Fourth Edition The Comprehensive Guide for Practitioners

Leasing and Asset Finance

Chapter 1

Review of the leasing and asset-finance industry

Vic Lock
Introduction: the evolution and growth of leasing
Leasing remains an enigma to many in both mature and emerging economies. Although the practice dates back over 2000 years, it is a phenomenon that to all intents and purposes arrived in Europe from the United States some 40 years ago. Since then, the leasing industry has grown in importance around the world. Since its introduction to the United Kingdom in 1960, it has established deep roots and approaching 25 per cent of capital equipment is now financed through leasing arrangements annually. Growth in other parts of Europe has been explosive. From a standing start in 1991, leasing in the Czech Republic financed almost 3 billion (US$3.2 billion) of equipment and real estate investment in 2001, up from around 0.2 billion 10 years earlier. While the US represents the largest single leasing market in the world, at US$242 billion (230.5 billion) of new business in 2001 (or 31 per cent of total business investment in equipment), the industry has a wide geographical spread. In Australia, for example, leasing financed A$23 billion (US$13.5 billion) of a total capital expenditure of A$43 billion in 2001 (see Exhibit 1.1). Exhibit 1.1 Five-year new business trends in Australia, the United States, the five leading European Union leasing nations plus the Czech Republic
2001 (billions)
A$23 US$242 46.3 33.4 32.3 26.8 9.7 2.9

Country
Australia US Germany UK Italy France Spain Czech Republic

2000 (billions)
A$15.83 US$247 38.2 33.6 26.7 24.9 8.5 2.5

1999 (billions)
A$13.66 US$234 31.1 30.5 14.1 17.9 6.8 2.0

1998 (billions)
A$13.49 US$207 27.2 31.0 11.6 15.5 5.6 1.9

1997 (billions)
A$13.35 US$179 24.7 29.6 9.4 13.0 4.2 1.8

Sources: European Federation of Leasing Company Associations (Leaseurope) and national leasing associations.

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ROLE AND OPERATION OF LEASING AND ASSET FINANCE

Because of the fiscal, regulatory and accounting impact on leasing, it is an industry in constant transition. Whether tax or non tax-based, however, leasing retains a single guiding principle: that ownership of assets resides with lessors which hire them to lessees over defined periods in exchange for regular rental payments. Later chapters in this book provide much greater detail of the different forms of asset finance and the tax and accounting impact. Suffice to say here that in some countries of the world a pay-out, or finance, lease must include a purchase option exercisable by the lessee at the end of the primary period of the contract; in other countries a purchase option is specifically excluded. The general test is broadly that a purchase option is applicable in jurisdictions where the lessee might wish, ultimately to own the asset and where there are no tax benefits for the lessor. However, in countries where the lessor claims investment tax credits (in the United Kingdom, capital allowances), the inclusion of a purchase option would have adverse tax consequences, but the equipment user can achieve ultimate ownership through a hire-purchase contract. In both domestic and international cross-border markets, it is the tax impact that has significantly shaped leasings evolution. Such has been the aggression of some of the worlds tax authorities against leasing that some professional advisers have predicted its eventual demise. Certainly a number of cross-border leasing structures for example the Japanese leverage lease, the US lease-in, lease-out product and Australian cross-border structures have been neutralised, but the pessimists have yet to be proved accurate soothsayers. Optimists counter the doom mongers by pointing to the 1984 UK budget that signalled the end of the then 100 per cent first-year capital allowance regime by phasing it down to a 25 per cent writing down allowance by 1986. Some thought this change would herald the end of leasing in the United Kingdom. They could hardly have been more wrong: in 1983, UK lessors wrote 4.8 billion of new business; in 2001 they wrote 33.4 billion. Similarly, the US Internal Revenue Service terminated the investment tax credit and imposed an alternative minimum tax effective from 1 January 1986. At the time, US lessors were writing some US$90 billion of new business annually; in 2001 they closed transactions valued at approaching US$244 billion.

