Chapter CA23845
| Published date | 16 April 2016 |
| Record Number | CA23845 |
| Court | HM Revenue & Customs |
| Issuer | HM Revenue & Customs |
A non-resident is a person not resident in the UK who leases an asset that it does not use exclusively for earning profits chargeable to tax to another person. A resident is a person resident in the UK who leases an asset that it uses exclusively for earning profits chargeable to tax.
A non-resident may lease an asset directly or indirectly to a resident who treats the lease as a long funding lease or a lease purchase contract within CAA01/S67 CA23300. The lessee may then lease the asset to a non-resident under a lease that it does not treat as a long funding lease. This means that the lessee keeps the capital allowances because there is no disposal event. The overall effect is that a non-resident has leased an asset to another non-resident but by passing the asset through a person that is a UK resident somebody has obtained UK capital allowances.
If the sole or main purpose of arranging things that way is to let the lessee get capital allowances, then treat the lease from the resident to the non-resident as a long funding lease. That means that if the resident has treated its expenditure under the lease from the non-resident as qualifying expenditure it has to bring a disposal value to account.
If you have a case where an overseas lessor leases to an overseas lessee via a UK resident and the UK resident claims capital allowances you should assume that the main purpose, or one of the main purposes, of the arrangements is to let the UK resident claim capital allowances. That is one of the results of the arrangements. If the taxpayer does not want the legislation to apply it is up to them to explain why the UK resident was inserted into the chain. For example, they should explain why the non-resident lessor could not lease the asset directly to the non-resident lessee.
Change in accountancy classificationWhere a person is the lessor or lessee under a long funding lease the accountancy classification of the lease may change from finance lease (or loan) to lease that is not a finance lease or vice versa. If this happens treat the lease as terminating when the accountancy classification changes. You then treat a new lease that is a long funding lease for the lessor as beginning on the date of the change. You treat the term of the new lease as beginning on the date of change.
The accountancy classification of the lease is the way it would be treated in accordance with...
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