BIM61101 - Leasing: Finance leasing: tax
treatment: introduction
A finance leasing transaction is accounted for as if it were the
making of a loan to fund the purchase of the asset concerned, see
BIM61030 onwards. However, the tax
treatment of a finance lease follows the legal form of the
transaction, which is the hiring of an asset by the lessor to the
lessee:
- rentals are wholly revenue items - no part
is regarded as the repayment of a loan;
- rental rebates are wholly revenue items,
see
BIM61160;
- whatever machinery and plant capital
allowances are due go to the lessor as legal owner of the asset,
unless there is a purchase option in a lease in which case the
allowances go the hire purchase lessee, see CA23300;
- industrial buildings allowance goes to the
holder of the `relevant interest', see CA33000.
BIM61105 - BIM61185 give guidance on the tax treatment of
finance lessees.
BIM61190 - BIM61195 give guidance on the
tax treatment of finance lessors.
