Finance Leasing Manual - FLM33.14

Cumulative accountancy rental excess: mechanics of relief against capital gains disposal proceeds

Under Paragraph 12 Schedule 12 FA 1997 the lessor may deduct all or part of any cumulative accountancy rental excess (see FLM33.01) in certain capital gains computations. In those circumstances unused cumulative accountancy rental excess may be set off against the consideration received on the disposal, up to the amount of the consideration.

The simplest, and most common, case where Paragraph 12 applies will be one where a lessor company simply disposes of the whole of its interest in the leased asset for a capital sum. In such a case the whole of the unused cumulative accountancy rental excess up to the consideration received may be set against that consideration in the capital gains computation.

Paragraph 12 is of no application to the assignment of a lease in circumstances where it is treated under the capital gains code as a no gain/no loss disposal - see FLM33.15.