The benefits and limits of leasing

Leasing is thus a fluid and extensively used product. Whatever its form, its relevance transcends tax efficiency. Its universal benefits to lessees include: the preservation of working capital; the mitigation of the risk that equipment becomes obsolescent; often 100 per cent financing; the matching of rental profiles to income streams; and the quiet enjoyment of the equipment leased, providing rentals are paid according to contract. However, it is perhaps unfortunate that some lease arrangers have pushed their structuring ingenuity to the edge of the envelope in large value transactions. The response of tax authorities was, in some cases, draconian. In the United Kingdom, the two finance acts of 1997, enacted by the former Conservative government and the succeeding Labour administration, sent as large a shock wave through the leasing industry as the budget changes of 1984. In an attempt to counter perceived tax-abusive leasing structures, the UK Treasury advised by the Inland Revenue introduced sweeping legislative changes that fundamentally altered the nature of leasing. (For greater detail, see Chapter 10 and the section on the UK in Chapter 20 of this book; also the two UK finance acts of 1997.) One of the many changes of the first act, made law under the then Conservative administration, was the introduction of the

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REVIEW OF THE LEASING AND ASSET-FINANCE INDUSTRY

long-life asset regime. This reduced from 25 per cent to 6 per cent the writing down allowances available on assets capable of a useful life of over 25 years in the hands of any user. While certain assets were granted a time limited exemption from the regulations notably rail equipment and ships aircraft and plant used in some utilities sectors were caught by the regime. Such was the lobbying efficacy of, for example, the aviation industry, that the Inland Revenue eventually granted a three-year concession (from 2000) that by and large provided an effective 15 per cent allowance on most large aircraft and 25 per cent on smaller types. Given the changes wrought on the airline industry by the 11 September 2001 attack on the US, it is difficult to believe that the concession will not be extended for qualifying airlines and lessors. Notwithstanding the aviation compromise (and other understandings that mitigate the impact of the long-life rules in regard to assets such as those used in the water and printing industries), the tax regime continues to discriminate against lease finance. The UK Finance Act 2000, for example, made permanent an enhanced 40 per cent first-year-allowance regime for small- and medium-sized enterprises (SMEs), but continued to exclude specifically the leasing industry from claiming the allowances on behalf of equipment users. The Inland Revenue believes that the exclusion is necessary to counter tax abusive structures and has, in fact, imposed such an exclusion in most cases where enhanced allowances have been introduced. The result is a complex set of rules (see Exhibit 1.2) that serves to confuse most equipment users, not least SMEs, and, if anything, has reduced allowance claims by those companies that they were introduced to help. Cynics might say that this was the Inland Revenues intention, but private and unsolicited comments suggest otherwise. In the words of one Inland Revenue official in 2001: We are very concerned that tax payers are not claiming all that they are entitled to. Contrast this with the views of another official: We couldnt possibly allow lessors to claim the enhanced allowances on behalf SMEs, they might abuse the system. The thought of big-ticket lease arrangers, who barely stir for transactions of less than 150 million, seriously sharpening their pricing pencils to contrive clever little packages for 80,000 SME deals is at best amusing. The position does, however, serve to illustrate the dichotomy of many tax authorities around the world. On the one hand they must ensure that those eligible for tax allowances receive them; on the other they must preserve revenue for their national exchequers. The dividing line is a narrow one and often hinges on interpretation. Did, for example, those that drafted the UK Finance Act that introduced capital allowances after World War II intend that only those companies that pay corporation tax should be eligible to claim investment allowances as the Inland Revenue seems to believe? Or did the legislators recognise that after six years of war, any incentive to invest, by any party, was essential for economic and social regeneration? No matter the jurisdiction, such statutes are ultimately for the courts to decide and for governments, in their wisdom, to amend as they see fit. Outside of the legislative and legal processes, however, over the past 10 years there has been an apparently concerted effort on the part of certain national tax authorities to reduce or eradicate capital allowances in the hands of lessors, especially in cross-border transactions. Conversely, however, many governments continue to recognise the effectiveness of capital allowances and their availability through the leasing industry. A growing feature of equipment finance has been the introduction of selective investment allowances by governments for economic sectors judged to be in need of help.

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ROLE AND OPERATION OF LEASING AND ASSET FINANCE

Exhibit 1.2 Tax allowances available in the United Kingdom for the acquisition of commercial assets
Effective rate (%)
4, 25, 100

Relevant assets
Industrial buildings (25% if in enterprise zone, 100% on initial construction in EZ) Long-life assets

Available Allowance to lessor

WDA/FYA Yes

Available to asset user

Yes

Time limit
No

Comments/ conditions
Includes qualifying hotels and sports pavilions. FYAs apply to initial construction. Assets with a useful economic life, when new, of 25 years or more. Cars not treated as long-life assets. Subject to number of flying hours and turboprop take-off weight levels. Little used allowance. Not economically viable. 6% for long-life assets. Allowances subject to certain registration conditions. The general UK writing down allowance. Covering expenditure on boilers and radiators in one million low-income homes.

