Income Tax (Trading and Other Income) Act 2005 section 148A

Lessor under long funding finance lease: rental earnings

Section 148A determines how to calculate the taxable income that a lessor earns from a long funding finance lease of plant or machinery, using the concept of "rental earnings" derived from generally accepted accounting practice.

• The section applies to any trader who is the lessor of plant or machinery under a long funding finance lease during a period of account
• The lessor's taxable income from the lease is the amount of "rental earnings" for the relevant period of account
• Rental earnings are defined as the gross return on investment for the period, as determined under generally accepted accounting practice, where the lease meets the finance lease test
• Where the lease is treated as a loan under generally accepted accounting practice, the portion of rental payments treated as interest is regarded as the rental earnings instead