Corporation Tax Act 2010 section 379

Lessee under long funding operating lease

Section 379 reduces the deductions that a lessee under a long funding operating lease of plant or machinery may claim when calculating its profits for corporation tax purposes, by reference to the expected loss in value of the leased asset over the lease term.

• Where a company leases plant or machinery under a long funding operating lease, its allowable deductions for corporation tax are reduced by the expected gross reduction in value of the asset over the lease term
• The expected gross reduction in value is the starting value of the asset minus its expected market value at the end of the lease
• The reduction attributable to any particular period of account is apportioned on a time basis according to how much of the lease term falls within that period
• Because the lessee is entitled to claim capital allowances on the leased asset, it effectively obtains tax relief through those allowances for the portion of lease payments that it cannot deduct from its trading profits