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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 normal rental excess: effect of assignment on cumulative excesses

In general the assignee of a lease does not take over any unused cumulative accountancy rental excess (CARE) or cumulative normal rental excess (CNRE) from the assignor. Any excesses that cannot be set against the assignor’s rentals are normally set off against the consideration received (or deemed to be received where market value is substituted for the actual consideration) in the capital gains computation on the assignment.

It is not possible to give relief for cumulative excesses in the computation of the capital gain on a disposal that is treated as a no gain/no loss disposal for capital gains tax purposes. In such circumstances, TCGA92/S37A is of no application and CTA10/S916 provides instead that the assignee should take over any unused CARE or CNRE from the assignor.

For the purpose of Part 21 of CTA 2010, on an assignment of a lease treated as a no gain/no loss disposal, the assignor’s period of account is deemed to end and that of the assignee to begin (Section 916(2)). This enables the assignee to take over the correct measure of CARE or CNRE from the assignor.