Finance Leasing Manual - FLM37.02

Part II Schedule 12: purpose

The sole purpose of Part II is to ensure that recognition for tax of rentals from finance leases, which do not have the capacity to turn income into capital, does not lag behind recognition in the accounts. It contains no rules about capital allowances disposal adjustment. Nor are there any 'catching up' provisions equivalent to Paragraph 13 when a lease comes within Part II part way through its term.

Where a lessor exits from a lease within Part II by indirect means which avoid ordinary disposal adjustments for capital allowances a report should be made to BTD4 Leasing.