Part 21 Leasing arrangements: finance leases and loans

Chapter 2 Finance leases with return in capital form

Reduction of taxable rent by cumulative rental excesses

907 Meaning of “accountancy rental excess” and “cumulative accountancy rental excess”
(1) For the purposes of this Chapter, there is an “accountancy rental excess” in relation to the lease for a period of account of the current lessor (“L”) if the taxable rent in relation to the lease for the period is as a result of section 905 (current lessor taxed by reference to accountancy rental earnings) an amount equal to the accountancy rental earnings.
(2) The amount of the accountancy rental excess for the period is equal to the difference between the accountancy rental earnings for the period and the normal rent for the period.
(3) But if the taxable rent for the period is reduced under section 910 (reduction of taxable rent by the cumulative normal rental excess), there is only an accountancy rental excess for the period if—
(a) the accountancy rental earnings, reduced by an amount equal to the reduction under that section, exceed
(b) the normal rent.
(4) And in that case the amount of the accountancy rental excess for the period is equal to that excess.
(5) In this Chapter the “cumulative accountancy rental excess”, in relation to the lease and a period of account of L, means so much of the total of the accountancy rental excesses for previous periods of account of L (as increased under section 912: recovery of bad debts following reduction under section 911) as has not been—
(a) set off under section 908 (reduction of taxable rent by the cumulative accountancy rental excess) against the taxable rent for any such previous period,
(b) reduced under section 911 (relief for bad debts: reduction of cumulative accountancy rental excess), or
(c) set off under section 37A of TCGA 1992 (consideration on disposal of certain leases) against the consideration for a disposal.