BLM50010 | Right-of use assets: commercial and tax impact of right-of-use assets

A right-of-use lessee’s accounts will look significantly different to the accounts prepared under any previous standards. If the lessee previously had operating leases, those leases are now recognised on the balance sheet.

The biggest change is in the treatment of property leases. Under previous standards, most property leases would have been operating leases with the accrued rentals going through the profit and loss account. All right-of-use assets are reported on the balance sheet. Property leases are not exempt.

The Schedule 14 FA 2019 changes were designed to ensure that there is no tax advantage or disadvantage to lessees when they move to reporting right-of-use assets. The only change for tax could be timing differences arising from differences in how lessees under operating leases and right-of-use leases account for the cash rentals. If you discover any situation where a lessee is accounting for right-of-use assets and there is an unexpected tax consequence, please contact BAI.