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HMRC internal manual

Business Leasing Manual

Taxation of leases that are not long funding leases: legal expenses: revenue or capital expenditure

You should distinguish between:

  • expenses relating to the acquisition of the asset, and
  • expenses incidental to the creation of the lease itself (terms, rates and so on).

The capital argument is stronger for expenses relating to the acquisition of the asset, especially when the expenditure can fairly be viewed as incurred on the provision of plant and machinery for capital allowance purposes.

Whether legal expenses incurred in negotiating a finance lease are revenue or capital in nature has not been tested by the Courts or by the Upper or First-tier Tribunal. There are tenable arguments on both revenue and capital sides - see BLM37015 onwards. If you require any advice when you have established the detailed facts about the nature of the expenditure, please consult CTISA (CT&BIT).