Capital Allowances Act 2001 section 70N

The finance lease test

Section 70N defines the "finance lease test", which determines whether a lease should be classified as a finance lease or loan for the purposes of the long funding lease rules.

• A lease meets the finance lease test if, under generally accepted accounting practice (GAAP), it would be treated as a finance lease or a loan in the accounts of the relevant person or, where that person is the lessor, any connected person.
• The term "accounts" includes consolidated or group accounts covering two or more companies, provided they are drawn up in accordance with GAAP.
• For non-UK residents whose accounts are not prepared under international accounting standards or UK GAAP, any GAAP questions are resolved by reference to international accounting standards.
• The test looks at how the lease would be classified in the accounts, even if no such accounts are actually prepared.