Finance Lease vs Operating Lease | AccountingWEB

Finance Lease vs Operating Lease

After some advice please.

We have just taken out a lease for some equipment.  The Lease Agreement specifically says that ownership of the equipment remains with the Leasing Agency and that we cannot claim Capital Allowances on it.


I rang the leasing company and they advised that all payments including a large (£20k) deposit all go through the P&L.


Is this correct? We are liable for insuring the asset and can pay a nominal fee at the end of the leasing period to transfer ownership to us.


What do you think the treatment should be of it?  Should I actually put it through the P&L or on the BS (Dr Fixed Assets Cr Obligations Under Finance Lease) - and then at what point would I reclaim the input VAT.


Any advice much appreciated.



There are 5 comments. Login or register to view them.

Sounds wrong to me

Richard Willis |
Richard Willis's picture


neileg |

Largely in agreement


Thanks BKD

neileg |

Sounds like an operating lease

jafrimania |