BLM00075 - Introduction: Leasing: Capital allowances
This manual is being updated to reflect FRS 102 (2024 amendments). For guidance on the tax treatment of accounts prepared under IFRS 16 or the revised FRS 102, please refer to pages within the BLM50000 chapter.
Genrally speaking, capital allowances are given to the legal owner of the asset. This is so whether the lease is a finance lease or an operating lease. But this is a complex subject. For example
- in the case of plant or machinery the allowances go to the legal owner of the asset; but there are also special rules for hire purchase cases and for fixtures (CA23300 and CA6000 respectively).
- In the case of the structures and buildings allowance, the allowances broadly go to the holder of the relevant interest (CA90100) but in certain circumstances the lessee is entitled to the allowance (CA90510)
FA 2006 introduced a new regime for taxing ‘long funding’ leases of plant or machinery – see BLM20000 onwards for details. If a lease is a long funding lease, the lessor loses the right to claim capital allowances and the lessee generally gains it.