Finance Leasing Manual - FLM11.02

Finance lessees: tax treatment of rentals paid: Statement of Practice 3/91

Statement of Practice (SP) 3/91 sets out the Board's view for leases entered into after its date of publication, 11 April 1991. Notes supplementing the guidance given in the SP appeared in the February 1995 issue of Tax Bulletin. SP3/91 and the Tax Bulletin article are reproduced at Appendices 1 and 2 of this manual.

SP3/91 is concerned with the treatment of finance lessees. It has no direct bearing on the timing of finance lease rentals as receipts in the hands of lessors.

SP3/91 arises out of an accounting standard (SSAP No.21; Accounting for leases and HP contracts) issued in 1984 but only adopted by the Revenue, in respect of lessees, for leases entered into on or after 12 April 1991. For leases entered into up to 11 April 1991, the standard practice was to deduct lease rentals as they arose under the lease agreement, the accounting treatment notwithstanding. SP3/91 does not apply to these older leases.