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HMRC internal manual

Business Leasing Manual

From
HM Revenue & Customs
Updated
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’Income-into-capital’ schemes and back loaded leases: Relief for set-offs against rentals: cumulative accountancy rental excess: example 1

Example

The simple example below, covering the first six years of a lease, illustrates the carry forward and set off of cumulative accountancy rental excesses (‘CARE’). There is a more complex example involving also cumulative normal rental excesses in BLM72065.

Period ‘Normal rent’ ‘Accountancy rental earnings’ Taxable before relief for cumulative accountancy rental excess b/f Relief for cumulative accountancy rental excess b/f Taxable after relief for cumulative accountancy rental excess b/f Cumulative accountancy rental excess b/f
             
1 500 1200 1200 (ARE) Nil 1200 700
2 800 1300 1300 (ARE) Nil 1300 700+500=1200
3 1200 1400 1400 (ARE) Nil 1400 1200+200=1400
4 1700 1500 1700 (NR) 200* 1500 1400-200=1200
5 2300 1500 2300 (NR) 800* 1500 1200-800=400
6 3000 1300 3000 (NR) 400 2600 400-400=nil
Total 9500       9500  

*restricted to excess of normal rent over accountancy rental earnings.