Whenever a 'new' lease, initially treated as an operating
lease, is reclassified as a finance lease (or loan), whether
because its terms change or because accountants change their view
of it, the rules in Schedule 12 (Part I or Part II as the case may
be) apply from that point. For the reasons set out in the next
paragraph no 'cumulative excesses' (see
BLM72001) are brought forward from
earlier periods when the lease was classified as an operating
lease.
No 'cumulative excesses' are brought forward from earlier
periods because, by definition, 'accountancy rental earnings'
cannot be derived from an operating lease. The underlying
definition of 'rental earnings' is the income derived from what
accountants regard as a finance lease or loan. By virtue of
FA97/Sch12/Para6(1) a normal rental excess can only arise in a
period of account in which a lease is classified as a finance lease
(or loan).
