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HMRC internal manual

Business Leasing Manual

From
HM Revenue & Customs
Updated
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Taxation of leases that are not long funding leases: tax advantages: comparing leasing and lending - commercial accounting position

Finance leases

The commercial accounting position is the same for the finance lessor and for an actual lender. The commercial profit is simply the interest earnings on the finance provided less any expenses, including particularly the interest payable on the money borrowed to fund the lending or the leasing.

The commercial accounting position is the same for the finance lessee and for an actual borrower. The commercial profits of both are arrived at by deducting the interest payable and the depreciation of the asset (whether bought with the loan or leased through the finance lease).

Operating leases

The commercial accounting position differs substantially between an operating lessor, even where the lease is an alternative to borrowing, and an actual lender.