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HMRC internal manual

Business Leasing Manual

Taxation of long funding leases: Lessees: General rules

In broad terms, lessees under long funding leases are treated as having bought the asset. This allows a lessee to claim plant or machinery allowances, see BLM42010 and CA23800.

The amount of rentals that is allowed as a deduction in computing profits is restricted to compensate for the availability of capital allowances, see BLM42025 and BLM42040.

As with lessors (BLM40005), the tax rules depend on whether the lease is a long funding finance lease or a long funding operating lease.