Finance lessors can offer any desired rental profile.
However, the provisions of FA97/SCH12 (see
BLM70000 onwards) have made the
calculations more complex and require sophisticated computer
programs. This is because Schedule 12 makes the minimum taxable
earnings equal to the accountancy earnings in order to counteract
leasing arrangements which defer or avoid tax.
There is therefore an iterative process between the
computation of the rental the lessor needs to charge and the
computation of the accountancy earnings. If the rental goes up the
accounts earnings will go up and so will the tax charge; that
increased tax charge then has to be fed back into the rental
computation which, in turn, feeds back into the accountancy
earnings; and so on. Normally the iterative process will converge
on an appropriate level of rentals or, at least, one that is
sufficiently close for practical purposes.
