BLM15630 - Lease accounting: finance lease accounting: finance lessees: example 2: whether straight-line method acceptable
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.
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The Financial Reporting Standard for Small Enterprises (FRSSE) permits, but does not require, finance lessees which are 'small' companies to account for the interest portion of rentals by apportioning the total interest element evenly over the primary period of the lease. This method will usually defer somewhat the deduction for that element of the rentals. Where that method is used in the accounts of a small company, it may be followed for tax purposes. 'Small company', for this purpose, is defined in sections 247 to 249 of the Companies Act 1985. Subject to minor exceptions it is a company which has an annual turnover under £5.6 million, a balance sheet total of under £2.8m with an average number of employees of under 50 (and is not a member of a group with figures in excess of the same).