Finance Leasing Manual - FLM13.02

Sale and leaseback: economic purpose

It is also important to bear in mind that the economic purpose of a sale and finance lease-back transaction is for the trader (the lessee) to borrow money. If the borrowed money is used for trading purposes, no difficulties arise. But if what is effectively borrowed money is used for other purposes, or if the effects of the borrowing arrangements are largely circular (so that, broadly speaking, the funds end up back in the lender's hands) the only effect of which is to give the lessor capital allowances, such cases should be examined closely - see FLM13.35.