B3.340A Hire purchase of plant and machinery and similar contracts
Subject to the exceptions noted below, where a person incurs capital expenditure on the provision of plant or machinery for the purposes of his qualifying activity or a 'corresponding overseas activity' under a contract providing that he shall or may become the owner of the asset on completion of the contract, for capital allowances purposes the asset is treated as owned by him (and not by any other person) at any time when he is entitled to the benefit of the contract1. This legislation therefore applies both to hire purchase and conditional sale agreements, but does not apply to a credit sale agreement under which the title to ownership of the asset passes immediately but payment is deferred.
A corresponding overseas activity is one which would be a qualifying activity if the person carrying it on were resident in the UK2. The inclusion of such activities ensures that hire purchase contracts with non-residents are treated in the same way as contracts with residents in comparable circumstances.
The general rule does not apply to a contract which, in accordance with generally accepted accounting principles, falls to be treated as a lease3; in such a case, the lessee under the contract will only be treated as the owner of the plant or machinery, and thus able to claim capital allowances, if the contract falls to be treated as a finance lease (see B3.340D), or would be so treated if the lessee did prepare