»Ê¹ÚÌåÓýapp

In contrast to the commercial accounting, the tax position differs depending on whether there is a finance lease or an actual loan.

Lessor / lender

• »Ê¹ÚÌåÓýapp taxable income of a lender is the interest receivable. From this is deducted the interest payable and other expenses. This is exactly the same as in the commercial accounts.
• »Ê¹ÚÌåÓýapp gross taxable income of a finance lessor is the gross rentals (‘interestâ€� and ‘capitalâ€� elements). From this is deducted interest payable, other outgoings and any capital allowances. Unlike the commercial accounts, the ‘loan repaymentâ€� (capital) element in the rentals is also taxable income but capital allowances are available instead if any expenditure qualifies for them.

For lessors, there may be cases where the true profits only emerge in a group’s consolidated accounts.

Lessee / borrower

• »Ê¹ÚÌåÓýapp taxable profits of a borrower are calculated by deducting the loan interest payable. This is the same as in the commercial accounts.

• »Ê¹ÚÌåÓýapp taxable profits of a finance lessee are calculated in principle in the same way as the commercial accounts, by deducting

  • the finance charge payable in accordance with correct accounting principles; this is normally the same as the figure in the commercial accounts; and
  • the depreciation on the leased asset in accordance with correct accounting principles; again, this is normally the same as the depreciation charged in the commercial accounts. »Ê¹ÚÌåÓýapp capital element of the rental payments will normally follow the accounts depreciation charges.

Whether the tax treatment of the lessee actually follows the commercial accounts depends mainly on whether those accounts were drawn up in accordance with GAAP.