Corporation Tax Act 2010 section 913

Relief for bad debts: reduction of cumulative normal rental excess

Section 913 deals with how bad debt deductions interact with the cumulative normal rental excess relief available to a lessor under a finance lease, ensuring that relief is only given against rental income that has effectively been brought into account for tax purposes.

• The section applies where a lessor has both a cumulative normal rental excess and a bad debt deduction for the same period of account in relation to a lease.
• Where accountancy rental earnings do not exceed normal rent and the bad debt deduction exceeds that rent, the cumulative normal rental excess is reduced by the surplus of the bad debt deduction over the rent, but not below nil.
• Where accountancy rental earnings exceed normal rent, the amount of cumulative normal rental excess that can be set against taxable rent is capped at the excess of accountancy rental earnings over the bad debt deduction.
• Where accountancy rental earnings exceed normal rent but the bad debt deduction exceeds accountancy rental earnings, the cumulative normal rental excess is reduced by that excess, but again not below nil.