Income Tax (Trading and Other Income) Act 2005 section 148D

Lessor under long funding operating lease: periodic deduction

Section 148D provides the rules for calculating the tax deduction available to a trading lessor of plant or machinery under a long funding operating lease, based on the expected depreciation of the asset over the lease term.

• A person carrying on a trade who leases out plant or machinery under a long funding operating lease may claim a tax deduction when calculating their trading profits for each period of account.
• The deduction is based on the expected gross reduction in the asset's value over the lease term — calculated as the starting value minus the expected residual value at the commencement of the lease.
• The portion of that total expected depreciation attributable to any given period of account is determined on a time-apportioned basis, according to how much of the lease term falls within that period.
• The meanings of "starting value" and "residual value" are defined in related sections 148DA, 148DB, and 148J respectively.