Finance Leasing Manual - FLM31.03

Part I Schedule 12 FA 1997: computational effect

A lease to which Part I Schedule 12 applies is subject to two principal computational effects under the Schedule. These are summarised briefly below but are described in more detail in FLM32.01 (accountancy measure of rentals) and FLM35.01 (capital allowances).

The first computational effect is that, in common with leases to which Part II applies, the accountancy rental earnings from the lease (the 'interest' on the 'loan' described as 'gross earnings' from the lease under SSAP 21) are recognised for tax for any period of account in which they exceed the rent taxable apart from Schedule 12. This is subject to provisions intended to ensure that ultimately the same sums are not brought into account for tax more than once.

The second computational effect is that it is not possible to side-step capital allowances balancing adjustments on exit from a Part I lease by arrangements to dispose of the leased asset indirectly. These rules do not apply to leases within Part II.