Income Tax Act 2007 section 614BK

Reduction of taxable rent by the cumulative normal rental excess

Section 614BK provides a mechanism for reducing a lessor's taxable rent where accountancy rental earnings exceed normal rent and a cumulative normal rental excess has built up.

• Where the taxable rent for a period equals the accountancy rental earnings (under section 614BF) and a cumulative normal rental excess exists, a reduction is available
• The taxable rent is reduced by the amount of the cumulative normal rental excess, but cannot be reduced below the normal rent for the period
• This prevents the lessor from being taxed on more rental income than is actually due, where past overpayments relative to accountancy earnings have accumulated
• In some circumstances, section 614BN(3) and (4) may further limit the amount of cumulative normal rental excess that can be set against taxable rent, particularly in connection with bad debt relief