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HMRC internal manual

Business Leasing Manual

From
HM Revenue & Customs
Updated
, see all updates

Taxation of long funding leases: basic principles: definition of long funding finance lease and long funding operating lease

The taxation of long funding leases depends on whether the lease is properly accounted for under GAAP as a finance lease (or loan) or as an operating lease

  • a long funding finance lease is a long funding lease that is (or should be) accounted for by the lessor as a finance lease under GAAP.
  • a long funding operating lease is a long funding lease that is (or should be) accounted for by the lessor as an operating lease under GAAP.

Therefore, although a lease may meet the finance lease test where it is accounted for as a finance lease by a person connected to the lessor (BLM20210) it is only a long funding finance lease where is it properly accounted for as a finance lease by the lessor itself.