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HMRC internal manual

Corporate Intangibles Research and Development Manual

Finance leasing of intangible assets: lessees: scope

Finance lessees: whether asset within CTA09/PART8

As outlined in CIRD27020, in the hands of a finance lessee a finance leased asset appears on the lessee’s balance sheet along with assets which the lessee owns outright. Like any other asset, it will come within the scope of CTA09/PART8 if:

  • it satisfies the ‘asset conditions’ described in CIRD11000 onwards,
  • it does not come within the exclusions described in CIRD25000 onwards, and
  • it satisfies the time test described in CIRD11500 onwards.

These requirements are considered further below.

Asset conditions - points to note

  1. The accounting treatment of a finance leased asset in the hands of the lessee will not prevent the asset from being:
  • an intangible asset within FRS102 s18 (or IAS38/FRS105 s13/FRS10) (see CIRD11120),
  • a fixed asset as defined in CTA09/PART8 (see CIRD11170), nor, where relevant,
  • intellectual property as defined in CTA09/PART8 - the statutory definition of ‘intellectual property’ specifically includes a licence (see CIRD11150).
  1. The asset conditions do not include any requirement that an asset must legally be owned by the company in question.

  2. Nor does it matter whether the asset is within CTA09/PART8 in the hands of the finance lessor. For example, the finance lessor may have made an election to exclude computer software from the scope of CTA09/PART8 (CIRD25180).


A finance leased intangible asset may be excluded from CTA09/PART8 in the hands of the lessee company under the rules described in CIRD25000 onwards in the same way as an asset owned outright by the company. But the fact the asset is finance leased does not in itself cause the asset to be excluded. In particular, it does not fall within the ‘financial asset’ exclusion (CIRD25050).

Time test

In applying this test it will be necessary to determine when the rights represented by the finance leased asset were acquired (CIRD11505). This will be when the expenditure on them is ‘incurred’ under the rules described in CIRD11690. Since lease rental payments would be deductible in computing income under the general CT rules, the expenditure is regarded as incurred when it is recognised for accountancy purposes (sub-paragraph 4 of CIRD11690). That is when the finance leased asset is capitalised in the lessee’s balance sheet in accordance with GAAP.