SolvedBLM30215 | Taxation of leases that are not long funding leases: How tax advantages arise: timing differences - lender, a worked example - part 3 of 4
From HM Revenue & Customs · Business Leasing Manual
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.