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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 capital gains disposal proceeds

Under TCGA92/S37A the lessor may deduct all or part of any cumulative accountancy rental excess (see BLM72001) in certain capital gains computations. In those circumstances unused cumulative accountancy rental excess may be set off against the consideration received on the disposal, up to the amount of the consideration.

The simplest, and most common, case where Section 37A applies will be one where a lessor company simply disposes of the whole of its interest in the leased asset for a capital sum. In such a case the whole of the unused cumulative accountancy rental excess up to the consideration received may be set against that consideration in the capital gains computation.

Section 37A is of no application to the assignment of a lease in circumstances where it is treated under the capital gains code as a no gain/no loss disposal - see BLM72045.