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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Specific deductions: rent and rates: assets leased for employees

Rent paid under an arrangement whereby assets are leased by an employer for use by employees or directors will normally be allowable as a deduction in computing trading profits.

Where, however, the employer is a family-controlled company, the expense incurred by the company in leasing an asset for the use of a director or an employee who is a member of the family or household of a director may exceptionally be inadmissible. This is on the grounds that the expense is not incurred wholly and exclusively for the purposes of the trade (which in this case would be rewarding the service provided by the director or employee concerned). The approach set out in BIM47105 should be followed in deciding whether to challenge a leasing arrangement of this kind.

Similarly no deduction may be made in respect of expenditure incurred by a sole trader or partnership for the personal advantage of an employee who is a member of the family or household of the sole trader or, in the case of a partnership, of one of the partners.

As regards the restriction of a deduction in respect of rental charges paid for the hire of certain expensive motor cars, see:

  • BIM47725 if the lease was entered into on or after 1 April 2009 (6 April 2009 for unincorporated businesses);
  • BIM47780 if the lease was entered into before those dates.

For cross-references to the guidance on leasing, see BIM46805.

For details of the liability of the employee, see EIM21732.