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HMRC internal manual

Business Leasing Manual

HM Revenue & Customs
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Lease accounting: finance lease accounting: finance lessees: checking how finance charges are allocated

Checking how a finance lessee’s finance charges are allocated between periods of account under GAAP is not likely to be worthwhile, except in the more unusual cases. But it is important to understand that judgements are being made (see BLM15040). The consequences are more likely to be material where there is something unusual about the lease terms - see Example 2 at BLM15600.

If the company is part of a group it is also relevant to consider the following

  • what methods of allocating finance charges are used within the group;
  • if different methods are used in different related companies find out why - is there, for example, an attempt to exploit timing differences between finance lessee and finance lessor members of a group;
  • if different methods are used at group and individual company level, find out why.

You should refer any cases where different methods of apportionment result in significant tax differences to CTIS (CT&BIT).