Finance Leasing Manual - FLM40.07

Expenses incidental to creation of lease

The argument for regarding expenses incidental to the creation of the lease itself as revenue can probably be put in two ways, see FLM40.08. The argument for regarding such expenses as capital in nature is explained at FLM40.11.

Both revenue arguments start from the proposition that issues of this kind are to be judged in the context of the economic substance of the business in question and without relying too much on the niceties of legal form.

Lord Wilberforce in Strick v Regent Oil, 43 TC 55, said:
'What is an outgoing of capital and what is an outgoing on account of revenue depends on what the expenditure is calculated to effect from a practical and business point of view rather than upon the juristic classification of the legal rights, if any, secured, employed or exhausted in the process.'