Prior to FA 2006 there were rules that restricted that
availability of capital allowances where a UK Lessor leased to an
overseas lessee (CA24000). These rules are being phased out and
although they continue to apply to leases entered into before 1
April 2006, they no longer apply to leases entered into on or after
that date.
The introduction of the long funding lease rules by FA 2006
limits the type of leases that can benefit from the tax-timing
benefits that capital allowances provide. However tax-timing
benefits are still available and it is certainly the case that
overseas leasing is seen as an attractive business opportunity in
the right circumstances. Indeed, specialist press reports have
suggested that there is more overseas leasing than HMRC might have
expected.
Tax-based leasing inevitably carries a cost to the UK
Exchequer. In the case of overseas leasing that cost is not usually
matched by a compensating benefit to the UK economy.
Some cross-border leases involve simple finance leases of no
more than 5 years or simple operating leases that are not long
funding leases; others involve more complex arrangements that
attempt to maximise the tax benefits in ways that were not
anticipated when the long funding lease rules were introduced. Such
schemes may or may not have the result the parties intend.
All cross border leases where –
should be notified to HMRC under the Tax Avoidance Disclosure Regulations, see BLM31010.
