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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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Overseas leasing: Qualifying purpose: basic rules

CAA01/S122 & S125

The concept of qualifying purpose is primarily of importance because the leasing of a ship, aircraft or transport container is protected leasing and so exempt from the overseas leasing rules if that leasing is use for a qualifying purpose under CAA01/S123 CA24120 or CAA01/S124 CA24130. It is also of importance because the legislation preventing any WDAs being given on an asset leased overseas CA24300 does not apply if the asset is used for a qualifying purpose.

Plant or machinery is used for a qualifying purpose at any time when any of the people listed below uses it for short-term leasing CA24100:

  • the person who incurred expenditure on the plant or machinery,
  • a person connected with the person who incurred expenditure on the plant or machinery,
  • a person who acquired the plant or machinery from the person who incurred expenditure on the plant or machinery at a time when the qualifying activity carried on by that person was treated as continuing,
  • a lessee who is resident in the UK,
  • a lessee who uses the plant or machinery for short-term leasing in the course of a qualifying activity carried on in the UK.

 

There are further rules about when a ship, aircraft or transport container is used for a qualifying purpose CA24120 and CA24130.

Plant or machinery is also used for a qualifying purpose if:

  • the person who incurred expenditure on its provision,
  • a person connected with that person, or
  • a person who acquired the plant or machinery from the person who incurred expenditure on the plant or machinery when the qualifying activity carried on by that person was treated as continuing,

 

uses, other than leasing, the plant or machinery for a qualifying activity.