Once the existence of a derived lease has been established it
is necessary to establish what that derived lease looks like. In
particular it is necessary to establish the term of each derived
lease and the rentals attributable to it.
Clearly, the term of any derived lease cannot exceed the term
of the mixed lease from which it derived.
Similarly, the rentals payable under each derived lease can
only be treated as paid when rentals are payable under the mixed
lease and on any one payment date the totals of the rentals payable
under each derived lease must equal the amount payable under the
mixed lease.
Within those constraints, CAA01/S70M sets out the way in
which the term and rentals for the derived lease are to be
calculated. Once that has been done, the rules in CAA01/S70G
establish whether the derived lease is a long funding lease.
