Under SSAP21 the treatment of a finance lease for accountancy
purposes follows the economic substance of the transaction rather
than the legal form. The transaction is not treated as the hiring
of an asset. Instead, in accordance with the substance of the
transaction, the lessor is regarded as making a loan at interest to
the lessee to fund the lessee's acquisition of the asset in
question.
The accountancy treatment has no effect on the lessor’s
title to capital allowances (which depends on the legal
ownership).
