»Ê¹ÚÌåÓýapp

This manual is being updated to reflect FRS 102 (2024 amendments). For guidance on the tax treatment of accounts prepared under IFRS 16 or the revised FRS 102, please refer to pages within the BLM50000 chapter.

Consider the possibility that the lessee no longer wants to use the leased asset at the end of the fourth year.  »Ê¹ÚÌåÓýapp lessee terminates the lease.  It is then required to be sold to an unconnected party.  Assume that in this example the sale takes place on the first day of year 5 for £42,000.  At that point the lessee still 'owes' £11,522 (BLM15535).  Repayment of that will be the first charge on any sale proceeds.

»Ê¹ÚÌåÓýapp premature repayment will also cause the terms of the loan to be revisited.  »Ê¹ÚÌåÓýapp rate of interest charged under a loan normally bears some relation to the period of the loan.  Assuming this is a variable rate loan (normally tied to LIBOR), shorter loans tend to bear marginally higher rates.  »Ê¹ÚÌåÓýapp premature termination may therefore increase the rate.  »Ê¹ÚÌåÓýapp repayment might cost (say) £12,000 (including £478 extra interest).

»Ê¹ÚÌåÓýapp accounting entries are set out at BLM15545.