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

Cases where ss 148A to 148F do not apply: lessor also lessee under non-long funding lease

Section 148FB disapplies the long funding lease rules in sections 148A to 148F where a person who leases plant or machinery under a non-long funding lease then sub-leases that same plant or machinery to someone else under a long funding lease.

• Where a person leases plant or machinery under a lease (lease A) that is not a long funding lease, and then grants a sub-lease (lease B) of that plant or machinery as lessor, and lease B is a long funding lease, special rules apply
• In these circumstances, the long funding lease provisions in sections 148A to 148F do not apply to lease B — meaning the normal long funding lease income tax treatment is switched off for the sub-lease
• This disapplication reflects the fact that the person's interest in the plant or machinery is only as a lessee under a non-long funding lease, so the full long funding lease regime would be inappropriate
• However, if lease A is subsequently reclassified as a long funding lease (because the lessee's tax return treats it as such under section 70H of the Capital Allowances Act 2001, and it remains so classified), the disapplication is treated as never having applied — meaning sections 148A to 148F will then apply to lease B retrospectively