HMRC has identified several issues which should be addressed in conjunction with such a proposal, including:
- Can HMRC trust companies to use ‘sensible’ depreciation policies or will there need to be legislation for it?
- In order to avoid distorting the ‘lease or buy’ decision, the government may be willing to offer an enhanced deduction to lessees that would otherwise have qualified for the AIA.
- Could HMRC combine an accounts-based regime with giving the lessee an option to claim CAs on the ‘right of use’ asset?
Inevitably, there is a long way to go on these issues. But the eventual outcome is potentially quite far-reaching for UK corporates – for example if HMRC can become comfortable on the issue of ‘sensible’ depreciation policies without a lot of new anti-avoidance legislation.
If you have any questions on the tax implications of lease accounting please contact David Porter.