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only set the allowance off against other income from that particular special leasing activity.290 Unused allowances may be rolled forward indefinitely.291 There are separate rules for corporation tax.292 The effect of this is to make equipment leasing an unattractive proposition, except when it is a full-time business. |
The right to allowances does not apply where the plant or machinery is let for use in a domestic house.293 |
The 1992 restriction on first year allowances, which applied where the lessor carried on a trade of leasing, also applies here.294 |
24A.2.12.3 Overseas Leasing |
A number of special rules apply to overseas leasing. First it may attract rates of 25%, 10% or 0%. Overseas leasing is defined a meaning a lease under which the lessee is not resident in the UK and does not use the asset exclusively for earning profits chargeable to tax.295 So if a person is resident in the UK and the asset is exclusively for the purposes of earning profits which are chargeable to tax in the UK the normal 25% rate will apply. However, ‘profits or gains chargeable to UK tax’ do not include those arising to a person who can claim relief under a double taxation agreement, eg the UK branch of a foreign company.296 The full rate of 25% can also be claimed if the asset comes within what the Act calls ‘protected leasing’ a term which covers both short term leasing of plant or machinery and certain arrangements for ships, aircraft or transport containers.297 |
| If the overseas leasing does not come within the notion of protected leasing the rate of writing down allowance is restricted to 10%, unless the long life asset rate of 6% would apply anyway.298 The restriction to 10% is to apply only for the designated period which means broadly 10 years from the time the person brought the asset into use.299 |
However even that reduced rate of allowance is not available if the asset is used for a non-qualifying purpose and certain other conditions are satisfied eg the lease is for more than 13 years.300 |
| In applying the 10% rate a separate overseas leasing pool must be established; a long life asset must be the subject of a separate asset pool as must any other asset required to be placed in a separate pool by other rules.301 A disposal from the overseas pool to a connected person may |