CAA01/S70D provides for lessees under long funding finance
leases to be entitled to further capital allowances where the
lessor incurs additional expenditure on the asset (perhaps
enhancing it to increase capacity). The corresponding increase in
the present value of the minimum lease payments qualifies for
capital allowances.
There is no equivalent of CAA01/S70D for lessees under long
funding operating leases. The amount on which capital allowances is
claimed remains the same, as does the limit on deductions (see
BLM42040). It follows that a lessee
under a long funding operating lease will receive relief as a
revenue deduction for any increased rentals payable.
CAA01/S70D also applies to leases that are, exceptionally,
accounted for as loans.
