Section 37A: Consideration on disposal of certain leases
928.This section deals with the calculation of the amount of any chargeable gain on a disposal within section 614BP of ITA (including that section as applied by section 614CD of that Act) or within section 915 of CTA 2010 (including that section as applied by section 929 of CTA 2010) if there is any cumulative accountancy rental excess. It is based on paragraph 12(1) to (4) and (6) of Schedule 12 to FA 1997.
929.In such cases any unused part of the cumulative accountancy rental excess is set against the disposal proceeds in calculating the chargeable gains position on the disposal. This is to ensure that the same sum is not taxed twice, once as income and again as a chargeable gain. The charge to income tax or to corporation tax on income takes priority because the cumulative accountancy rental excess represents that part of the proceeds on the disposal which is in substance of an income nature.
930.Section 614BP(2) of ITA and section 915(2) of CTA 2010 treat a period of account as coming to an end immediately before any disposal. This ensures that the amount of cumulative accountancy rental excess available for set off against the disposal proceeds under this section can be properly calculated.
931.The cumulative accountancy rental excess for any period of account is, in effect, the aggregate accountancy rental excess for periods before the current period of account (see section 614BH(5) of ITA and section 907(5) of CTA 2010). By treating a period of account as ending immediately before the disposal, the accountancy rental excess for that period can be included in the cumulative accountancy rental excess available to be used in calculating the chargeable gain.
932.If the disposal mentioned in subsection (1) or (2) is a part disposal, subsections (6) to (9) provide that the amount of the cumulative accountancy rental excess to be set against the disposal proceeds in accordance with subsection (3) is an apportioned part only of the full amount.
933.If two or more of the disposals mentioned in subsection (1) or (2) are made at the same time, subsection (10) provides that a just and reasonable proportion of the full cumulative accountancy rental excess is to be set against the proceeds of each disposal in accordance with subsection (3).