½Û×ÓÊÓƵ

Background to leases

B5.401 Leases—overview

A lease is an agreement under which one person (the 'lessor') gives possession and use of an asset to another (the 'lessee') over an agreed period of time on payment of rentals or other consideration¹. A lessor's income usually arises from the leasing of land or buildings, plant or machinery, or intangible assets such as software. Income arising from the leasing of land is taxed as property income (see Part B6), but in the case of other types of asset, the vast majority of such activity amounts to trading. In either case, the method of computing the profits is broadly similar. There are a number of different types of lease structure, outlined below. Depending on the type of lease, either the lessor or the lessee may be entitled to claim capital allowances on the leased asset. This division does not cover capital allowances on leasing, for which see Division B3.3. This division is concerned mainly with the tax treatment of lease rental