Finance Leasing Manual - FLM11.16

Rents deductible as revenue expenditure: order in which other statutory rules are applied

In certain circumstances rentals which would otherwise be allowable are restricted by statute. One common example is CAA 1990, Section 35(2) which sets a ceiling on the deduction for rentals of 'expensive' motor cars (see CA 2410 onwards). Another such restriction (in the sale and lease-back context) is to be found in ICTA 1988, s 779 - ICTA 1988, s 785 (IM 4808 onwards). Where statutory provisions of this nature apply, the adjustments required by SP 3/91 should be made as a first step. Any further adjustment required under the statutory provision should then be made to the rentals allocated to the period of account under SP 3/91.