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HMRC internal manual

International Manual

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Controlled Foreign Companies: Assumed Taxable Total Profits, Assumed Total Profits and the Corporation Tax Assumptions: Elections for leases to be treated as Long Funding Leases

Elections for leases to be treated as long funding leases

The long funding lease legislation is in CAA01/S70A to S70YJ. The legislation provides in certain circumstances for the lessee under a long funding lease, rather than the lessor, to claim plant and machinery allowances. This applies only to lessees under a long funding lease where the lessor is not claiming capital allowances.

TIOPA10/S371SJ requires the assumption that a long funding lease election has been made (or withdrawn, as the case may be) by a CFC where a notice is given to an officer of HMRC in the correct form, within the required time limits and by the chargeable company or chargeable companies holding the majority of chargeable profits that would be apportioned to chargeable companies if an apportionment fell to be made under step 3 of section 371BC(1) for that accounting period. Where such a notice is given, the assumed taxable total profits of the CFC are calculated taking into account regulation 2(5) of the Long Funding Leases (Elections) regulations 2007 (S.I. 2007/304). TIOPA10/S71SJ(3) provides for the withdrawal of such a notice provided the withdrawal is made within the prescribed time limits and in the correct form.