Finance Leasing Manual - FLM31.01

Part I Schedule 12 FA 1997: definition of a Part I lease: introduction

Part I of Schedule 12 is aimed at finance leases with the capacity to allow the lessor (or a connected person of the lessor) to get back at least part of the return on the lessor's outlay on a leased asset (in substance interest on a loan) as a capital sum, not as taxable rental income.

A lease (see FLM31.07) is one to which Part I applies if it simultaneously satisfies the five conditions set out in Paragraph 3 of the Schedule (see FLM31.11). Once it has satisfied those conditions it remains within Part I until it is terminated or assigned to (broadly) an unconnected person.