Finance Leasing Manual - FLM33.26

Series of disposals

It is in principle possible for there to be a series of disposals on which relief for cumulative accountancy rental excess under Paragraph 12 (1) Schedule 12 FA 1997 may be available.

For example, assume the only asset of a company is the share capital of its 100% subsidiary which leases, in circumstances within Schedule 12, a single asset. At different times the leased asset itself, the shares in the lessor or the shares in its parent (both assets representing the leased asset) may be sold.

Relief given on the first disposal is prevented from being available on a subsequent disposal by Paragraph 6(4)(c) Schedule 12 FA 1997 which reduces the cumulative accountancy rental excess by the amount deducted in the capital gains computation on the disposal. The same provision also prevents cumulative accountancy rental excess deducted in this way from being set against normal rent arising subsequently. (This situation could arise on the part disposal of a leased asset in circumstances where the part retained continues to generate rental income.)