Finance Leasing Manual - FLM11.09

Capital / revenue issues: hire purchase and lease purchase agreements

If the agreement provides for legal ownership of the asset to pass to the hirer or gives the hirer an option at any point to purchase the asset concerned, the arrangement should be regarded as a hire purchase or lease purchase agreement. Under such agreements part of the rental payments may be capital expenditure on the right to purchase the asset.

Guidance about hire purchase agreements is at IM710 onwards.
Guidance on the capital allowances consequences of hire purchase agreements when the asset is machinery or plant is at CA2180 onwards.