BLM74030 - Schedule 12 FA 1997: bad
debts: where the normal rent is taxed – a worked example
Example
The two consequences described at
BLM74025 can be illustrated by adapting
slightly the figures in the example at
BLM74010.
| Year | Accountancy rental earnings | Normal rents | Bad debt reduction |
| 1 | 1000 | Nil | Nil |
| 2 | 500 | 1000 | 2000 |
In this case:
- none of the cumulative accountancy rental
excess brought forward to year 2 (1000) can be set against the
excess of normal rents over accountancy rental earnings for that
year because there is no excess of normal rent over bad debt
deduction (FA97/Sch12/Para9(3)); and
- the cumulative accountancy rental excess
carried forward from year 2 (1000) is reduced by the excess of the
bad debt deduction over the normal rent (also 1000) so that the
cumulative accountancy rental excess is reduced to nil (paragraph
9(4)).
Paragraph 9(5) and (6) go on to provide that where a restriction
under paragraph 9 is made and subsequently the bad debt deduction
triggering the restriction is written back (and taxed), the
cumulative accountancy rental excess brought forward to the period
of the write back is increased by the amount of the write back.
