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HMRC internal manual

Business Leasing Manual

HM Revenue & Customs
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Introduction: Lease taxation: Whether lessor trading

In general, where chattels are leased, you should accept that the leasing is by way of trade.

In exceptional cases, however, where the evidence of trading is extremely slight, for example if only one asset has been acquired for leasing and there is no personal involvement by the taxpayer or any semblance of a trading organisation, the taxpayer’s activities may be special leasing within CAA01/S19.

You should not seek to deny trading treatment where, although there is no personal involvement by the taxpayer, there is trading activity by a manager as agent for the taxpayer.

The same principle applies to special purpose vehicle lessor companies set up by groups that carry out leasing activities. In such cases it is not unusual for the company to own only one (or a few) assets and be managed by a group member.

Plant and machinery allowances may be due in connection with special leasing. Compared with allowances available to traders, there are more restrictions on the way non-trading allowances can be used, see CA29450 onwards.