In the case of a long funding finance lease, the lease
rentals are restricted to the finance charges that are (or would
be) shown in accounts prepared under GAAP.
The effect of this restriction is that the lessee obtains a
deduction for the full amount of the rental payments, partly by way
of a deduction for the finance charge element and partly by way of
capital allowances. The capital allowances computations ensure that
if a lease terminates early the appropriate capital allowances are
available to the lessee, see CA23825.
The same principle applies where, exceptionally, the lease is
accounted for as a loan.
