Capital Allowances Act 2001 section 70YD

Increase in proportion of residual amount guaranteed: review of status

Section 70YD deals with what happens when a lessor enters into arrangements after a lease has started that increase the guaranteed residual value, and those arrangements would have caused the lease to be classified as a long funding lease had they been in place from the outset.

• Where a lessor under a non-long-funding lease enters into one or more arrangements that increase the proportion of the guaranteed residual amount after the lease's inception, and those arrangements would have made the lease a long funding lease had they existed from the start, the lease status must be reviewed.
• In these circumstances, the existing lease is treated as having terminated immediately before the latest such arrangement, and a notional new lease is treated as having begun immediately afterwards.
• The new lease is deemed to run for the unexpired portion of the original lease term, with both its inception and commencement of term falling on the date of the latest arrangement.
• The Treasury has the power to make regulations restricting how this section applies or operates.