BLM00035 – Introduction: Leasing: Lease classification

Accountants classify leases as finance leases or operating leases.

The nature of the asset does not affect the classification of the lease. The characteristics of a finance lease of land are therefore the same as those of a finance lease of plant or machinery.

Lease classification – whether a lease is a finance lease or an operating lease – may be important for tax purposes. An outline of the distinction is at BLM00040 and BLM00045. Further details are at BLM11000 onwards.