Introduction The lease and long funding leaseback schemes
39.The lease and leaseback avoidance involves an asset owner who has claimed capital allowances on that asset granting a long funding finance lease of the asset to another person who leases the asset back to them under a long funding operating lease. The intention is that the lessor receives a lump sum that is commercially equivalent to a loan which is neither taxed as income nor brought into their capital allowances computation, leaving the lessor with a continuing entitlement to capital allowances over and above the net cost of the asset to them. The timing of the benefit can be enhanced if the lessee under the leaseback can claim a first year allowance.
40.This measure will ensure that the person granting the long funding lease is taxed on the lump sum received and that on reacquisition there is capital allowance symmetry. It also removes the lessee’s entitlement to first year or annual investment allowances.