CA24300 -
Overseas leasing: When no allowances are due
CAA01/S110
No WDAs or balancing allowances are due on plant or machinery
used for overseas leasing, other than protected leasing, in the
designated period where the plant or machinery is used other than
for a qualifying purpose and any of the following conditions
apply:
- The lease is for a period of more than 13
years.
- There is a provision in the lease or a
separate agreement under which the plant or machinery could be
leased for a period of more than 13 years.
- There is a period of more than one year
between the dates on which any two consecutive payments are due
under the lease.
- Payments are due under the lease, or under
any collateral agreements, which are not periodical payments.
- The payments due under the lease, or any
collateral agreements, are not always for the same amount. You
should ignore any variations in payments made under the terms of
the lease which arise from changes in:
-
- the rate of corporation tax or income
tax,
- the rate of capital allowances,
- the rate of interest, where the changes
are linked to changes in the inter-bank rate, or
- insurance premiums charged by a person not
connected with the lessor or lessee.
- The lessor, or a person connected with the
lessor, receives or becomes entitled to receive residual value
payments at the end of the lease and the amount of those payments
was determined before the end of the lease. In checking this you
should ignore any insurance payments.
The above conditions apply to secondary as well as primary
periods of a lease. For example, a lease with a primary period of
five years at an annual rent of £10,000, followed by a
secondary period of three years at an annual rent of £5,000,
is caught because the payments are not always the same.
Chain of leases
You may have a case that involves a chain of leases. Where there
is a chain of leases and one of the leases in the chain
- is to an overseas lessee,
- was finalised before 1 April 2006 (see
s.105(2A) CAA), and
- satisfies one of the above conditions
refer the case to CT & VAT for advice before accepting that
capital allowances are due to the lessor.
