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HMRC internal manual

Business Leasing Manual

HM Revenue & Customs
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Defining long funding leases: amendments, transfers and assignments: sale and lease back, lease and lease back (CAA01/S70Y)

Where there is a sale and leaseback or a lease and leaseback and the seller (or grantor of the head lease) has leased the plant or machinery to another person under a long funding lease the leaseback is also a long funding lease for both parties to the leaseback.

If the plant or machinery is leased back indirectly all of the leases involved in the leaseback are long funding leases.

The rules about the meaning of the transfer of an asset that apply to transfers and assignments apply to sale and leasebacks and lease and leasebacks with one addition: the transfer of an asset also includes the grant of a lease.


B Ltd owns a ship that he leases to C Ltd under a long funding lease. B Ltd then enters into a sale and leaseback of the ship with A Ltd. The leaseback from A Ltd to B Ltd is necessarily a long funding lease by virtue of CAA01/S70Y, even if it would otherwise not be a long funding lease.

If A Ltd leases the ship to X Ltd who then leases it back to B Ltd the lease from A Ltd to X Ltd and the lease from X Ltd to B Ltd are both long funding leases.