WDA

Yes

Yes

Rail/ships exempt till 31 Dec 10

6, 15.5, 25

Executive jets, helicopters, turboprops Export leasing: plant and equipment

WDA

Yes

Yes

31 Dec 03

10

WDA

Yes

13-year maximum lease

15.5

Large aircraft

WDA

Yes

Yes

31 Dec 03

25

Plant and equipment exc. long-life assets Affordable warmth programme

WDA

Yes

Yes

No

25

WDA

Yes

No

31 Dec 07

25, 10

Qualifying ships (25% on first 40 million value; 10 on next 40 million)

WDA

Yes

No

Ship Available under owner tonnage tax regime. election by Leases 27 Jul 01 subject to restrictions. See REV BN 21. 31 Jul 02 Film maker must be incorporated in EU, any studio used must be in the United Kingdom.

33.3

Films (feature length)

SLD

Yes

No

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REVIEW OF THE LEASING AND ASSET-FINANCE INDUSTRY

Exhibit 1.2 continued Tax allowances available in the United Kingdom for the acquisition of commercial assets
Effective rate (%)
40

Relevant assets

Available Allowance to lessor

FYA No

Available to asset user

Small/ mediumsized enterprises

Time limit
No

Comments/ conditions
SMEs must satisfy two of three upper limits: turnover 11.2 million; assets 5.6 million; employees 250. Subject to place of filming rules and performer nationality restrictions. Must satisfy two of three upper limits: turnover 2.8 million, assets 1.4 million; employees 50. Excludes longlife assets, aircraft, commercial vehicles agriculture/fishing. Covers oil rigs, pipelines and other N. Sea oil installations. Cars registered after 17 April 2002 that emit no more than 120gm/km CO2 or that are electrically propelled. Equipment used in connection with refuelling cars with natural gas or hydrogen. Available on a specified list of energysaving technologies, reduction of water use/ quality-improvement* plant and equipment.

Plant and equipment exc. long-life assets, cars, rail or ships

100

Films (up to 15 million production cost)

FYD

Yes

Yes

1 Jul 02

100

IT/communications equipment/software

FYA

No

Small companies

31 Mar 04

100

Northern Ireland

FYA

No

Small/ 11 May 02 mediumsized enterprises Yes No

100

Demolition and reuse of oil installations

FYA

No

100

Low emission cars

FYA

Yes

Yes

31 Feb 08

100

Hydrogen fuel equipment

FYA

Yes

Yes

31 Feb 08

100

Certain energysaving and water measurement/ quality-improvement equipment

FYA

Yes

Yes

No

Note: This list is not intended to be exhaustive. It should be used as a guide only. WDA: writing down allowance. FYA: first-year allowance. FYD: first-year deduction. SLD: straight-line deduction. *See the section Current issues for the United Kingdom in Chapter 10. Source: LEASINGLife.

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ROLE AND OPERATION OF LEASING AND ASSET FINANCE

In some cases, the selective allowances have applied to whole economies. In France, for example, rules introduced in 1998 regulated the use of leverage leasing but, subject to ministry of finance approval, left the door wide open for transactions that, amongst other things, provide significant economic and social benefit to France. Meanwhile in Ireland a wide variety of social projects, such as student accommodation, car parks, park-and-ride schemes and property built for holiday lets, have been accorded favourable capital allowance treatment. In a move that took much of the UK leasing industry by surprise, the 17 April 2002 budget opened the enhanced-allowance door to leasing. In a move that clearly demonstrated the selective use of capital allowances, as well as the UK governments green credentials, new rules were introduced for the financing of low-emission cars, refuelling infrastructure and energy saving technologies. Low-emission cars were removed from the United Kingdoms luxury cars rule, which restricts capital allowances, available on a reducing balance basis, to cars valued at no more than 12,000 (US$19,320). The 100 per cent first-year allowances (FYAs) on cars and refuelling equipment are available until 31 March 2008. FYAs applicable to energy saving equipment are available on an open-ended basis and have been extended in an amendment to the Finance Bill 2003 by the addition of lessor entitlement to 100 per cent FYAs for assets to measure/reduce water consumption, and on investment to improve water quality.

