CA28500 | PMA: Anti-avoidance: Finance leases - meaning of sale and finance leaseback

CAA01/S221

A sale and finance leaseback is very similar to an ordinary sale and leaseback. Broadly there is a ‘sale and finance leaseback’ if, after a person sells an asset, the asset is used for the purposes of an activity carried on by that person or a connected person and the availability of the asset for such use is directly or indirectly as a consequence of a finance lease.

It does not matter if there is a gap between the sale and the leaseback. All that matters is that the asset is not used for any qualifying activity other than leasing during the gap. It also does not matter what the asset is used for after the leaseback.

Example

Robert has a yacht that he uses in his trade of running cruises. He sells the yacht to Jimmy. Jimmy leases the yacht out for a few months and then he leases it back to Robert under a finance lease. This is a sale and finance leaseback. Jimmy used the yacht for leasing and nothing else during the gap between the sale and the finance leaseback. If, however, Jimmy had used the yacht for running cruises before he leased it back to Robert there would not be a sale and finance leaseback.