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HMRC internal manual

Business Leasing Manual

Taxation of leases that are not long funding leases: finance lessors: general taxation issues: 'grossing up'

Prior to 1997 finance lessors could account for permanent tax advantages (such as receipt of development grants) for by a process of ‘grossing up’. That is by showing a standard rate tax charge in respect of the (actually tax-free) profit in question, and increasing the profit by that tax charge, so that the after-tax profit from the lease is unchanged.

This accounting methodology is no longer allowed.