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HMRC internal manual

Capital Allowances Manual

HM Revenue & Customs
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Overseas leasing: When no allowances are due


No WDAs or balancing allowances are due on plant or machinery used for overseas leasing, other than protected leasing, in the designated period where the plant or machinery is used other than for a qualifying purpose and any of the following conditions apply:

  • The lease is for a period of more than 13 years.
  • There is a provision in the lease or a separate agreement under which the plant or machinery could be leased for a period of more than 13 years.
  • There is a period of more than one year between the dates on which any two consecutive payments are due under the lease.
  • Payments are due under the lease, or under any collateral agreements, which are not periodical payments.
  • The payments due under the lease, or any collateral agreements, are not always for the same amount. You should ignore any variations in payments made under the terms of the lease which arise from changes in:

    • the rate of corporation tax or income tax,
    • the rate of capital allowances,
    • the rate of interest, where the changes are linked to changes in the inter-bank rate, or
    • insurance premiums charged by a person not connected with the lessor or lessee.

      • The lessor, or a person connected with the lessor, receives or becomes entitled to receive residual value payments at the end of the lease and the amount of those payments was determined before the end of the lease. In checking this you should ignore any insurance payments.


    The above conditions apply to secondary as well as primary periods of a lease. For example, a lease with a primary period of five years at an annual rent of £10,000, followed by a secondary period of three years at an annual rent of £5,000, is caught because the payments are not always the same.

    Chain of leases

    You may have a case that involves a chain of leases. Where there is a chain of leases and one of the leases in the chain

    • is to an overseas lessee,
    • was finalised before 1 April 2006 (see s.105(2A) CAA), and
    • satisfies one of the above conditions


    refer the case to CTIAA for advice before accepting that capital allowances are due to the lessor.