Finance Leasing Manual - FLM36.21

Calculation of catching-up charge

The catching-up charge under Paragraph 13 Schedule 12 FA 1997 is imposed on the 'cumulative accountancy rental excess' (see FLM35.05) which would have been in existence immediately prior to the time when the lease first comes within Part I if Part I had applied to the lease for all periods beginning with 26 November 1996. This is the income which may be turned into capital.

The cumulative accountancy rental excess is the difference between

• the rental income recognised in the accounts from 26 November 1996 to the time the lease first comes within Part I Schedule 12, and

• the income actually recognised for tax over that period.