Capital Allowances Act 1990

41 Writing-down allowances etc. for leased assets and inexpensive cars

(1) Where—

(a) section 42 applies to expenditure on the provision of machinery or plant for leasing in the course of a trade, or

(b) section 22(4)(c) precludes, or would but for section 75 preclude, the making of a first-year allowance in respect of expenditure incurred by a person on the provision of machinery or plant for leasing in the course of a trade, or

(c) paragraph (a) above does not apply and expenditure is incurred on the provision for the purposes of a trade of a motor car to which section 34 does not apply,

then, subject to the following provisions of this Chapter, subsections (2) to (6) below shall have effect with respect to the allowances and charges to be made in the case of the trade (“the actual trade”) under section 24.

(2) It shall be assumed for the purposes of sections 24, 25 and 26—

(a) that the person carrying on the trade incurred the expenditure on the provision of the machinery or plant wholly and exclusively for the purposes of a trade carried on by him separately from the actual trade and any other trade carried on by him; and

(b) that without prejudice to section 24(6)(c)(i) to (iii), the separate trade is permanently discontinued when the machinery or plant begins to be used wholly or partly for purposes other than those of the actual trade;

and the allowance or charge under section 24 which, on those assumptions and having regard to subsections (3) and (4) below, would fall to be made for any chargeable period in the case of the separate trade shall be made for that period in the case of the actual trade.

(3) If an allowance under section 24 falling by virtue of this section to be made for any chargeable period in the case of the actual trade is not claimed or is disclaimed under subsection (4) of that section, or is reduced in amount in accordance with a requirement under subsection (3) or under subsection (4) of that section, then in determining the allowance or charge under that section which would fall to be made for any subsequent chargeable period in the case of the separate trade, any allowance falling to be made in the case of that trade for the first-mentioned chargeable period shall be treated as not claimed or as disclaimed or, as the case may require, as proportionately reduced.

(4) Where in the case of any person sections 24, 25 and 26 apply in accordance with this section to different items of machinery or plant—

(a) those sections shall apply separately in relation to expenditure falling within paragraph (a) of subsection (1) above and to expenditure falling within paragraph (b) or (c) of that subsection; and

(b) if there is more than one item of machinery or plant falling within subsection (1)(a) above or within subsection (1)(b) or (c) or one item of machinery or plant falling within subsection (1)(b) and one falling within subsection (1)(c), those sections shall apply as if the separate trade for which each such item is treated as used were the same trade, and accordingly that trade shall not by virtue of subsection (2)(b) above be treated as permanently discontinued until all the items falling within subsection (1)(a) or subsection (1)(b) and (c) begin to be used wholly or partly for purposes other than those of the actual trade.

(5) Where sections 24, 25 and 26 have effect in accordance with this section in respect of expenditure incurred by a person providing machinery or plant for the purposes of a trade, then, if the machinery or plant is disposed of by him to a person who is connected with him and the disposal is not on an occasion on which the trade is treated as continuing by virtue of section 113(2), 114(1) or 343(2) of the principal Act or section 77(1) of this Act—

(a) the disposal value to be brought into account under sections 24, 25 and 26 in the case of the separate trade shall be of an amount equal to the price which the machinery or plant would have fetched on a sale at the same time in the open market or, if less, the capital expenditure incurred or treated as incurred on the provision of the machinery or plant by the person disposing of it; and

(b) the person acquiring it shall be treated for the purposes of this Part as having incurred on its provision expenditure equal to that disposal value.

(6) This section does not apply to machinery or plant in relation to which sections 24, 25 and 26 apply in accordance with section 34, 79 or 80.