as the amendment does not change any processes or tax administration obligations.
Operational impact (£million) (HMRC or other)
This measure restores the original policy intention, and therefore no operational impact is expected.
Other impacts
No environmental impacts are expected.
Other impacts have been considered, and none have been identified.
Monitoring and evaluation
Consideration will be given to monitoring the impact of this measure through tax receipts and information contained in Corporation Tax returns.
Further advice
If you have any questions about this change, contact HMRC by email contact.capitalallowances@hmrc.gov.uk.