TTM10100 - Ship leasing: Defeased leasing: Outline
Concept of 바카라 사이트˜defeasance바카라 사이트™
Defeasance is a term applied to arrangements made by a borrower who sets assets aside to cover the liability. In the context of leasing it is used where arrangements are put in place to remove the usual risk of a lessor that payments will not be made under the lease.
Thus, under a straightforward finance lease, the lessor provides the finance that the lessee needs to acquire an asset. The lessor, as the owner of the asset, is entitled to claim capital allowances, and the tax benefit of these allowances may be passed on to the lessee in the form of lower lease rentals. But some finance leasing schemes do not involve the provision of new finance, and they are in substance no more than arrangements for the sale of the benefit of the capital allowances, with little or no risk to the lessor. Such leases are said to have been 바카라 사이트˜defeased바카라 사이트™, which is further explained at CFM11170.
Special rules for ships leased to tonnage tax companies
Tonnage tax companies cannot themselves claim capital allowances, and there are special rules (in FA00/SCH22/PART10) to prevent lessors claiming capital allowances if they have not provided the finance required to purchase the underlying asset.
No capital allowances are available if the lease is part of sale and lease-back arrangements, even if those arrangements do not involve defeasance, see TTM10200.
For new acquisitions, the special rules are intended to prevent allowances being given where there is:
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- 바카라 사이트˜cash defeasance바카라 사이트™, whereby the proceeds of the financing arrangement finds its way back into the banking system, for instance by a defeasance payment being deposited in a bank account from which the lease rentals are paid, or
- 바카라 사이트˜legal defeasance바카라 사이트™, whereby a third party assumes all the rental obligations under the lease in return for a defeasance payment from the lessee.
However, 바카라 사이트˜leveraged leasing바카라 사이트™ is effectively permitted, that is, the lessor may lay off (share) the risk with a third party, as long as the arrangements with the third party do not themselves involve defeasance.
How the special rules work
Defeasance schemes can take many forms, and so the rules work by denying capital allowances in cases where the arrangements remove the whole, or the greater part, of the lessor바카라 사이트™s non-compliance risk, see TTM10110.
When considering the extent of the lessor바카라 사이트™s non-compliance risk for this purpose, certain forms of security may be disregarded. These are known as 바카라 사이트˜excepted forms of security바카라 사이트™, see TTM10120Â and TTM10130.
References
| FA00/SCH22/PARA90 (defeased leasing) | |
| FA00/SCH22/PARA91 (excepted forms of security) | TTM17501 |
| FA00/SCH22/PARA92 (sale and lease-back arrangements) | TTM17536 |
| Meaning of defeased leasing | TTM10110 |