Taxation (International and Other Provisions) Act 2010 section 37A

Consideration on disposal of certain leases

Section 37A deals with how to calculate chargeable gains when a lessor disposes of their interest in a finance lease, the leased asset, or an asset representing the leased asset, where there is a cumulative accountancy rental excess.

• When a finance lease is disposed of and there is a cumulative accountancy rental excess, that excess is set against the disposal proceeds to reduce the chargeable gain, preventing the same amount being taxed as both income and a capital gain.
• The income tax or corporation tax charge on the rental excess takes priority, because the cumulative accountancy rental excess represents the portion of disposal proceeds that is income in nature rather than capital.
• Where only part of the asset is disposed of, the cumulative accountancy rental excess must be apportioned between the part disposed of and the part retained, using the same proportions as the standard part disposal rules for allowable costs.
• Where two or more qualifying disposals occur at the same time, the cumulative accountancy rental excess must be split between the disposals on a just and reasonable basis.