Finance Leasing Manual - FLM13.38

Sale and leaseback: tax treatment of leaseback

Rentals under lease-back arrangements are generally deductible as under any other finance lease (see FLM11.01 onwards), subject to the guidance on defeasance arrangements (see FLM13.36). But even outside defeasance situations it may sometimes be appropriate to consider in more detail the deductibility of rents payable under the lease-back under the general rules for deductions (under Schedule D Case I/II or Schedule A as the case may be). There is also specific legislation on sale and lease-back transactions in Sections 779-785 ICTA 1988; see IM4800 onwards for detailed guidance.