Finance Leasing Manual - FLM13.26

Sale and leasebacks: tax treatment of sale

Up to a point, the tax treatment of a sale and lease-back is the same as for a lease. The lessee pays rent under a lease agreement. The rent is (ordinarily) a revenue item and deductible as the asset is depreciated under SSAP21. But the fact that the prospective lessee already owns the assets to be leased influences the accounting, and may affect the tax treatment as well, see FLM13.28 onwards.