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HMRC internal manual

Corporate Intangibles Research and Development Manual

Finance leasing of intangible assets: outline

Hire of intangible assets

Most transactions involving the hiring out (or licensing) of intangible assets are classified for accounting purposes as operating leases. The rules in CTA09/PART8 apply as they stand to such transactions. Note in this connection that:

  • the rights of the licensee company may count as an intangible asset within the rules even though they do not appear as an asset on its balance sheet (see CIRD11170),
  • the statutory definition of ‘intellectual property’ specifically includes a licence (see CIRD11150).

Finance leasing

But like other assets the hiring out of intangibles (however the arrangements are labelled) can in principle be regarded as a finance lease for accounting purposes. In practice, computer software is the most likely asset to be made subject to such arrangements.

The rules in CTA09/PART8 apply without adaptation to a finance leased intangible asset in the hands of the lessee.

But special provisions are required to bring finance leased assets within the scope of CTA09/PART8 in the hands of the lessor. These are contained in regulations (SI2002/1967) which take effect from 1 April 2002. Not all finance leases of intangible assets are brought within CTA09/PART8 in this way. And for those which are the computational rules are slightly modified.

Location of guidance

The accountancy background is described briefly in CIRD27020.

The application of the rules in CTA09/PART8 to finance lessees is discussed in CIRD27030 and CIRD27035.

The special rules for finance lessors are the subject of CIRD27050 onwards.