Finance Leasing Manual - FLM26.08

Back loaded leases: lessors' within Sch D Case I

Where the leasing was a trade taxable under Schedule D Case I lessors argued that their taxable earnings could not be more than the rent actually receivable under the lease for the accounting period. This is a tenable view but we believe that the better view is to follow the accountancy as far as possible, as was done for rental payments by lessees in Gallagher v Jones in 1993 (66 TC 77). This technical argument has not been resolved - Schedule 12 FA 1997 effectively applies the Revenue's view by statute.