Finance Leasing Manual - FLM34.13
Bad debts deduction: where the normal rent is taxed: example
The two consequences described at FLM34.10 can be illustrated by
adapting slightly the figures in the example at FLM34.04.
Modified
example
In this case:
- none of the cumulative accountancy rental excess brought forward to year 2 (1000) can be set against the excess of normal rents over accountancy rental earnings for that year because there is no excess of normal rent over bad debt deduction (Paragraph 9(3) Schedule 12 FA 1997); and
- the cumulative accountancy rental excess carried forward from year 2 (1000) is reduced by the excess of the bad debt deduction over the normal rent (also 1000) so that the cumulative accountancy rental excess is reduced to nil (Paragraph 9(4)).
Paragraph 9(5) and (6) go on to provide that where a restriction under Paragraph 9 is made and subsequently the bad debt deduction triggering the restriction is written back (and taxed), the cumulative accountancy rental excess brought forward to the period of the write back is increased by the amount of the write back.
