188体育

Example

Assume now that the facts in the example at BLM70615 are changed slightly (differences in italics):

• a period of account of a lessor company runs for the year to 31 December 1997;
• the company has been in business for some years and the lease in question was granted on 1 July 1997;
• rent of 拢1,000 is due annually in advance on 30 June 1997;
• the accountancy rental earnings from the lease for the year ended 31 December 1997 are 拢600.

The rents to which the lessor becomes entitled for 1997 are now 拢1000 but the spreading mechanism ensures that for the purposes of the comparison required by CTA10/S902(7) the normal rent is 6/12 x 拢1000 = 拢500. The effect of spreading therefore is to cause the condition to be satisfied (since the 拢600 accountancy rental earnings are less than 拢1000 but more than 拢500). But, even if the lease is within Part I for 1997, the rents which will be taxable must be determined without any spreading. So the taxable rents are 拢1000 (the ordinary Schedule A 鈥榚ntitlement basis鈥� measure) since this is not less than the accountancy rental earnings.