Section 614BL: Relief for bad debts: reduction of cumulative accountancy rental excess
857.This section deals with a bad debt deduction in respect of rent under a lease for a period of account if there is a cumulative accountancy rental excess for the period. It is based on paragraph 9(1) to (4) and (7) of Schedule 12 to FA 1997 and paragraph 5(1) of Schedule 2 to ITTOIA.
858.Subsection (2) reduces the cumulative accountancy rental excess for a period where the accountancy rental earnings exceed normal rent by an amount equal to the excess of the bad debt deduction over the accountancy rental earnings.
859.Subsection (3) deals with the converse situation if, for a period of account, normal rent is at least equal to accountancy rental earnings (so that it is the normal rent which is taxed). In those circumstances there are two restrictions.
860.Subsection (4) provides that relief otherwise available under section 614BI(2) in a period for any cumulative accountancy rental excess brought forward from previous periods is restricted to any excess of the normal rent over any bad debt deduction given in respect of rents from the lease. That is because only the normal rent net of bad debt relief is in effect being brought into account for tax.
861.Subsection (5) applies if the bad debt deduction exceeds the normal rent for a period of account. In such a case any cumulative accountancy rental excess brought forward from previous periods is reduced by the amount by which the bad debt deduction exceeds the normal rent. That is because the excess of the bad debt deduction over the normal rent for the period of account already represents relief for rents taxed in previous periods.
862.The definition of “bad debt deduction” in subsection (6) corrects a missed consequential in ITTOIA by substituting for the cross-reference to “sub-paragraph (i), (ii) or (iii) of section 74(1)(j) of the Taxes Act 1988” a cross-reference to “section 35(1)(a), (b) or (c) of ITTOIA 2005”.