Tax deductibility of finance lease rentals

<p>The significance of Statements of Practice issued by the Inland Revenue varies. However where a Statement fundamentally affects the way in which tax deductions are computed under a system of financing equipment which, in 1990, amounted to some £10,300 million, the Statement cannot go unremarked. Nor has the Inland Revenue Statement of Practice SP3/91 issued in April 1991 done so. But the purpose of this article is not to complain that the Statement of Practice was issed without sufficient thought about its application in many of the more complicated areas, but to consider more fundamental questions underlining the approach of the Inland Revenue to deducting payments under a long-term contract and the way in which they are prepared to implement it in particular cases. In particular it is to explore the way in which the accounts treatment is based on a fiction.</p>