Business Leasing Manual

BLM00510 - Introduction: Lease taxation: Lease not Long Funding Lease: Operating lessees

This manual is being updated to reflect FRS 102 (2024 amendments). For guidance on the tax treatment of accounts prepared under IFRS 16 or the revised FRS 102, please refer to pages within the BLM50000 chapter.

For tax purposes the timing of rental deductions under an operating lease follows the correct application of GAAP.

In certain cases, the deduction for the cost of hiring a car which can be made in calculating the profits of a trade is restricted. A 15% restriction applies to cars  with CO₂ emissions over certain levels.  For leases on cars costing more than £12,000 and entered into before 1 April 2009 for companies and before 6 April 2009 for individuals, the deductions were also restricted, see BIM47714.

Note that different rules may apply if the lease is a long funding lease, see outline at BLM00550 and detail at BLM20000.

Further details on the taxation of operating lessees is at BLM12005 (lease not a long funding lease) and BLM40000 (long funding leases).