The growth of additional services leases

Leasing is not entirely driven by taxation issues, however. It is increasingly about lessors investing in equipment and taking real residual-value (RV) risk under an operating lease. In its simplest form, an operating lease can protect the lessee from equipment obsolescence, provide for upgrades in line with advancing technology and provide for shorter-term asset needs such as in the construction industry. In recent years however, the operating lease product has become increasingly sophisticated. The provision of an asset for, say, a three-year period, has moved on to varying degrees of accompanying services. Arguably the trend towards additional service leases started in the car sector. In contract hire, which has become a fairly generic term, specialist car operating lessors have been providing maintenance, fuel management, insurance, breakdown cover and the like since the early 1990s, often on a fleet basis. The contract hire, or full-service concept, has gradually migrated to other assets and customer types. It is now not uncommon for operating leases on medical equipment to cover equipment maintenance, or for delivery lorries to be provided with drivers. Rental profiles are also changing. Driven to a large extent in the United Kingdom since 1993 by the governments private finance initiative, rentals in an increasing number of contracts more typically, but not exclusively, for public-sector lessees are priced on a usage basis. Examples might include the provision of: turnstiles financed on customer throughput numbers; computer equipment on a cost per keystroke; or medical equipment on a cost per scan. Whilst the move to the provision of a service as well as an asset might look a logical commercial step, it is not without significant risks to lessors. Although many equipment manufacturers own their own leasing companies, known as captives, the majority of lessors are either bank owned or operate independently from either manufacturers or banks. For either of the latter to make the quantum leap from the provision of an asset to the provision of a raft of associated services requires a major investment in additional resources. Some lessors have addressed this by acquiring companies with the relevant infrastructure and experience, others have formed strategic alliances with service providers.

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REVIEW OF THE LEASING AND ASSET-FINANCE INDUSTRY

Whatever the guise they choose, it is likely that a growing number of lessors will become service providers. One obvious reason is the pursuit of enhanced returns; another is price volatility in the used-equipment market.

Calculating residual value

Operating leasing is a risk business. Different jurisdictions have different ways of measuring risk for tax and accounting purposes, but the practical common denominator is the lessors assessment of the RV of a given asset at the end of the primary period of a lease, and how that value might be achieved to realise, ultimately, a profit from the ownership of the asset. This contrasts with a finance lease under which a lessor would expect to recoup its investment in the asset its overheads, cost of funds, etc and take a profit at the end of the primary period. While operating leasing is not a new concept and has been used in aircraft and car finance, for example, for many years, interest in the product has accelerated over the past five to 10 years. To a certain extent the growth of RV-based leasing products has been driven by increased competition within the finance leasing industry and changes in tax legislation. More importantly, however, operating leasing fulfils commercial demands in both the private and public sectors that are met by no other equipment financing product. World economic cycles can destroy a lessors assessment of the resale value of an asset, an assessment which is made three or five years into the future at the very least. While various RV risk mitigation instruments for example manufacturer buy-backs, residual value insurance and guarantees can be important elements of an operating lessors risk containment strategy, the ability to forecast economic cycles, to achieve a balanced portfolio either of asset types or transaction periods and to re-market equipment is critical. A potentially large secondary market for each asset class is also often an important factor. A quick review of the past 15 years or so illustrates the importance of economic cycles. If a lessor had started writing five-year operating leases in the mid-1980s, it would have faced re-marketing the relevant equipment around the time of the Gulf war and the early 1990s recession. Similarly, to have written new five-year deals in the early 1990s on the assumption of an economic recovery would have left the lessor trying to re-market equipment in the mid 1990s at the height of the Asian economic slump when a vast array of new equipment was being dumped into Western markets at huge discounts. Currency fluctuations and general improvements in equipment manufacturing processes can also have an adverse impact on a lessors residual value assumptions. For example, early in 2002 the auctioneer Henry Butcher offered for sale by private treaty a 1999 1,600-tonne hydraulic machine used in the plastics injection-moulding industry. The new machine had cost 1.3 million, yet in 2002 the same machine could be purchased new for 1 million. Clearly, any lessor that had based its RV assumptions on this asset at its 1999 price might wonder where its profit had gone, especially since the machine in question realised only 333,333. This example illustrates yet one more essential skill required by the operating lessor. In order to be able to assume residual risk, the lessor must have a detailed understanding of likely technological advances in each asset type in which it invests, the commercial nature of the industry in which the asset is to be used and its specific operating environment. A forklift truck used in a food retail warehouse, for example, will be in far better condition after five years use than the same piece of kit used in a builders yard or an oil refinery.

