Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Business Leasing Manual

From
HM Revenue & Customs
Updated
, see all updates

Defining long funding leases: plant or machinery leased with other assets: derived lease term

The normal rules (BLM25100 onwards) apply to determine the term of a derived lease except that its term is limited to the remaining useful economic life of the relevant plant or machinery at the beginning of the term of the derived lease.

Example 1 – factory plus plant

Assume a factory plus production plant has been leased for 35 years and that the remaining useful economic life of the production plant at the beginning of the term of the derived lease is 20 years.

The rules in CAA01/S70YF might make the lease term 35 years. However the term of the derived lease of the production plant cannot exceed the remaining useful economic life of the plant, so the term of the derived lease of the production plant is 20 years.

Example 2 – two items of plant

Different items of plant or machinery may be treated in different ways. For example, if two different machines were leased together, and one machine had a life of 10 years but the other had a life of 20 years, a different lease would be deemed in respect of each, one with a term of 10 years, the other with a term of 20 years.