Finance Leasing Manual - FLM34.27

Bad debts: Schedule A lessors: periods before 1 April 1998: Part II leases

Neither Paragraph 8(8) nor 8(9) Schedule 12 FA 1997 (see FLM34.26) apply to a new lease which is not within Part I Schedule 12 where the accountancy rental earnings exceed the 'normal rent' in a period of account other than the first. In such a case Section 41 ICTA 1988 is only disapplied by Paragraph 8(2) for the first period in which the accountancy rental earnings are taxable and for subsequent periods. This is the case whether

• the lease is within the definition of a Part II lease from its inception but accountancy rental earnings do not initially exceed normal rent, or

• the lease is not initially within Part II at all but later the terms are changed to bring it into Part II.

Any attempt to obtain a double deduction in this way for a bad debt in respect of a Part II lease should be immediately reported to BTD4 Leasing.