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HMRC internal manual

Business Leasing Manual

Taxation of long funding leases: long funding finance lessors: bad debts

Where a debt under a long funding finance lease turns out to be bad the bad debt may be reflected in a reduction in rental earnings and/or as a loss elsewhere in the accounts. The loss will therefore be relieved under CTA10/S360 or CTA10/S361, as appropriate.

Any later recovery of the bad debt would be taxed under CTA10/S361 unless it was taken through rental earnings, in which case it would be taxed under CTA10/S360.