The sale and long funding leaseback scheme
41.The sale and leaseback avoidance scheme is also based on arrangements that are commercially equivalent to a secured loan. An owner sells plant or machinery used in their business to a finance provider and leases it back when it is worth more than its original cost to the owner. The aim is that the seller will obtain increased capital allowances entitlement where in substance they have received a loan and there has been no change in the use of the asset.
42.This measure provides a rule that limits the qualifying expenditure that can be claimed by the lessee under the long funding leaseback to the amount that has been brought in as disposal proceeds by the seller (or head lessor). Where the seller or head lessor has not claimed capital allowances the qualifying expenditure will be limited to the lower of market value or the cost, to the seller, of the plant or machinery.
