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

Lessee under long funding finance leases: right-of-use leases

Section 148GA adjusts the income tax deduction available to a lessee under a long funding finance lease when there is a change in the amounts payable under the lease that triggers a remeasurement or other accounting entry in the lessee's accounts.

• Applies where a trader leasing plant or machinery under a right-of-use long funding finance lease experiences a change in lease payments during a period of account
• Only triggered where the payment change leads to either a remeasurement of the lease liability in the accounts or to an accounting deduction that is not categorised as interest expense, depreciation or impairment of the right-of-use asset
• The tax-deductible amount for lease payments (after any cap imposed by section 148G) is increased or decreased to reflect the accounting remeasurement or deduction arising from the change in rentals
• No adjustment is made where the remeasurement or deduction instead gives rise to additional capital expenditure eligible for capital allowances under section 70D of the Capital Allowances Act 2001