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HMRC internal manual

Business Leasing Manual

Defining long funding leases: funding leases that are not long funding leases: short leases: excluded leases: order of priority within the regulations

It is possible that plant or machinery could fall within article 4 (plant or machinery that is not to be treated as background plant or machinery) but also fall within article 3 (plant or machinery treated as background plant or machinery). For example, lighting, which falls within article 3, may be used to help display goods and so fall within article 4.

Therefore the regulations provide that

  • Article 3 takes priority over article 4 (see article 4 (4)), and
  • Article 4 takes priority over article 2 (see article 2 (3)).

So, for example, lighting that falls within both of articles 3 and 4 will be treated as background plant or machinery.

There is no need to prioritise articles 2 and 3 as plant or machinery which falls within either article is, or is treated as, background plant or machinery.