BLM00315 - Introduction: Lease taxation: Whether lessor trading
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.
In general, where chattels are leased, you should accept that the leasing is by way of trade.
In exceptional cases, however, where the evidence of trading is extremely slight, for example if only one asset has been acquired for leasing and there is no personal involvement by the taxpayer or any semblance of a trading organisation, the taxpayer's activities may be special leasing within CAA01/S19.
You should not seek to deny trading treatment where, although there is no personal involvement by the taxpayer, there is trading activity by a manager as agent for the taxpayer.
The same principle applies to special purpose vehicle lessor companies set up by groups that carry out leasing activities. In such cases it is not unusual for the company to own only one (or a few) assets and be managed by a group member.
Plant and machinery allowances may be due in connection with special leasing. Compared with allowances available to traders, there are more restrictions on the way non-trading allowances can be used, see CA29450 onwards.