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HMRC internal manual

Business Leasing Manual

From
HM Revenue & Customs
Updated
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Taxation of long funding leases: long funding operating lessors: termination amount

The termination amount (CAA01/S70YG) depends on the situation.

The lessor has not been entitled to plant or machinery allowances on the asset because the lease is a long funding lease. However

  • the lease may terminate as a result of an event that would have been a disposal event (see CA23240) if the lessor had been entitled to such allowances, or
  • an event that would have been a disposal event had the lessor been entitled to capital allowances may occur as a result of or in connection with the termination of the lease.

In that case the termination amount is the disposal value (see CA23250) that would have been brought to account by the lessor if the lessor had been entitled to plant or machinery allowances and had claimed all allowances available.

If there is no disposal event (and as the lease is a long funding operating lease) the termination amount is the market value of the asset immediately after the termination of the lease.