The table below summarises the net profit from a finance
lease for tax and accountancy purposes. The table shows receipts at
the top, then deductions and finally the profit.
| GAAP | Tax |
| Interest receivable
| Interest element of rents plus capital element of rents |
|
(less interest payable) |
(less interest payable) |
| (less other expenses) | (less other expenses) |
|
| (less capital
allowances)
|
|
Commercial profit |
Taxable profit |
The key difference is that the capital repayment element is
not part of the commercial earnings. But unless the lease is a long
funding lease (in which case FA97/Sch12 does not apply) it is part
of the tax earnings, although there may be a compensating deduction
for capital allowances depending on the nature of the asset.