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ROLE AND OPERATION OF LEASING AND ASSET FINANCE

Although lessors finance a wide range of equipment, in Europe, at least, the financing of motor cars has represented a major portion of the business over the past five years. A plethora of institutions finance motor cars through a variety of instalment payment plans which span hire purchase, finance and operating leasing and contract hire. As governments change taxation policies on, for example, the use of company cars, so the financing products change. In the UK, for example, the growth of personal contract purchase or contract hire schemes introduced in the 1990s accelerated in 2002 with the introduction of an emissions-based tax policy that basically favoured cars of a lower cubic capacity and also diesel-engined models. It is at the car-finance level that the provision of finance to the business and consumer sectors becomes most closely aligned. Perceived wisdom suggested in the early 1990s that, based on historic databases and the huge size of the secondary market for cars, their RVs were very predictable. The three years to 2002 proved just how dangerous assumptions can be. One of the largest car lessors in the United Kingdom at the time with a fleet of over 90,000 vehicles made a provision in its accounts for 2000 of 75 million against future RV losses. Nobody in the industry is under any illusions that this was an isolated case; in fact the problem is more or less uniform. In 2000, members of the British Vehicle Leasing and Rental Association invested in 1.1 million vehicles, the equivalent of 49.4 per cent of the total new vehicle market for the year. The collapse in RVs was caused by a concerted consumer campaign launched in 1999 against the high price of cars in the United Kingdom compared with most other European countries. That the price differential was largely because of different national car-purchase tax regimes and the high value of sterling was of little interest to consumer groups or the UK Competition Commission. As 1999 gave way to 2000, new car sales dried up in anticipation of lower prices. By early 2001 they were down by around 10 per cent. Used-car values fell in unison with a devastating impact on lessors RV assumptions. In 2001 the consumer finance market for new vehicles recovered strongly, although the business market remained depressed. In March 2002, the long-awaited European Union (EU) consultation paper on block exemption was released. Introduced in 1985 and amended 10 years later, block exemption essentially excluded new-car distribution and sales from EU competition laws in an attempt to enhance consumer service and protect manufacturers brand image. The concession also protected cash outflows from those EU member states that on the one hand did not have an indigenous car manufacturing sector and on the other imposed very high car-purchase taxes. One of the major effects of block exemption has been to give manufacturers total control over their sales channels and thus their pricing policies. The block exemption rules were changed in September 2002, with a new freer and more flexible regime entering force in October 2003. A central plank of the European Commissions policy is to harmonise car prices across the EU. Although prices in, for example, the United Kingdom remained higher than those in most EU member states in the first half of 2002, price convergence was thought likely to see an increase in new car price rises in some member states and falls in others. The issue is of critical importance to much of the European leasing community. According to statistics from the Brussels-based umbrella federation Leaseurope, which unites some 25 national leasing associations around Europe, car finance, at 53.4, represented over 25 per cent of the 192.7 billion total for equipment leasing new business in 2001. In some countries the percentage of car finance business is much higher; in Switzerland, for example, it was 65 per cent; in Hungary 62 per cent; and in Ireland 52 per cent. In several other coun-

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Exhibit 1.3 Top 12 European car finance markets in 2001, new car-finance business for the preceding five years and the percentage of total new business represented by cars in each country ( billion)
Country
Germany United Kingdom France Italy Switzerland Sweden Austria Czech Republic Ireland Portugal Hungary Belgium

