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HMRC internal manual

Capital Allowances Manual

HM Revenue & Customs
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PMA: Anti-avoidance: Meaning of sale and finance leaseback


A sale and finance leaseback is very similar to an ordinary sale and leaseback. Broadly there is a sale and finance leaseback if a person carrying on a qualifying activity sells an asset used in a qualifying activity and leases it back under a finance lease. There is also a sale and finance leaseback if the asset is leased back to a person connected with the seller. It does not matter if there is a gap between the sale and the leaseback. All that matters is that the asset is not used for any qualifying activity other than leasing during the gap. It also does not matter what the asset is used for after the leaseback.

Example Robert has a yacht that he uses in his trade of running cruises. He sells the yacht to Jimmy. Jimmy leases the yacht out for a few months and then he leases it back to Robert under a finance lease. This is a sale and finance leaseback.Jimmy used the yacht for leasing and nothing else during the gap between the sale and the finance leaseback. If, however, Jimmy had used the yacht for running cruises before he leased it back to Robert there would not be a sale and finance leaseback.

A trader may acquire an asset with a long build time financed through a finance lease. The anti- avoidance legislation does not apply if the asset is ordered by the lessor initially or if the purchase contract is novated to the lessor before the asset is brought into use for the purposes of the trade and:

  • neither the lessee nor anyone connected with the lessee will claim PMAs on the asset, and
  • the transaction is not a transaction to obtain allowances.


Do not treat the testing of the asset or use for the training of operators before it is accepted from the manufacturer as bringing it into use in this context.