Income Tax Act 2007 section 614BM

Recovery of bad debts following reduction under section 614BL

Section 614BM deals with what happens when a lessor recovers a debt that had previously been written off as bad, where that bad debt had led to a reduction in the cumulative accountancy rental excess under the finance lease rules.

• Where a lessor's cumulative accountancy rental excess was previously reduced because of a bad debt deduction, and the debt is later recovered or credited, the cumulative accountancy rental excess for that later period must be increased.
• The increase equals the amount recovered or credited (the "relevant credit"), but only up to the total of the reductions that were originally made for the bad debt.
• If the amount recovered exceeds the total of the original reductions, the increase is capped at the total of those reductions — the lessor cannot end up with a larger cumulative accountancy rental excess than they would have had without the bad debt.
• This provision only applies where a cumulative accountancy rental excess exists in the period in which the recovery or credit arises.