Finance Leasing Manual - FLM27.13

Part II Schedule 12 FA 1997: back-loaded leases

Part II of Schedule 12 is concerned with the deferral of tax generated by back-loaded finance leases. These are leases where the rentals start low and increase over time. At the end of the day the lessor gets back the full capital cost of the asset (the 'loan') plus a commercial rate of interest. The interest will be more than under a conventional 'straight-line' lease where the rental payments are level. This is because the 'loan' is not repaid as fast and so there is more interest.