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.

 

Beccy

Comments
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Sounds wrong to me

Richard Willis |
Richard Willis's picture

Treatment

neileg |

Largely in agreement

BKD |
BKD's picture

Thanks BKD

neileg |

Sounds like an operating lease

jafrimania |