Finance Leasing Manual - FLM12.10

Lease classification: tax effect

If the terms of the agreement are inconsistent with the accounting classification, it may be worth considering if different classification would materially affect the recognition of rental payments for tax. The treatment for both finance and operating leases is outlined at FLM2.01 onwards. If the difference is material you may want to ask what consideration was given to lease classification in drawing up the accounts. You should also consider consulting Revenue accountants for advice at an early stage of any such enquiries.