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HMRC internal manual

Business Leasing Manual

HM Revenue & Customs
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Defining long funding leases: basic definition: transaction treated as lease under GAAP (CAA01/S70K (3) and (4))

The second of the definitions in CAA01/S70K applies to an agreement or arrangement where

  • it is (or should be) treated as a lease in accordance with GAAP (CAA01/S70K(3)), and
  • for the purpose of GAAP it is treated as conveying the right to use plant or machinery (CAA01/S70K (4)).

This definition encompasses transactions that are not leases, but which are accounted for as if they are leases.

Examples of arrangements that may fall within this definition are arrangements that are treated as leases under IFRIC 4 (for example outsourcing arrangements and take-or-pay and similar contracts) see BLM10025.

In addition, FRS 5 Reporting the Substance of Transactions, might require arrangements to be accounted for as a lease. Such arrangements would fall within the scope of scope of S70K (3) providing they met the conditions in S70K (4),