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HMRC internal manual

Capital Allowances Manual

HM Revenue & Customs
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PMA: Fixtures: Acquisition of ownership

CAA01/S193 - S195

Where CAA01/S188 CA26500 treats a lessee or licensee asceasing to own a fixture on the termination of a lease or licence, the lessor or licensor is treated as beginning to own the fixture.

Where the rights of an equipment lessor under an equipment lease are assigned CA26550, the equipment lessor is treated as ceasing to own the fixture. The rights assigned will be the right to receive rents under the lease. The person to whom the rights are assigned (the assignee) is treated as owning the fixture on and after the assignment as a result of a CAA01/S177 election CA26200.This means that the assignee is treated like an equipment lessor. The consideration that the assignee gives for the assignment is treated as the expenditure incurred by the assignee on acquiring the fixture. It is also treated as the sale price of the fixture received by the equipment lessor.

Example As in the example at CA26200, the Redding Lift Company, an equipment lessor, leases a lift to Budokan Computers. If the Redding Lift Company assigns its rights under the lease of the lift to Henderson Ltd, and Henderson Ltd pays it £25,000 for those rights, then:

  • the Redding Lift Company is treated as if it had sold the lift for £25,000;
  • the Redding Lift Company is treated as ceasing to own the lift and Henderson Ltd. is treated as owning it;
  • Henderson Ltd is treated as having incurred expenditure of £25,000 on the provision of the lift;
  • Henderson Ltd becomes an equipment lessor.

Where an equipment lessee’s obligations are discharged on the payment of a capital sum CA26550 by the equipment lessee, the equipment lessee is treated as:

  • incurring the capital sum on the provision of the fixture, and
  • owning the fixture.

If the equipment lessee’s financial obligations become vested in another person, then these rules apply to that person as if that person were the equipment lessee.

Example As in the example at CA26250 Budokan Computers leases Kane House. The Redding Lift Company is an equipment lessor that leases the lift in Kane House to Budokan Computers. Budokan Computers assigns its leases of Kane House and the lift to Zanzibar Ltd. If Zanzibar Ltd pays £10,000 to the Redding Lift Company to discharge Budokan Computers’ obligations under the lease of the lift, then Zanzibar Ltd is treated as if it had incurred expenditure of £10,000 on the provision ofthe lift. Zanzibar Ltd can claim capital allowances on the £10,000 (restricted to Redding’s disposal value) CA26400.