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HMRC internal manual

Business Leasing Manual

HM Revenue & Customs
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‘Income-into-capital’ schemes and back loaded leases: Definition of a Chapter 2 of Part 21 CTA 2010 lease: Condition A: finance lease wrongly treated as operating lease

The accounting treatment actually adopted in accounts said to be drawn up in conformity with GAAP is not always decisive in establishing whether the lease is a finance lease (or loan). The test is what the treatment ought to be. This is because the provisions refer to how the leasing arrangements ‘fall to be treated’ in accordance with GAAP (CTA10/S902(2)-(4)).

That said, the treatment of leasing arrangements in accounts drawn up under GAAP and attracting an unqualified auditors’ report is very strong evidence of the correct treatment. Where, exceptionally, you consider that operating lease treatment in such accounts may be incorrect you should take early advice from your advisory accountant.