Finance Leasing Manual - FLM34.22

Bad debts: Schedule A lessors: periods before 1 April 1998

For periods of account beginning before 1 April 1998 Schedule 12 FA 1997 contains special rules for giving bad debts relief to Schedule A lessors.

For such periods relief for bad debts on UK real property leases generating rentals taxable under Schedule A is usually given (under Section 41 ICTA 1988) by reducing the rents which have become bad and which the lessor previously recognised as taxable income on the statutory entitlement basis, rather than as an independent deduction in computing the rents taxable net of expenses in the way that trading lessors are treated.
Paragraph 8 Schedule 12 FA 1997 disapplies the rules in Section 41 for bad debt relief in all the circumstances where the Section would interact with the rules in Schedule 12. Instead bad debt relief is to be computed as if the property in question was leased in the course of a trade.