Capital Allowances Act 2001

Restrictions on allowances

214 Connected persons

Allowances under this Part are restricted under sections 217 and 218 if—

(a) B enters into a relevant transaction with S, and

(b) B and S are connected with each other.

215 Transactions to obtain allowances

Allowances under this Part are restricted under sections 217 and 218 if—

(a) B enters into a relevant transaction with S, and

(b) it appears that the sole or main benefit which (but for this section) might have been expected to accrue to B or S, or to any other party, from—

(i) the relevant transaction, or

(ii) transactions of which the relevant transaction is one,

was obtaining an allowance under this Part.

216 Sale and leaseback, etc.

(1) Allowances under this Part are restricted under sections 217 and 218 if—

(a) B enters into a relevant transaction with S, and

(b) the plant or machinery—

(i) continues to be used for the purposes of a qualifying activity carried on by S, or

(ii) is used after the date of the transaction for the purposes of a qualifying activity carried on by S or by a person (other than B) who is connected with S, without having been used since that date for the purposes of any other qualifying activity except that of leasing the plant or machinery.

(2) In this section—

• “the date of the transaction” means the date of the sale, the making of the contract or the assignment referred to in section 213(1)(a) to (c), and

• “qualifying activity” includes any activity listed in section 15(1) even if any profits or gains from it are not chargeable to tax.

217 No first-year allowance for B’s expenditure

(1) If this section applies as a result of section 214, 215 or 216, a first-year allowance is not to be made in respect of B’s expenditure under the relevant transaction.

(2) Any first-year allowance which is prohibited by subsection (1), but which has already been made, is to be withdrawn.

(3) If plant or machinery is the subject of a sale and finance leaseback (as defined in section 221) section 223 applies instead of this section.

218 Restriction on B’s qualifying expenditure

(1) If this section applies as a result of section 214, 215 or 216, the amount, if any, by which B’s expenditure under the relevant transaction exceeds D is to be left out of account in determining B’s available qualifying expenditure.

D is defined in subsections (2) and (3).

(2) If S is required to bring a disposal value into account under this Part because of the relevant transaction, D is that disposal value.

(3) If S is not required to bring a disposal value into account under this Part because of the relevant transaction, D is whichever of the following is the smallest—

(a) the market value of the plant or machinery;

(b) if S incurred capital expenditure on the provision of the plant or machinery, the amount of that expenditure;

(c) if a person connected with S incurred capital expenditure on the provision of the plant or machinery, the amount of that expenditure.

(4) If plant or machinery is the subject of a sale and finance leaseback (as defined in section 221), section 224 or 225 applies instead of this section.