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HMRC internal manual

Business Leasing Manual

From
HM Revenue & Customs
Updated
, see all updates

Plant and machinery leasing - Anti-avoidance: Long funding lease rules: Disposal values: Introduction

When the long funding lease rules were introduced it was possible to make arrangements that resulted in the disposal value of plant and machinery being depressed, either when it started to, or ceased to be, leased under a long funding lease.

This could act to give a lessor, who grants a long funding lease over existing equipment, or the lessee at the end of the long funding lease, excessive writing down allowances or a large balancing allowance. It could also be used to avoid a balancing charge.

The type of arrangements seen include:

* the grant of a long funding lease for a premium (BLM62220)
* the grant of a long funding lease for a premium, or an advance payment of rentals is made (BLM62230)
* the grant of a long funding lease by a person who has borrowed on a non recourse basis to fund the leased asset (BLM62240)
* the grant of a long funding lease by a person who has pre-sold the rentals (BLM62250)
* the end of a long funding lease with a residual value guarantee (BLM62260)
* the end of a long funding lease with a market value option (BLM62270)