The normal rules (
BLM25100 onwards) apply to determine the
term of a derived lease except that its term is limited to the
remaining useful economic life of the relevant plant or machinery
at the beginning of the term of the derived lease.
Example 1 – factory plus plant
Assume a factory plus production plant has been leased for 35
years and that the remaining useful economic life of the production
plant at the beginning of the term of the derived lease is 20
years.
The rules in CAA01/S70YF might make the lease term 35 years.
However the term of the derived lease of the production plant
cannot exceed the remaining useful economic life of the plant, so
the term of the derived lease of the production plant is 20 years.
Example 2 – two items of plant
Different items of plant or machinery may be treated in
different ways. For example, if two different machines were leased
together, and one machine had a life of 10 years but the other had
a life of 20 years, a different lease would be deemed in respect of
each, one with a term of 10 years, the other with a term of 20
years.
