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HMRC internal manual

Business Leasing Manual

Taxation of leases that are not long funding leases: passing on the benefits: where lessee is not liable to tax - overseas lessees

An overseas lessee might be able to gain a tax-timing advantage in their own state. It is, for example, not unusual for other states to give the equivalent of capital allowances to a finance lessee. In fact, this is more common than giving capital allowances to the legal owner of a finance-leased asset.

Where the lessee is able to claim the benefit of the equivalent of capital allowances it gains the benefit of tax-timing advantages twice. This is known as ‘double-dipping’ and is a common tool of the international tax planner. Multiple dips are possible, usually using complex lease structures, with each dip adding value to the ultimate lessee, at the expense of the Exchequers in the lessors’ or lessees’ fiscs.

See also BLM31000 for further guidance on overseas leasing.