Finance Leasing Manual - FLM31.07

What counts as a lease of an asset

Before the five conditions described in the following paragraphs can be considered it is necessary to establish that 'a lease of an asset is or has been granted' (Paragraph 2(1)(a) Schedule 12 FA 1997). In most cases the position will be self-evident and only in exceptional cases will it the point be arguable.

'Lease' is defined in Paragraph 30(1) Schedule 12 FA 1997 in broad terms drawn from the sale and leaseback anti-avoidance legislation in Sections 779-785 ICTA 1988 (described in IM 4800 onwards). The first part of the definition (concerning land) is drawn from S779(12) and the second part (assets other than land) comes from S785. Asset is defined as 'any form of property or rights' (Paragraph 30(1)). Essentially a lease is any agreement or arrangement for the hiring of any sort of asset, wherever situated and including intangibles and intellectual property of all descriptions, such as rights in a film or book.

A lease of land is 'granted' within the meaning of Paragraph 2(1)(a) Schedule 12) even though the agreement for a lease may not be followed up by the formal grant of a lease on completion. And a lease of an asset other than land is 'granted' simply by the making of an agreement to hire the asset.