Lease vs Buy decisions

This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.

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July 16, 2017 at 5:36 pm #396376
thiran
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Dear Sir,
This question is related to an example given in BPP Study text which is on page 211. In the example it is said that a company is considering whether to acquire a machine outright or lease it. The lease is a FINANCE lease. In the answer, when they calculate the PV of leasing cost they have not taken ‘Tax Savings on Tax dep.’. Why is that? If the leasing facility were an operating lease It would be okay. But in this question the leasing facility is a Finance leasing meaning that risks and rewards are transferred to lessee so that company can claim capital allowances. Cant he?
Thank you in advance. 🙂
July 17, 2017 at 9:09 am #396889
John Moffat
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Although the accounting treatment is different between finance and operating leases, as far as the tax is concerned (certainly for Paper F9) it is the same in both cases – the lease payment alone is treated as being tax allowable.
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