Finance Leasing Manual - FLM35.08

Capital allowances: disposal proceeds less than cost of asset

Where the disposal proceeds are less than cost and the total 'accountancy rental earnings' taxed exceed the 'normal rent' (so that there is a balance of unrelieved cumulative accountancy rental excess) the lessor will normally have suffered a bad debt. This will have been be fully relieved under the ordinary rules (as modified Paragraph 8 Schedule 12 FA1997) and no further deduction will be due. (Indeed a restriction of cumulative accountancy rental excess under Paragraph 9 Schedule 12 may be appropriate). A very simple example illustrating this is at FLM35.09.