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HMRC internal manual

Capital Allowances Manual

Overseas leasing: overseas leasing pool: rate of allowance

CAA01/S107 - S109

Expenditure on plant or machinery to which the overseas leasing legislation applies is put into a pool separate from all the other pools. The annual rate of WDA for the overseas leasing pool is 10%. It is not a single asset pool. It contains all the expenditure on plant or machinery to which the overseas leasing legislation applies apart from:

  • expenditure on long life assets: they stay in the long life asset pool on which WDAs are given at an annual rate of 6%, up 1/6 April 2008 when the balance was transferred to the special rate pool* and
  • expenditure that must be allocated to a single asset pool, such as expenditure on an asset that is used partly for non-business purposes. WDAs on the single asset pool are given at an annual rate of 10%.

 

If a person disposes of plant or machinery leased overseas to a connected person and has to bring a disposal value to account, that disposal value is the lower of:

  • the market value of the plant or machinery, and
  • the qualifying expenditure incurred by the person disposing of the plant or machinery.

 

The person acquiring the plant or machinery is treated as incurring qualifying expenditure equal to the disposal value.

Example Bob and Sara are married. Bob owns a yacht that he leases overseas. The yacht cost him £100,000. After two years, when the market value of the yacht is £95,000, he sells it to Sara for £50,000. Bob’s disposal value is £95,000 because that is the lower of the market value of the yacht, £95,000, and Bob’s qualifying expenditure, £100,000. If Sara decides to lease the yacht her qualifying expenditure is £95,000, Bob’s disposal value.

*FA2011 reduced the rate of special rate WDAs from 10% to 8% from 1 April 2012 (CT) and 6 April 2012 (IT).