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HMRC internal manual

Business Leasing Manual

Defining long funding leases: the three tests: the finance lease test: consolidated accounts

The finance lease test looks at the accounting treatment of the lease in the accounts of the lessor and of any person connected with the lessor. For this purpose, ‘accounts’ includes group accounts.

Connected person takes the definition in CTA10/S1122.

Without this rule it would be easy for a lessor to treat the lease as an operating lease and for the group to treat it as a finance lease, thus side-stepping the finance lease test.