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HMRC internal manual

Business Leasing Manual

Defining long funding leases: election: qualifying incidental leases (SI2007/304 regulation 4)

It is common, particularly in the last few months of a technology lease (but also in other situations), to add on fresh technology for a short while. This will usually be for less than 12 months and, where that is the case, condition D of regulation 3 is not met. This additional technology etc is financed via a new schedule to the existing lease, or by a new lease.

In general, the election does not apply to short-term leases (ie leases of less than 12 months) but a short-term lease is treated as an eligible lease if

  • the short-term lease is wholly incidental to a longer lease, and
  • the short-term lease would be an eligible lease if it were for a term of at least 12 months.