Finance leases in micro-entity accounts
Short version. Use the leased asset and liability balances from your prepared accounts. Enter them separately in the balance sheet. You determine the lease classification.
Go to the steps and entry details
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Enter the asset and the amount owed separately
Use your prepared lease classification and balances. The wizard does not decide whether a lease is a finance lease.
- Prepared asset balance
- Financial data → Balance sheet → Tangible assetsInclude the leased equipment’s net book value in the total. Do not subtract the lease liability from the asset.
- Liability due within one year
- Creditors: due within one yearInclude the prepared current portion of the lease liability.
- Liability due later
- Creditors: due after more than one yearInclude the remaining non-current portion. Use the prior-year column for the previous closing balances where requested.
For example, if your accounts show leased equipment at a net book value of £8,000, include £8,000 in Tangible assets. If the remaining lease liability is £6,000, include that liability in creditors, split between amounts due within and after one year as applicable. Do not net the liability off the asset.
Can a leased asset appear in micro-entity accounts?
Yes. Under FRS 105, a finance lease is recognised as an asset and a liability. Legal ownership need not have passed. Classification depends on the lease terms and the transfer of substantially all risks and rewards, not the label on the agreement.
Accounting recognition is not a capital-allowance decision
Operating leases are treated differently under FRS 105. Do not add every rented asset to fixed assets. A finance-lease asset in the accounts does not by itself establish a capital-allowance claim. Enter your accounting figures and the tax treatment appropriate to the agreement. We do not ask for evidence of ownership.
See section 15, particularly paragraphs 15.10 to 15.14, of FRC FRS 105. Use the edition and amendments applicable to your accounts period.