Finance Leasing Manual - FLM40.03

Legal expenses: revenue of capital expenditure

There is a distinction between

• expenses relating to the acquisition of the asset, and

• expenses incidental to the creation of the lease itself (terms, rates and so on).

The capital argument is stronger for expenses relating to the acquisition of the asset, especially when the expenditure can fairly be viewed as incurred on the provision of plant and machinery for capital allowance purposes.

Whether legal expenses incurred in negotiating a finance lease are revenue or capital in nature has not been tested by the Courts or the Special Commissioners. There are tenable arguments on both revenue and capital sides - see FLM40.07 onwards. If you require any advice when you have established the detailed facts about the nature of the expenditure, please consult BTD4 Leasing.