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HMRC internal manual

Business Leasing Manual

Taxation of long funding leases: basic principles: lessors - capital allowances

CAA01/S34A prevents lessors from being entitled to capital allowances where plant or machinery is acquired for long funding leasing. Plant or machinery acquired for any other type of leasing enters the capital allowance regime in the usual way.

There are also rules which cater for the possibility that

  • lessors have claimed capital allowances on assets which begin to be used for the purpose of long funding leasing,
  • lessors retain an asset that was used for the purpose of long funding leasing, but which is now used for another qualifying activity.

Guidance on the capital allowances aspects of long funding leasing is at CA23800.