Lessors of residential property are not generally entitled to
claim capital allowances on any plant or machinery it may contain
because CAA01/S35 denies capital allowances for expenditure
‘incurred in providing plant or machinery for use in a
dwelling-house’.
Some leases of residential property such as blocks of flats
may include expenditure on lifts and air-conditioning etc in the
common parts. These qualify for capital allowances and you should
accept that they are wholly incidental to the lease of the property
itself, and so qualify as background plant or machinery.
As a consequence, leases of residential property will not
include long funding leases unless the lease includes plant or
machinery that does not fall within the definition of background
plant or machinery. (For this to be the case, the lease would have
to include plant or machinery that is not normally found in
residential property and which is not there to contribute to the
functionality of the building as residential property.)
