Corporation Tax Act 2010 section 372

Lessor also lessee under non-long funding lease

Section 372 deals with the situation where a company sub-leases plant or machinery under a long funding lease, but holds that plant or machinery itself under a lease that is not a long funding lease.

• Where a company leases in plant or machinery under a non-long funding lease (Lease A) and then sub-leases it out under a long funding lease (Lease B), the normal long funding lease rules for lessors (sections 360 to 369) are switched off for Lease B.
• This means the company is not taxed as a long funding lessor on Lease B in these circumstances — instead, the ordinary leasing rules apply to its position as sub-lessor.
• However, if the lessee subsequently files a valid tax return treating Lease A as a long funding lease (under section 70H of the Capital Allowances Act 2001), section 372 is treated as never having applied to Lease B, and the full long funding lease rules take effect for Lease B from the outset.
• If a tax return that initially treated Lease A as a long funding lease is later amended so that Lease A is no longer treated as a long funding lease, section 372 applies again to Lease B, switching off the long funding lessor rules once more.