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HMRC internal manual

Business Leasing Manual

Taxation of leases that are not long funding leases: leasing of fixtures: 'deemed leases'

The capital allowances fixtures code contemplates that a lease of a fixture may exist for capital allowances purposes where the lessor does not own the fixture (often referred to as a ‘deemed lease’). This can happen where either

  • the lessor has an interest in the land in respect of which the expenditure on the fixture is incurred, or
  • there is an election by lessor and lessee.

In both cases the lessor is treated as owning the asset and title to capital allowances passes to the lessor, see CA26200. You should generally apply the same principles to ‘deemed leases’ of this nature as you would apply to other leases. But the tax treatment of the lessee on the termination of leases of this kind can raise specific points, see BLM34015.