Question to the Cabinet Office:

To ask His Majesty's Government, further to the Written Answer by Baroness Twycross on 28 January (HL3970), why the reclassification of the sub-lease from an operating lease to a finance lease was not reflected in the 2022–23 accounts or identified during its 2022–23 audit, given that the deed of variation was agreed in March 2023; and why it was only corrected in the 2023–24 accounts.

The reclassification of the sub-lease from an operating lease to a finance lease arose due to a correction in a sub-lease extension which was identified during 2023/24.

A lease end extension that was agreed by both parties in February 2023 was not clearly documented in the Deed of Variation, resulting in GPA’s Horizon system incorrectly recording the lease end date as 2033. As a result, this was accounted for as an operating lease as at March 2023.

The error in the lease end date was identified during 2023/24 when the Deed of Variation needed updating for occupancy and rent setting changes. At this point, the Horizon system was updated to reflect the correct lease end date of 2045. Correcting the lease end date changed the classification from an operating lease to a finance lease.

GPA has strengthened its control processes as a result of identifying this error. Unambiguous data tables are now attached to each occupancy agreement and signed off by both Property and Finance teams to: prevent future misinterpretation of lease terms, ensure the accurate uploading of lease data onto the Horizon system, and ensure that the accounting for leases accurately reflects the agreed lease terms.