Website Cookie Policy

We use cookies to give you the best possible online experience. If you continue, we’ll assume you are happy for your web browser to receive all cookies from our website.
See our cookie policy for more information.

Practice Areas

More Information

thepartners@wrigleys.co.uk

Leeds: 0113 244 6100

Sheffield: 0114 267 5588

FOLLOW WRIGLEYS:

Beware of finance leases dressed up as operating leases

June 2017

A reminder of when academies need ESFA consent.

Background

Suppliers to academies and schools are becoming more familiar with the academies financial handbook and other legal restrictions on what agreements academies and schools can enter into. In general this is a good thing.  Suppliers understand what may require a consent from the ESFA. However, we are seeing a few examples where a finance lease is described as an operating lease with a view to avoiding the need for a ESFA consent (as required by the academies financial handbook).
    
What is an operating lease? - In general terms an operating lease is one where a supplier provides goods or property to a purchaser for a period at a price (usually called a rent). Once the period ends the goods or property return to the supplier. The purchaser knows the goods or property don't belong to it, they know they can use it, but they have to look after it and give it back at the end.

What is a finance lease? - There is no simple all encompassing definition, but it is an arrangement where a supplier provides goods to a purchaser in return for payments over time. Once all the payments have been made then the goods belong to the purchaser. Hire purchase is one example and there are many variations on the theme. Many involve some sort of lump sum or interest, which is how the supplier makes some of its profit.

Our recommendations

  1. Purchasers must be careful not to enter into a finance lease without getting an ESFA consent or clearance from ESFA that the arrangement is not a finance lease. It is important to look at the substance of the arrangement and not merely the description written on the document. Giving a document the heading "operating lease" does not necessarily mean the substance of the arrangement is one.  
  2. We would also recommend you to be wary of any supplier who offers an operating lease combined with a separate document, assurance or verbal promise that they will donate the goods to you after the rental period. Entering into such arrangements could be considered a sham arrangements dressed up to avoid rules against borrowing and needing an ESFA consent. Such arrangements are not likely to sit well with the regulator or your auditors.   


 

If you would like to discuss any aspect of this article further, please contact Tim Wrigley or any other member of the Education team on 0113 244 6100.

You can also keep up to date by following Wrigleys Schools team on Twitter here

The information in this article is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors

 

 

 For more information about academisation download our podcasts

 

Tim Wrigley View Biography

Tim Wrigley

Partner
Leeds

Strong and stable: ignore the spin, the substance still matters

Strong and stable might no longer be a fashionable phrase, but that's exactly what good governance of academy trusts is all about.

Click here to view more

Modern slavery statements and the academy trust

With victims of modern slavery in England likely to number over 10,000, we consider supply chain transparency requirements for academy trusts.

Click here to view more

Community-led housing: Lancaster gathering

Interested in community-led housing? Join us on Saturday 4 November at the Friend's Meeting House in Lancaster.

Click here to view more

Philanthropy Impact - The role of professional advisers, philanthropists...

Date: 07 Nov 2017

Venue:

Speaker: Fran Hegyi, Executive Director, Hull UK City of Culture 2017; Andrew Dixon, Director, Culture Creativity Place, Bid adviser Leeds 2023; Other speakers TBC

Further information and booking

Schools Breakfast Club: Preparing for GDPR in Schools - 14th November

Date: 14 Nov 2017

Venue: Wrigleys Solicitors, 19 Cookridge Street, Leeds

Speaker: Ibrahim Hassan, solicitor and director of Act Now Training Limited

Further information

Community ownership of land and buildings: lessons and policy implications Scotland & the North

Date: 16 Nov 2017

Venue: Radisson Blu, Leeds

Further information

Mailing list

Receive the latest news, events and updates from Wrigleys:

Follow Wrigleys: