BLM32810 - Taxation of leases that are not long funding leases: finance lessees: pre-use rentals: tax treatment of finance charge element

»Ê¹ÚÌåÓýapp accounting treatment of the finance charge (‘interestâ€�) element (which will often be the whole of the payment) should be followed for tax purposes if

  • it is charged against commercial profits in the period in which it is incurred, and
  • that treatment is in accordance with GAAP.

»Ê¹ÚÌåÓýapp finance charge paid in the pre-primary period will also sometimes be capitalised. »Ê¹ÚÌåÓýapp amount capitalised then forms part of the cost of the rights to be written off under GAAP. »Ê¹ÚÌåÓýapp deduction for tax purposes normally follows the accounts treatment when that write off is made.

See also the guidance at BLM20160 and BLM25050.