BLM00010 | Introduction: Leasing: What is leasing?

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.

A lease is an agreement whereby one person (the lessor) hires an asset to another (the lessee) for a series of rental payments over an agreed period of time.

Leasing can cover anything from the hiring of a power tool for a day or so through the hiring of a car for months to the hiring of a fleet of aircraft for decades or the hire of a building for centuries. Where assets are hired for longer periods they are usually referred to as being ‘leased’ rather than ‘hired’ but there is no clear distinction between the two terms.

This manual is mostly concerned with the leasing of plant or machinery. The majority of guidance on taxing the leasing of real property (buildings and land) is to be found in the Property Income Manual.

This manual does, however, cover particular issues concerning the finance leasing of real property. See, in particular

• BLM20300 onwards, for guidance where plant or machinery is leased with land and where the plant or machinery element is a long funding lease.

• BLM50000 onwards, for guidance on a new International Accounting Standard for leasing, IFRS 16, which was announced in 2016.

• BLM70000 onwards, for guidance on anti-avoidance legislation in Part 21 CTA 2010 / Part 11A ITA 2007 that was directed at schemes often – but not always – involving land.

This manual also covers the impact on the lessee for the leasing of real property.