Lease it to me

LEGISLATION WAS INTRODUCED in FA 2006 to determine the taxation treatment of certain plant or machinery leasing transactions — so-called 'long funding leases' — leases which in HMRC's view are essentially financing arrangements. The legislation operates to treat the lessee as if they had borrowed money to buy the asset. For capital allowances purposes it is the lessee under a long funding lease who is entitled to allowances with the 'interest' element of the lease rentals taxable for the lessor and deductible for the lessee.
A relatively straightforward principle then but one which is comprised in more than 40 pages of new legislation (at FA 2006 Sch 8). This article necessarily simplifies some of the relevant concepts.
It is perhaps helpful to note the following two points at the outset.

• The new legislation creates an additional regime; the pre-existing basis of taxing lease arrangements...