An election by a lessor does not generally affect whether a
lease is a long funding lease in the hands of the lessee and it has
no effect on whether the leased asset is plant or machinery in the
hands of the lessee.
Is the lease a long funding lease?
Lessees are not generally affected by a lessor making a long
funding lease election. Where an election is made, eligible leases
and qualifying incidental leases become long funding leases in the
hands of the lessor only.
Furthermore, as a lessee does not have to treat a lease as a
long funding lease (CAA01/S70H,
BLM20120), there is no requirement for
the lessee to know about, or be affected by, the lessor making an
election. However, there may be circumstances where
In such circumstances, if the lessor makes an election it is not
entitled to claim capital allowances. Therefore the condition in
CAA01/S70Q that the lessor is not entitled to claim capital
allowances is satisfied.
Thus, in exceptional cases, a lease which is potentially a
long funding lease in the hands of the lessee could, if the lessor
makes an election, become a long funding lease in the hands of the
lessee (and assuming the lessee makes a return on that basis).
Is the asset plant or machinery?
The fact that a particular asset is plant or machinery in the
hands of a lessor does not affect whether the asset is plant or
machinery in the hands of the lessee.
Wherever a lessee claims that a lease is a long funding lease
of plant or machinery the leased asset will need to meet the same
tests to qualify for plant or machinery allowances as in any other
case and the guidance at CA21010 onwards applies.
