Finance Leasing Manual - FLM11.78

Leasing of fixtures: 'deemed leases'

The capital allowances fixtures code contemplates that a lease of a fixture may exist for capital allowances purposes where the lessor does not own the fixture (often referred to as a 'deemed lease'). This can happen where either:

• the lessor has an interest in the land in respect of which the expenditure on the fixture is incurred - CAA 1990, s 52 and CA2542 onwards; or

• there is an election by lessor and lessee - CAA 1990, s 53 and CA2550.

In both cases the lessor is treated as owning the asset and title to capital allowances passes to the lessor. You should generally apply the principles set out in SP 3/91 to 'deemed leases' of this nature. But the tax treatment of the lessee on the termination of leases of this kind can raise specific points, see FLM11.80.