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

Lessee under long funding finance lease: limit on deductions

Section 148G limits the amount a lessee of plant or machinery under a long funding finance lease can deduct when calculating trading profits for income tax purposes.

• Applies to anyone carrying on a trade, profession or vocation who leases plant or machinery under a long funding finance lease
• The deduction for lease payments is capped at the amount shown as finance charges or interest expenses in the lessee's accounts under generally accepted accounting practice (GAAP)
• Where GAAP treats the lease as a loan rather than a finance lease, the cap still applies as though the lease were accounted for as a finance lease
• The restriction applies on a period-of-account basis, so the limit is assessed for each accounting period individually