User Roles AdminStaff contributor ✗External contributor ✗Pulse user 

Use the Finance lease (SP3/91) template for assets held under a finance lease where the accounting treatment is followed for tax under Statement of Practice 3/91. Under SP3/91, the depreciation and finance charge shown in the accounts for a finance-leased asset are accepted for tax, so the depreciation is not added back in the usual way. The template identifies the finance-leased assets and reconciles the depreciation and impairment.

Table of contents 

When should I use this template?

Use it where the company is the lessee under a finance lease and, following SP3/91, the accounting depreciation on the leased asset is to be allowed for tax rather than disallowed.

Before you start

A business type must be selected in the Business type section of the Return information template. If none is selected, the template shows a warning and cannot calculate.

Qualifying assets are pulled in from the Total fixed asset additions template, so mark the relevant additions with the finance lease (SP3/91) tax treatment there first.

How does SP3/91 work?

Normally, depreciation is not an allowable deduction and is added back. For finance-leased assets within SP3/91, HMRC accepts the commercial accounting treatment: the depreciation (and finance charge) in the accounts is effectively allowed for tax, in place of the lease rentals. This template applies that treatment so the depreciation on qualifying finance-leased assets is not added back.

How does the analysis work?

For each finance-leased asset, the template tracks:

  • Acquisition date
  • Description
  • Book value brought forward
  • Additions
  • Disposals
  • Depreciation / impairment
  • Other movements
  • Book value carried forward
  • Any profit or loss on disposal

The depreciation / impairment is reconciled to the P&L analysis and treated as allowable under SP3/91.

Where does the data come from?

  • Qualifying finance-leased assets are pulled from Total fixed asset additions (items given the finance lease (SP3/91) tax treatment), which in turn draws on the Fixed Assets Register.
  • Disposals are taken from Tangible fixed asset disposals.
  • The depreciation / impairment is reconciled to the Profit and loss / OCI analysis, and the business type comes from Return information.

What flows through to the rest of Corporation Tax?

Because the depreciation on SP3/91 finance-leased assets is allowed rather than added back, the template adjusts the profit of the relevant business type accordingly, so the depreciation add-back applied elsewhere is not applied to these assets.

Frequently asked questions

Why is depreciation allowed here when it is normally disallowed?

Because SP3/91 allows the accounting treatment of finance-leased assets to be followed for tax, so the depreciation (in place of rentals) is effectively allowed.

Where do the assets come from?

From Total fixed asset additions, marked with the finance lease (SP3/91) tax treatment.

This article relates to the Finance lease (SP3/91) template in the UK Corporation Tax workflow. It is provided as guidance and does not constitute tax advice.