BLM00610 - Introduction: Commercial substance and structure: Finance leases: Finance lease rentals
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.
Typically a finance lease is structured like a repayment mortgage. That is, in substance, the rentals in the early years are mostly 'interest' while towards the end they are mostly loan' repayment. The following simple example shows a typical profile for a ten year lease.
Diagram of a typical profile for a ten year lease
See BLM00630 for a brief description of alternative profiles.