Taxation of Chargeable Gains Act 1992 section 37A

Consideration on disposal of certain leases

Section 37A reduces the disposal consideration used to calculate chargeable gains on certain finance lease disposals, by setting off any cumulative accountancy rental excess, to prevent the same amount being taxed as both income and a capital gain.

• When a lessor disposes of a finance lease and there is a cumulative accountancy rental excess for the period of account in which the disposal occurs, the disposal consideration is reduced by that excess (but not below nil) when calculating any chargeable gain.
• The normal rule that excludes amounts already taxed as income from the capital gains computation does not apply to the extent that amounts are represented by cumulative accountancy rental excess that has been or will be set against disposal consideration under this section, whether on the current disposal or a previous one by the same or a connected person.
• Where the disposal is a part disposal, the cumulative accountancy rental excess must be apportioned between the part disposed of and the part retained, using the same proportions as those used to apportion allowable costs under the standard part disposal rules, and only the portion relating to the property disposed of reduces the consideration.
• Where two or more qualifying disposals take place at the same time, the cumulative accountancy rental excess is shared between them on a just and reasonable basis.