Capital Allowances Act 2001 section 70G

Long funding lease

Section 70G defines what constitutes a "long funding lease" for capital allowances purposes, setting out the conditions a funding lease must satisfy and addressing situations where the leased asset is not initially used in a qualifying activity.

• A long funding lease is a funding lease that is not a short lease, not an excluded lease of background plant or machinery for a building, and not excluded because the plant or machinery is leased with land at a low percentage value.
• If the leased plant or machinery is not used for a qualifying activity when the lease begins but is later brought into such use, the lease can still qualify as a long funding lease provided it would have met the definition at its inception had the asset been in qualifying use from the outset.
• For the lessee, the long funding lease classification is subject to the requirement that the lessee's tax return treats the lease as a long funding lease, and it does not apply where the lessor retains the right to claim capital allowances on the asset.
• Special rules under the tonnage tax regime may treat certain leases as not being long funding leases.