BLM41010 - Taxation of long funding leases: long funding operating lessors: 'relevant value'

The starting point for calculating the periodic deduction, the ‘relevant value’, depends on the circumstances (ICTA88/S502E (4)):

• if the asset was acquired for the purpose of a particular long funding operating lease, the relevant value is cost,
• if the asset was last used in a qualifying activity for another long funding operating lease, the relevant value is market value,
• if the asset was last used in a qualifying activity for a long funding finance lease, the relevant value is the value at which the plant or machinery is recognised in the books or other financial records of the lessor at commencement of the operating lease,
• if the asset was last used by the lessor for the purpose of a qualifying activity other than leasing under a long funding lease, the relevant value is the lower of cost and market value,
• if the lessor owns the plant or machinery as a result of having incurred expenditure on its provision for purposes other than those of a qualifying activity (perhaps because the expenditure was incurred before the lessor became resident in the UK), but

• the plant or machinery is brought into use for a qualifying activity on or after 1 April 2006, and
• that leasing of plant or machinery is part of that qualifying activity.

the relevant value is the lower of

• the market value at commencement, and
• the first use amortised value.

The first use amortised value is the value that the plant or machinery would have had when it was first brought into use for the purposes of the qualifying activity on the assumption that the costs and any additional costs had been written off on a straight line basis.