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HMRC internal manual

Business Leasing Manual

Taxation of leases that are not long funding leases: finance lessees: termination adjustments: part exchange - hire purchase

The part exchange problem illustrated by the example at BLM32345 is unique to finance leases. If the asset was bought outright or purchased under an HP type lease, the trade-in value of the asset would decrease, and the cost of the new asset would increase, the capital allowances pool. So by off-setting there would be no net difference. But that is not the case where a finance lease is involved.