BLM72065 - ’Income-into-capital’ schemes and back loaded leases: Relief for set-offs against rentals: cumulative accountancy rental excess: example 3
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 4 the cumulative accountancy rental excess (‘CARE’) of £1400 brought forward at the beginning of that period is first reduced by the £200 set against normal rent for the period (see below) and only the balance of £1200 set off 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 |
| 4 | 1700 | 1500 | 1700 (NR) | 200* | 1500 | 1400-200=1200 |