Capital Allowances Act 2001 section 70J

Funding lease

Section 70J defines what constitutes a "funding lease" for the purposes of the long funding lease rules, and sets out the circumstances in which a lease that would otherwise qualify is excluded from being a funding lease.

• A funding lease is a plant or machinery lease that, at inception, meets at least one of three tests: the finance lease test, the lease payments test, or the useful economic life test — or alternatively involves cushion gas
• A lease is not a funding lease where the lessee is already treated as the owner of the plant or machinery under the rules for persons entitled to the benefit of a contract
• A lease is excluded from being a funding lease where the lessor has previously leased the same asset under earlier non-funding leases whose combined terms exceed 65% of the asset's remaining useful economic life at the start of the earliest such lease
• A transitional exclusion applies where the plant or machinery had been leased for at least 10 years in total before 1 April 2006 and the same lessor was in place on the last day before that date on which the asset was subject to a lease