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HMRC internal manual

Business Leasing Manual

Taxation of leases that are not long funding leases: leases with option for lessee to purchase the leased asset: interaction of CAA01/S67 and CAA01/S70A


B Ltd (a UK resident) enters into a HP contract to acquire a machine from A Ltd (possible UK resident, possibly resident overseas).

B Ltd leases the machine under a long funding lease to C Ltd, another UK resident.

Under CAA01/S67, B would be entitled to capital allowances, but CAA01/S34A denies B that right. However, CAA01/S67 provides that the plant or machinery is treated as owned by B, and not by any other person, and nothing in s.70A overrides that.

This means that neither B nor C is entitled to claim capital allowances.