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HMRC internal manual

Business Leasing Manual

’Income-into-capital’ and back loaded leases: Bad debts: trading income - reducing cumulative normal rental excess

The logic for making the restriction to cumulative accountancy rental excess (see BLM74005) is that where rentals are effectively taken out of charge to tax by a bad debt deduction those rentals should not trigger a further subsequent deduction. This applies equally to cumulative normal rental excess. CTA10/S913 therefore provides a set of rules to restrict that type of excess for bad debt deduction which are a mirror image of those in CTA10/S911.

In practice, however, it is only necessary to consider those rules in the exceptional case where relief for cumulative normal rental excess is available, bad debts arise in respect of lease rentals and the situation is one of those described in BLM74040 where a restriction has a practical effect.

If problems arise in applying the rules in CTA10/S913 to such a case, you should seek advice from CTISA (CT&BIT).