Corporation Tax Act 2010 section 907

Meaning of "accountancy rental excess" and "cumulative accountancy rental excess"

Section 907 defines two key terms used in the finance lease rules: "accountancy rental excess" and "cumulative accountancy rental excess", which measure the extent to which accountancy rental earnings exceed normal rent over time.

• An accountancy rental excess arises in a period where the lessor is taxed on accountancy rental earnings (under section 905) and those earnings exceed the normal rent for that period.
• The amount of the excess is the difference between the accountancy rental earnings and the normal rent, but if the taxable rent has already been reduced under section 910, the excess is only the amount by which the reduced accountancy rental earnings still exceed the normal rent.
• The cumulative accountancy rental excess is the running total of all accountancy rental excesses from previous periods, adjusted for any bad debt recoveries under section 912, but only to the extent that the total has not already been used up.
• The cumulative total is reduced by amounts previously set off against taxable rent under section 908, amounts reduced for bad debt relief under section 911, and amounts set off against disposal consideration under section 37A of the Taxation of Chargeable Gains Act 1992.