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FA 6: Recharacterisation of amounts derived under finance leases
or “Treating finance leases as sales and loans for tax purposes”
You could also call this:

“How to calculate the loan amount in a finance lease”

When you’re dealing with a finance lease, you need to know how to work out the amount of the loan. This depends on whether you’re the person leasing out the item (the lessor) or the person using the leased item (the lessee).

If you’re the lessor, you can find out how to calculate the loan amount by looking at section EW 32. This section talks about how to figure out the value of different types of agreements, including finance leases.

If you’re the lessee, you need to look at two different sections to work out the loan amount. First, check section EW 32, just like the lessor does. Then, you also need to look at section EW 33. These sections explain how to determine the value of what’s being exchanged in the finance lease agreement.

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Next up: FA 8: Deductibility of expenditure under finance lease

or “You can claim depreciation on property you lease under a finance lease”
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Part F Recharacterisation of certain transactions
Recharacterisation of certain commercial arrangements

FA 7Determining amount of loan

  1. For a lessor under a finance lease, the amount of the loan is determined under section EW 32 (Consideration for agreement for sale and purchase of property or services, hire purchase agreement, specified option, or finance lease).

  2. For a lessee under a finance lease, the amount of the loan is determined under sections EW 32 and EW 33 (which relate to the value of consideration under the financial arrangements rules).

Compare
  • 2004 No 35 ss FC 8A(2), (3),OB 1 consideration, lessee’s acquisition cost, lessor’s disposition value