Finance leases in micro-entity accounts

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.

Enter the asset and the amount owed separately

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.

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.