BLM30215 - Taxation of leases that are not long funding leases: How tax advantages arise: timing differences - lender, a worked example - part 3 of 4
By contrast to the tax consequences for the finance lessor (see BLM30210), where an actual loan is made the lender’s tax computation will look something like this on similar assumptions:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Totals | |
|---|---|---|---|---|---|---|
| Interest receivable | 72 | 56 | 40 | 24 | 8 | 200 |
| Less interest payable | 58 | 45 | 32 | 19 | 6 | 160 |
| Gross profit | 14 | 11 | 8 | 5 | 2 | 40 |
| Less other expenses | 8 | 4 | 4 | 4 | 0 | 20 |
| Taxable profit | 6 | 7 | 4 | 1 | 2 | 20 |
| Tax paid at 30% | 2 | 2 | 1 | 0 | 1 | 7 |
In both cases
- the timing of receipts and payments is identical
- the same amount of tax is due from both the lessor and the lender (£7 in each case)
but the tax timing is quite different.