Leasing of Machinery or Plant – General Principles of Taxation

Revenue eBrief No. 030/24

Tax and Duty Manual 04-06-04 – Leasing of Machinery or Plant – General Principles of Taxation

Tax and Duty Manual Part 04-06-04 – Leasing of Machinery or Plant – General Principles of Taxation has been updated. This is to reflect the general legislative framework applicable when calculating taxable profits and gains related to leases of machinery or plant following the commencement of Finance (No.2) Act 2023 on 1 January 2024.

The manual sets out current Revenue guidance on general matters relating to the taxation of leases of machinery or plant, superseding previous guidance on the topic.

EXTRACT:

1 Introduction
A lease is an agreement where one party (the lessee) agrees to pay a specified rent for the use of a specific asset owned by another party (the lessor) for a fixed term.

For accounting purposes, a lease can be a finance lease (being a lease that transfers substantially all the risks and rewards of ownership of an asset to the lessee) or an operating lease (being a lease that does not transfer substantially all the risks and rewards of ownership of an asset to the lessee, or effectively a lease that is not a finance lease).

In law a lease typically remains a rental arrangement and is generally treated as such for tax purposes, unless the transaction has the hallmarks of a financing arrangement (the tax treatment of such leases is set out in section 299 of the Taxes Consolidation Act 1997) or the lease is in respect of a short-life asset (the tax treatment of which is set out in section 80A TCA).

This manual sets out the general tax treatment applicable to leases of machinery or plant, with particular regard to lease arrangements where the burden of wear and tear falls directly on the lessor. Although the contents of this manual applies to income arising from the leasing of cars, capital allowances available for cars and deductibility of car lease payments is set out in Tax and Duty Manual Part 11-00-01.

This manual sets out the general legislative framework1 applicable to the calculation of the profits and gains related to leases of machinery or plant from 1 January 2024, following the commencement of Finance (No.2) Act 2023. This document reflects current Revenue guidance on matters relating to the taxation of such leases, superseding all previous guidance on the topic.