BLM74350 - Schedule 12 FA 1997: lease changes: 'new' lease first comes within Part I - no catching-up charge

No catching-up charge is imposed when a 'new' lease first comes within Part I because the accountancy measure of rental income from the lease ('accountancy rental earnings') should not have systematically exceeded the taxable measure for previous periods (the 'normal rent').

• In the case of a lease which is initially a finance lease (or loan) Part II of the schedule will have applied to it and the excess of accountancy rental earnings over normal rents will have been recognised as income. FA97/Sch12/Para14 provides continuity of treatment of excesses in this situation (see BLM73010).
• In the case of a 'new' lease which is an operating lease the general rules applicable to the head of charge at issue (usually trading income but sometimes property income) will ensure that a satisfactory measure of income is brought to account for tax.