Finance Leasing Manual - FLM33.33

Cumulative normal rental excess

The relief for cumulative normal rental excess is also set out in Paragraph 6 Schedule 12 FA 1997. It is of much narrower application than the relief for cumulative accountancy rental excess.

Cumulative normal rental excess can only be set off against taxable rents from a lease where periods of account in which accountancy rental earnings exceed normal rent follow periods where normal rent exceeds accountancy rental earnings. That is where, in accountancy terms, periods in which 'negative depreciation' arises (see FLM32.18) follow periods where the rentals contain 'loan repayment' elements and so give rise to 'positive' depreciation.

Cumulative normal rental excess unused at the end of a lease cannot be relieved against capital gains disposal proceeds or in any other way.