Income Tax Act 2007 section 614BG

Reduction of taxable rent by cumulative rental excesses: introduction

Section 614BG introduces the framework for reducing the taxable rent of a lessor under a finance lease, ensuring that the total rent taxed as income over time does not exceed the rent actually due to the lessor.

• Sections 614BG to 614BK together provide for reductions to the taxable rent of a current lessor ("L") under a qualifying finance lease, preventing over-taxation of rental income across accounting periods.
• "Taxable rent" for a period of account means the amount that would otherwise be treated as lease rent arising to the lessor for income tax purposes in that period, before any reduction under these sections.
• Reductions depend on whether there is a cumulative accountancy rental excess or a cumulative normal rental excess for the lessor's period of account in question.
• Running totals of past differences between accountancy rental earnings and normal rents are maintained, so that an aggregate excess in one direction from earlier periods can offset a current excess in the opposite direction.