Corporation Tax Act 2010 section 911

Relief for bad debts: reduction of cumulative accountancy rental excess

Section 911 explains how a cumulative accountancy rental excess is adjusted when a lessor needs to recognise a bad debt in respect of unpaid rent under a finance lease.

• Where accountancy rental earnings exceed normal rent and the bad debt deduction is larger still, the cumulative accountancy rental excess is reduced by the amount by which the bad debt deduction exceeds the accountancy rental earnings, but never below nil.
• Where accountancy rental earnings do not exceed normal rent, the amount of cumulative accountancy rental excess that can be set against taxable rent is limited to the excess (if any) of normal rent over the bad debt deduction.
• Where accountancy rental earnings do not exceed normal rent and the bad debt deduction itself exceeds the normal rent, the cumulative accountancy rental excess is further reduced by that excess, but again never below nil.
• A "bad debt deduction" means the total impairment losses recognised in the accounts for a period in respect of rents due under the lease.