’Income-into-capital’ schemes and back loaded leases: Bad debts: trading income - example
The point at BLM74005 can best be illustrated by an example. Assume the following position for the first two accounting periods relating to a continuing finance lease to which Part 21 of CTA 2010 applies.
|Year||Accountancy rental earnings||Normal rents||Bad debt reduction|
In the absence of provisions in Part 21 restricting the cumulative accountancy rental excess, the excess available to carry forward at the end of year 2 would be 1000 even though, net of bad debt relief, no rents have been taxed.