Finance Leasing Manual - FLM1.21

Rental structures

These days finance lease rental schedules can be structured in all kinds of ways; for example, the initial rentals could be nil or much lower than the amount needed to pay off the debt. Subsequent rentals are then correspondingly higher. This has led to tax planning opportunities, particularly where the old Schedule A 'entitlement' basis of recognising income applies: 'interest' earnings could be recognised for accounts purposes much sooner than they are taxable. Schemes which avoid or defer tax, and the legislation enacted to counter them are described at FLM6.51 onwards