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HMRC internal manual

Business Leasing Manual

’Income-into-capital’ schemes and back loaded leases: Capital allowances: disposal proceeds less than cost of asset

Where the disposal proceeds are less than cost and the total ‘accountancy rental earnings’ taxed exceed the ‘normal rent’ (so that there is a balance of unrelieved cumulative accountancy rental excess) the lessor will normally have suffered a bad debt. This will have been be fully relieved under the ordinary rules and no further deduction will be due. (Indeed a restriction of cumulative accountancy rental excess under CTA10/S911 may be appropriate). A very simple example illustrating this is at BLM73020.