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Tax impacts of lease accounting change

HMRC has identified several issues which should be addressed in conjunction with such a proposal, including:

  1. Can HMRC trust companies to use ‘sensible’ depreciation policies or will there need to be legislation for it?
  2. In order to avoid distorting the ‘lease or buy’ decision, the government may be willing to offer an enhanced deduction to lessees that would otherwise have qualified for the AIA.
  3. Could HMRC combine an accounts-based regime with giving the lessee an option to claim CAs on the ‘right of use’ asset?

Inevitably, there is a long way to go on these issues. But the eventual outcome is potentially quite far-reaching for UK corporates – for example if HMRC can become comfortable on the issue of ‘sensible’ depreciation policies without a lot of new anti-avoidance legislation.

If you have any questions on the tax implications of lease accounting please contact David Porter.


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