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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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Plant and Machinery Allowances (PMA): introduction: special leasing

CAA01/S19 & CAA01/S35

Where plant and machinery is leased out, the leasing is usually part of some other qualifying activity, for instance a trade (which may be a trade of leasing or some wider trade that includes leasing), an ordinary property business, a furnished holiday letting business or an overseas property business. Where it is leased out other than in the course of some other qualifying activity, the leasing is described as ‘special leasing’ and is a qualifying activity for PMA. The qualifying activity starts when the asset is leased out and ends when the lessor permanently ceases to lease the asset out.

If the taxpayer also leases out some other asset other than in the course of some other qualifying activity, or recommences to lease the same asset after a permanent discontinuance, that is treated as a separate special leasing. PMA are calculated and given separately on each special leasing.

Example Jason is a professional musician. He owns a yacht for the private use of himself, family and friends, which he sometimes charters out. The profits from chartering out the yacht are taxed as miscellaneous income, Part 5 ITTOIA (s574 +). The chartering out of the yacht is a special leasing. PMA on the yacht are calculated separately from ones relating to his profession as a musician.

Jason buys a powerboat, which he also leases out occasionally. PMA are calculated separately on the yacht and the powerboat.

Special leasing - life assurance company

You should treat the hiring out by a company carrying on life assurance business of an investment asset other than in the course of an ordinary property business or an overseas property business as special leasing.

Special leasing - exclusion of assets let for use in a dwelling house

Where the qualifying activity is a special leasing, there is an additional condition that must be satisfied for expenditure on the provision of an asset to qualify for PMA. Expenditure incurred on the provision of plant or machinery for use in a dwelling house does not qualify for capital allowances.

The term ‘dwelling-house’ is not defined and therefore takes its ordinary meaning. You should treat any building, or part of a building, that affords the facilities required for day-to-day private domestic existence as a dwelling house, see CA11520.