Finance Leasing Manual - FLM1.42

Influence of tax on rental streams

The sensitivity of finance lease rental rates to the tax regime, especially the capital allowances rules, is illustrated by the provision usually found in leases for expensive items of equipment (known as 'big ticket' leases) whereby the lessor is able to adjust the rentals if there are changes in the tax provisions affecting the lessor or if the lessor fails to obtain the expected capital allowances.