2001
19.0 10 4.4 3.7 3.4 2.9 1.5 1.3 0.9 0.75 1.1 0.7

%
50 30 20 19 65 50 48 47 52 26 62 24

2000
16.70 10.90 3.50 3.34 2.63 2.51 1.65 1.16 0.96 0.86 0.71 0.66

%
53 28 18 20 61 51 50 49 52 30 58 24

1999
15.83 10.91 4.18 3.13 2.50 1.09 1.47 1.02 1.12 0.75 0.63 0.68

%
51 36 23 22 68 34 51 50 52 29 27

1998
13.66 11.83 1.64 2.53 2.11 1.02 1.22 0.89 1.07 0.56 0.54 0.54

%
50 38 11 22 72 27 49 47 52 28 24

1997
13.49 11.25 1.43 2.34 1.78 0.88 1.10 0.87 0.21 0.33 0.38 0.48

%
55 38 14 25 77 31 50 49 64 24

1996
13.35 8.38 1.90 2.54 1.61 0.76 1.10 0.73 0.70 0.36 0.42 0.45

%
58 35 19 29 69 31 53 55 32 79 25

Sources: Leaseurope and LEASINGLife.

tries, including Austria, the Czech Republic, Germany and Sweden, it was hovering around 50 per cent (see Exhibit 1.3). Any changes in car distribution or taxation could thus have a dramatic impact on many leasing companies businesses. While lessors that provide car finance to consumers, as opposed to fleet services to businesses, are less exposed to movements in RVs, they are nonetheless subject to movements in values, especially when faced with a default by the car user. Lessors have traditionally been very good at managing credit underwriting when dealing with businesses, but as more become exposed to the consumer market, the risks change.

The impact of recent shocks on the leasing industry

Following events of 11 September 2001, lessors of all hues began reassessing their exposures across a huge range of assets. At the obvious level, fewer airline passengers reduced the requirement for aircraft. Less obvious was the impact on sectors such as chauffeur-driven cars and short-term car rental. While the latter showed signs of recovery in the first half of 2002, the chauffeur-driven-car sector remained depressed as, amongst other things, investment banks continued to cull their expenses in an effort to stem losses from the huge decline in mergers and acquisitions and other corporate work. It was at the aircraft level, however, that the greatest exposure lay. Throughout 2002, credit-rating agencies downgraded securitisation vehicles of a number of aircraft-leasereceivable issues. The agencies primary concerns were declining lease rentals and the difficulty that the securitisation servicers might have in re-marketing aircraft as they came off-lease. Non-aircraft lessors that relied on securitisation techniques to fund their books were also watching the market nervously. In the United States, for example, the situation exacerbated the challenge as capital for investment in new equipment dried-up.

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ROLE AND OPERATION OF LEASING AND ASSET FINANCE

While events of 11 September 2001 formed one of the largest human tragedies of the past decade, the collapse of Enron, Worldcom, et al came as large corporate shocks. US regulators and the accounting standard setters were scurrying around in the early months of 2002 to establish just what had gone wrong. Clearly much of Enrons exposure was hidden through off-balance sheet structures. Leasing can, of course, also be used as an off-balance sheet instrument, but one that is normally covered in the notes to a lessees accounts. By the close of the year, the business world, in the United States at least, had to contend with new corporate governance rules. New accounting standards on such vehicles as special purpose entities were issued by the Financial Accounting Standards Board in January 2003 following extensive consultation.

Conclusion: the future for transparent asset financing

Lease accounting has been the subject of much debate over the past 20 years (see Chapter 13). The capitalisation of finance leases in the books of the lessee has been commonplace for many years. In 1996, the prospect of operating leases also being capitalised by the equipment user was raised in a discussion paper published by major accounting regulators. More recent proposals, combined with EC and International Accounting Standards Board policy objectives, are likely to see the demise of off-balance sheet leases sometime this decade. The process was already in motion; the Enron debacle merely gave more urgency to the regulators intentions. Nonetheless, as the dust settled on Enrons collapse, so the benefits and potential of leasing as a transparent equipment financing instrument were once again being recognised. In reality, neither the tax nor the off-balance sheet issues are of any consequence to the majority of lessees who operate small- and medium-sized businesses around the world. In early 2002, a study by the UK Competition Commission into banking services for the SME sector gave leasing a clean bill of health. The report stated: Other lending to SMEs is by providers other than the big four [UK] banks. This competitive environment is especially true of asset finance. Whether or not some regulators in some parts of the world dislike leasing, it has stood the test of time and, at times, it has proved to be a much more transparent and flexible means of equipment finance than any other so far devised. The next 10 years could see further significant reductions or the gradual demise of the two historic drivers of finance leasing: corporation tax and, where applicable, capital allowances. Such changes will not sound the death knell of leasing, they will merely mark further stages in its evolution.

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