Capital Allowances Act 2001 section 70H

Lessee: requirement for tax return treating lease as long funding lease

Section 70H requires a lessee to file a tax return on the correct basis in order for a lease to qualify as a long funding lease, and prevents subsequent claims for overpayment relief if the wrong basis was chosen.

• A lease only counts as a long funding lease for the lessee if they file a tax return for the initial period on the basis that the long funding lease rules apply to them
• This filing requirement is disapplied where the lessee has sub-leased the same plant or machinery on a long funding lease during the period from inception of the head lease to the filing (or last amendment) of that initial tax return, and also where a transfer and long funding leaseback arrangement applies
• Once the lessee has filed a return for the initial period — whether treating the lease as a long funding lease or not — they cannot subsequently claim overpayment relief on the grounds that tax was overpaid because of the basis they chose
• The initial period is the first accounting period or tax year in which there is a difference in reported profits or losses depending on whether the lease is treated as a long funding lease or not