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HMRC internal manual

Business Leasing Manual

Taxation of leases that are not long funding leases: finance lessees: taxation generally: SP3/91 and IAS

The view set out in BLM32210 was first formally set out in Statement of Practice 3 of 1991. The guidance in this manual retains the same approach but now refers to GAAP, rather than just to SSAP 21, making it clear the same principles apply to entities accounting under IFRS.

The use of SSAP 21 in this way (and by inference IAS 17) was approved by the Court of Appeal in the case of Threlfall v Jones (1993) 66TC77. It contains no concessional element. In particular it involves no deduction for depreciation as such. The allowance of the depreciation charge is simply a means of ensuring that rentals are deducted for tax purposes in a manner consistent with the accruals concept.