TTM10010 | Ship leasing: Outline: What is a finance lease?

For tonnage tax purposes ‘finance lease’ has the same meaning as it has for other capital allowance purposes.

Broadly speaking, a lease is a finance lease for tax purposes if, in accordance with normal accountancy practice, it falls to be treated as a finance lease (or as a loan) in the accounts of the lessor. Prior to 19 December 2002 the rules for finance leases were different from the rules on operating leases. From that date the same rules applied to finance and operating leases.