Peppercorn lease
A lease with nominal or very low lease payments — common in charity, public sector, and property contexts.
Definition
A peppercorn lease is one where the lease payments are minimal or nominal — often a token sum such as £1 per year. Peppercorn leases are common where an asset is provided at a subsidised or concessionary rate, such as a local authority granting use of a community building to a charity. Under IFRS 16 and amended FRS 102, peppercorn leases may still need to be assessed and, where in scope, could result in a right-of-use asset and nominal lease liability being recognised.
Why it matters
The fact that payments are minimal does not automatically exempt a peppercorn lease from scope. Charities and public sector entities in particular need to consider whether their peppercorn arrangements create lease obligations.
In AuditLease
AuditLease can accommodate leases with very low payment amounts. Users should review peppercorn arrangements carefully before deciding whether to include them in the lease register.
Related terms
Put this into practice with AuditLease
AuditLease handles IFRS 16 and FRS 102 lease calculations, statutory note generation, journal entries, and audit evidence, so your team spends less time on spreadsheets and more time on judgements.
This definition is for general information only and is not accounting or legal advice. Definitions are based on IFRS 16, FRS 102, and associated guidance published by the IFRS Foundation and the Financial Reporting Council. Users should refer to the applicable accounting standards and their professional advisers for judgement-specific matters.