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HMRC internal manual

Business Leasing Manual

Defining long funding leases: basic definition: conditions for being a lease met after inception

Under GAAP a lease is not accounted for as a lease (for example by the lessor recognising the net investment in the lease or the lessee recognising the asset on its balance sheet) until inception of the lease term (UK GAAP) or commencement of the lease term (BLM11030).

See BLM25050 for an example.

Therefore, to ensure that the long funding lease rules apply in such cases and to ensure consistency of treatment, the legislation provides that if a lease satisfies the conditions for being a plant or machinery lease immediately after commencement it is treated it as a plant or machinery lease from inception (CAA01/S70K (5)).