Finance Leasing Manual - FLM31.83

Fifth condition: qualifying lump sum

A 'qualifying lump sum' is defined in Paragraph 4(5) Schedule 12 FA 1997. It has a meaning which is close to, but not identical with, that of a 'major lump sum' in Paragraph 3(2). See FLM31.38 onwards for a detailed description of the definition of a major lump sum.

The similarities are that both a 'qualifying lump sum' and a 'major lump sum':

• must have excluded from it any sum which is 'rent';

• must contain an amount which, in accordance with UK accounting standards correctly applied, counts as a return on investment in respect of the finance lease (or loan).

The difference is that a 'major lump sum' but not a 'qualifying lump sum' must also contain an amount which in accordance with UK accounting standards counts as a repayment of that investment. In short a 'qualifying lump sum' but not a 'major lump sum' may consist solely of return on the investment, in substance interest.