Finance Leasing Manual - FLM49.01

FRS2: accounting for subsidiary undertakings

The background to FRS2 may be relevant because Schedule 12, FA 1997 makes the minimum charge to tax on a finance lease the higher of:

• the correct accountancy earnings of the lessor; and

• the correct accountancy earnings of any group of which the lessor is part.

This is to counter attempts to avoid Schedule 12 by showing a low profit or a loss in the lessor company (which is in the charge to tax) while showing a larger profit (the true profit) only in the consolidated accounts of the group. The consolidated accounts are not the accounts of any person and are otherwise not relevant for tax purposes. Schedule 12 breaks new ground in looking at the group position.