The provisions in FA97/Sch12/Para11 are triggered by the
occurrence of an occasion on which a 'major lump sum', as defined
in Paragraph 3(2), becomes payable (see
BLM73005). On such an occasion the major
lump sum is brought into account in order to recapture any
statutory allowance for capital expenditure on the leased asset
concerned. Since such allowances cannot be given on more than the
cost of the asset there are rules in Paragraph 11 to ensure that
any excess of the major lump sum over the cost of the leased asset
qualifying for allowances is left out of account.
In general, no further rules are needed to ensure that the
same sums are not brought into account twice - for example, once
under 'negative depreciation' (BLM70840) effectively charged to tax
under Paragraph 5 of Schedule 12 and once under the disposal
adjustment rules for capital allowances, as extended by Paragraph
11 Schedule 12. This is because there is no overlap between the
sums involved. 'Negative depreciation' is reflected in the proceeds
obtained from the disposal of a leased asset in excess of the
lessor's original investment in that asset. That excess is excluded
from the disposal proceeds taken into account for capital
allowances.
