BLM20155 | Defining long funding leases: basic definition: lease in a sale and finance leaseback (CAA01/S70K (1)(c))

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.

The third of the definitions means that the lease in a sale and finance leaseback is a long funding lease.

This definition is needed because, under GAAP, it might be argued that the lease in a sale and finance leaseback should be accounted for as if it were a loan. Section 70K (1)(c) removes any doubt about the tax treatment, which is discussed at BLM16005.

The concept of a sale and finance leaseback is defined in CAA01/S221, see CA28500. An important feature of the definition is that the lease must be accounted for as a finance lease by the lessor. It does not matter how the lessee accounts for the lease.