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HMRC internal manual

Business Leasing Manual

’Income-into-capital’ schemes and back loaded leases: Relief for set-offs against rentals: cumulative accountancy rental excess: mechanics of relief against future rentals

Under CTA10/SS906-910 the excess of accountancy rental earnings over normal rent for any period of account is described as the ‘accountancy rental excess’ (CTA10/S907(2)). It is added to any such excesses for previous periods of account (beginning with the period deemed to start on 26 November 1996) to arrive at the ‘cumulative accountancy rental excess’ (‘CARE’) carried forward to later periods (CTA10/S907(5)).

If then for any later period normal rent exceeds accountancy rental earnings (and is therefore taxable) the ‘CARE’ brought forward from earlier periods may be set against the normal rent. The ‘CARE’ carried forward to later periods is then reduced by the amount of the set off. The amount of ‘CARE’ set off in this way cannot be greater than the excess of the normal rent over accountancy rental earnings for the period for which the relief is given. The effect of this restriction is that the normal rent taxable for the period cannot be less than the accountancy rental earnings (CTA10/S910).