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HMRC internal manual

Business Leasing Manual

Sale of lessor companies and similar arrangements: business of leasing plant or machinery: adjustments to the balance sheet figures: present value of a lease

Section 437C CTA2010

Where plant or machinery is subject to a lease the ascribed value takes into consideration the value of the lease to the lessor.

The calculation of the ascribed value is based on the amounts payable under the lease after the relevant time and the residual amount. The present value of these amounts is calculated using the rate implicit in the lease and if that cannot be determined the rate is based on LIBOR + 1% on the relevant day.

Charges for services and qualifying UK tax are disregarded and if the lessee has an option to continue the lease after the initial term and it is reasonably certain that the lease will be extended then the amounts payable in the extended period are included in the calculation.


An asset is leased out for a period of 10 years at a rent of 100 a year. The rate implied in the contract is 5%. It is anticipated that the asset will have a residual value of 1 at the end of the lease.

At the end of year 3 the lessor company is sold.

The remaining amount payable under the lease is 700 and the expected residual value is 1.

The net present value of these amounts is therefore £580.