BLM00075 – Introduction:
Leasing: Capital allowances
Generally speaking, capital allowances are given to the legal
owner of the asset. This is so whether the lease is a finance lease
or an operating lease. But this is a complex subject. For
example
- in the case of industrial buildings, the
allowances broadly go to the holder of the 'relevant interest' (
CA30300); broadly
the freehold or leasehold interest held by the person who
originally incurred the expenditure on the asset or their
successor
- in the case of plant or machinery the
allowances go to the legal owner of the asset; but there are also
special rules for hire purchase cases and for fixtures (
CA23300 and
CA26000
respectively).
FA 2006 introduced a new regime for taxing ‘long
funding’ leases of plant or machinery – see
BLM20000 onwards for details. If a lease
is a long funding lease, the lessor loses the right to claim
capital allowances and the lessee generally gains it.
