Income Tax Act 2007 section 614BJ

Meaning of "normal rental excess" and "cumulative normal rental excess"

Section 614BJ defines two key terms used in the finance lease rules: "normal rental excess" and "cumulative normal rental excess", which measure the extent to which normal rent exceeds accountancy rental earnings over time.

• A normal rental excess arises in any accounting period where the normal rent from a finance lease exceeds the accountancy rental earnings for that period
• Where taxable rent has already been reduced by a cumulative accountancy rental excess under section 614BI, the normal rental excess is recalculated using the reduced normal rent figure
• The cumulative normal rental excess is the running total of all previous normal rental excesses, less any amounts already set off against taxable rent under section 614BK or reduced for bad debt relief under section 614BN
• The cumulative total may also be increased where bad debts previously written off are subsequently recovered, as provided by section 614BO