BLM00705 - Introduction: why lease: overview of tax and other benefits of leasing
This manual is being updated to reflect FRS 102 (2024 amendments). For guidance on the tax treatment of accounts prepared under IFRS 16 or the revised FRS 102, please refer to pages within the BLM50000 chapter.
The content of this page has been updated and transferred to BLM10011. This page will be archived at the end of February 2026.
BLM00710 gives a very brief overview of how the tax advantages of a lease arise. Tax advantages are traditionally associated with longer finance leases, but can also arise on shorter (say 5-year) finance leases and certain operating leases.
In principle, the tax advantage of a finance lease of plant or machinery over a loan arises from the timing gains which may be generated by the capital allowances due to the lessor. Capital allowances should not, in principle, generate an 'extra' relief overall.
However, lessors and their advisers have devised - and continue to be very active in devising - various avoidance schemes which distort this basic analysis. There is an overview of leasing anti-avoidance rules at BLM01000.