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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 2

Example

Example 1 in BLM72030 shows the cumulative accountancy rental excess brought forward and set off during the first 6 years of a lease. If in Example 1 the leased asset was sold by the lessor for £25,000 at the end of period 3 the cumulative accountancy rental excess (‘CARE’) at the end of that period (£1400 - see table below) is set against the £25,000 in the capital gains computation.

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