Corporation Tax Act 2010 section 381

Interpretation of Chapter

Section 381 provides definitions and interpretation rules for the key terms used throughout the chapter on long funding leases of plant and machinery.

• The chapter adopts the same definitions and classification tests for long funding leases as those found in the Capital Allowances Act 2001, including the finance lease test, lease payments test, and useful economic life test.
• A long funding lease is classified as either a "long funding finance lease" or a "long funding operating lease" — any long funding lease that does not qualify as a finance lease is treated as an operating lease.
• The "residual value" of plant or machinery under a long funding operating lease is its estimated market value at the end of the lease term, less the estimated costs of disposal.
• Where amounts are written off on a straight-line basis, this means the total sum is spread evenly on a time basis across each accounting period that falls within the writing-off period.