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HMRC internal manual

Business Leasing Manual

Defining long funding leases: election: following the accounts: operating leases - profits and losses on termination of the lease

Profits or losses that accrue to the lessor when the lease is terminated and the asset is sold are taxed or relieved when they arise (CTA10/S369 and ITTOIA05/S148F, BLM41035). The same applies to insurance proceeds, compensation and similar sums.

If a lessor wishes to follow the figures in the accounts it will need to demonstrate that its accounting policy delivers essentially the same figure for annual taxable profit that would be delivered following the strict statutory basis.