Finance Leasing Manual - FLM26.10
Comparison of tax and commercial profits
The table below summarises the net profit from a finance lease
for tax and accountancy purposes. The table shows receipts at the
top, then deductions and finally the profit.
SSAP 21 Tax
Interest receivable Interest element of rents
plus capital element of rents
-------------------------------------------------
(less interest payable) (less interest payable)
(less other expenses) (less other expenses)
(less capital allowances)
-------------------------------------------------Commercial profit Taxable profit
The key difference is that the capital repayment element is not part of the commercial earnings. It is part of the tax earnings although there may be a compensating deduction for capital allowances depending on the nature of the asset.
