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assets acquired under Lease purchase

Can you claim annual investment allowance on assets acquired under Lease purchase?

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Clients bought an asset costing £50k to claim AIA, his year end is 31/3.

He has financed it using lease purchase where he has a final optional payment of £75 to buy it outright. The process is almost identical to HP apart from the fact he doesn't own the asset until the final payment is made.

I think he has probably ballsed up and cant claim AIA. Am i correct?

Replies (20)

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By Dib
30th Mar 2017 17:21

Have a look at CA23310.

Basically says that a person may pay for an asset in instalments. If so the seller may keep ownership of the asset until the last instalment has been paid. A hire purchase contract is a contract like that. Another name for such a contract is a lease purchase contract.

When a person buys an asset under a hire purchase type contract the person cannot satisfy the ownership condition that has to be satisfied for the expenditure to be qualifying expenditure for PMA while the payments are being made. That is because ownership does not pass until the last payment is made.

The legislation (in Section 67 CAA) treats the person making the payments under the contract as the owner of the asset as soon as that person is entitled to the benefit of the contract. It also stops anyone else, even the actual owner, being treated as the owner of the asset for CA purposes. This means that when the buyer / lessee becomes entitled to the benefit of the contract the seller has to bring a disposal value to account.

I appreciate this is not the legislation itself but a helpful bit of guidance nontheless.

So, looks like he can claim CAs, and AIA if the asset qualifies for AIA

Thanks (2)
By Ruddles
30th Mar 2017 17:50

"The process is almost identical to HP apart from the fact he doesn't own the asset until the final payment is made."

Why 'almost'?

Out of interest, has he taken delivery of the asset yet?

Thanks (1)
Replying to Ruddles:
wolfy
By rob winder
30th Mar 2017 18:07

"almost" as the asset isn't invoiced to the company but the finance provider as opposed to HP where the client would be invoiced not the finance company.

I'm not actually sure if he has taken delivery to be honest. The invoice to the supplier is dated 23/3 if that makes any difference.

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By Dick Stastey
30th Mar 2017 18:00

"Almost identical to HP, apart from the fact he doesn't own the asset until the final payment is made."

So exactly like HP then!

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Replying to Dick Stastey:
wolfy
By rob winder
30th Mar 2017 18:17

So the answer to the question is? He can or can't?

Funded by HP he can claim AIA, I don't think he can with lease purchase.

Presumably if it was EXACTLY the same as HP it would be called HP not lease purchase. Think you will find there are a number of differences between the two.

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Replying to rob winder:
By Ruddles
30th Mar 2017 18:56

Since you appear to have made up your own mind, why bother to ask the question? (Although your answer is almost certainly wrong.)

You may want to read the full text of the HMRC guidance referred to above - that should allow you to convince yourself of the appropriate treatment.

You may also want to find out if/when the asset has been brought into use - that is likely to be of some importance.

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Replying to Ruddles:
wolfy
By rob winder
31st Mar 2017 09:29

Why bother? because I haven't made my mind up! My initial interpretation/ thought was it wouldn't be allowable as the client wasn't invoiced for the item but the lender was.

After reading the comments here and carrying out further investigation I have changed my initial viewpoint.

Is that not the point of the forum, rather than people making nit picking, snidey remarks that don't actually add any value to the thread?

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Replying to rob winder:
By Ruddles
31st Mar 2017 09:51

If you think that suggesting that you want to check the date of delivery is nit-picking and adds no value then sod off.

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Man of Kent
By Kent accountant
30th Mar 2017 21:28

This old chestnut, been discussed plenty on here before and I think the general consensus is if its an HP agreement then CA's including AIA can be claimed as soon as the asset is brought into use.

CAA01/S67

https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23310

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Replying to Kent accountant:
By Ruddles
30th Mar 2017 21:39

Likewise with a lease purchase agreement, provided that the additional conditions are met. It's not for you nor I, but the OP, to confirm whether that is the case.

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Replying to Ruddles:
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By mumpin
31st Mar 2017 09:56

Ruddles, you've done a 180 degree u-turn on this.
Hats off to you.
It takes a brave man to admit when he is wrong!

Thanks (1)
Replying to mumpin:
By Ruddles
31st Mar 2017 10:13

What are you blethering about? I haven't changed my mind on anything. I have always said, and will continue to say, that AIAs and WDAs are available on HP and (most) LP acquisitions. And that they are not available on finance lease 'acquisitions'. I can only assume that you don't understand the difference between a finance lease and a lease purchase.

Let's see how brave you are.

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Replying to Ruddles:
wolfy
By rob winder
31st Mar 2017 12:21

You're a pleasant easy going type of person aren't you.

"Lets see how brave you are"!!!!!

What a tool.

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Replying to rob winder:
By Ruddles
31st Mar 2017 12:33

It was mumpin that suggested that it takes a brave man to admit that he's wrong. Mumpin is wrong, so I'm just wondering whether he's brave enough to admit it - as you were, to your credit.

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Replying to rob winder:
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By Jackie0802
31st Mar 2017 12:34

Congratulations, you have been Ruddled. She thinks she has entered a competition to find the most arrogant obnoxious 'contributor' to any website anywhere ever. And she's winning!! Probably a plain little mouse in the real world, but robustly rude and nasty on here. A tool indeed.

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Replying to Jackie0802:
By Ruddles
31st Mar 2017 12:57

Jackie0802 wrote:
She thinks she has entered a competition to find the most arrogant obnoxious 'contributor' to any website anywhere ever.

Well done -you're now at the top of the list.

I find that being robustly rude and nasty is the only way to deal with some of the morons that populate this site.

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Replying to Ruddles:
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By Jackie0802
31st Mar 2017 13:03

You speak as though you don't have the option to ignore that which you are intolerant to. The fact that you feel compelled to respond in such an ugly and repugnant way on a forum where you can hide anonymously behind your screen rather than just pass by the people you term as morons speaks volumes about you. I doubt you would have the balls to respond to people in the real world in those terms. You are the epitome of a spineless troll.

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Replying to Jackie0802:
By Ruddles
31st Mar 2017 13:16

Hmmm ... abuse from someone that has just jumped in to hurl insults. At least I took the trouble to at least try and answer the OP's question. I wonder who the real troll is here?

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Replying to Ruddles:
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By Jackie0802
31st Mar 2017 19:45

Look to your left, my own name and photo. I don't have the need to hide behind a pseudonym and a picture of an old dog. Unless of course.....

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Replying to Jackie0802:
By Ruddles
31st Mar 2017 20:09

It may not be a pseudonym, but ...

And if you think that is out of order, just remember who it was that jumped into this thread to hurl unprovoked insults without any attempt to discuss the topic in hand.

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