BLM00650 - 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.
In general, operating lease payments can be thought of as reflecting the market rate for leasing the asset concerned and not as containing an interest and capital element.
However, operating lease rentals are not always based on the market rate for the asset concerned and such leases can function as financing transactions. The accountancy treatment always reflects the legal form of the transaction (hire of an asset), where the lease is classified as an operating lease, but the commercial reality can be different, as explained at BLM00060 and BLM00065.