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HMRC internal manual

Business Leasing Manual

HM Revenue & Customs
, see all updates

Taxation of leases that are not long funding leases: finance lessees: termination adjustments: terminal rebate - SP3/91 not applied

In those very rare cases where GAAP has not been followed (and so the principle first articulated in SP3/91 has not been applied), the rentals that have been relieved for tax purposes may not correspond with the depreciation in the accounts. Likewise, the amount to be recognised on disposal will not correspond to the amount credited in the accounts. If all the rents paid under a lease subject to a ‘pre SP3/91’ practice have already been written off, the full amount of the rebate should be taxed irrespective of the accounting entries.

Leases to which SP3/91 may not have been applied include leases entered into before 12 April 1991 and some post 12 April 1991 leases which have been afforded the old treatment. SP3/91 may not have been applied to some lease agreements entered into on or after 12 April 1991 because computations may have been prepared on the former basis and this may have been mistakenly accepted in some cases. See example at BLM32360.