Part 2 Plant and machinery allowances

Chapter 17Other anti-avoidance

Restrictions on allowances

218 Restriction on B’s qualifying expenditureF1: section 214 or 216

(1)

If this section applies as a result of F2section 214 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 F3(2), (2A) 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.

F4(2A)

D is nil if—

(a)

S is not required to bring a disposal value into account under this Part because of the relevant transaction, and

(b)

at any time before that transaction S or a linked person became owner of the plant or machinery without incurring either capital expenditure or qualifying revenue expenditure on its provision.

(3)

F5Otherwise, 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.

F6(3A)

“Linked person”, in relation to plant or machinery, means a person—

(a)

who owned the plant or machinery at any time before the relevant transaction, and

(b)

who was connected with S at any time between—

(i)

the time when the person became owner of the plant or machinery, and

(ii)

the time of the relevant transaction.

(3B)

Expenditure on the provision of plant or machinery is “qualifying revenue expenditure” if it is expenditure of a revenue nature—

(a)

that is at least equal to the amount of expenditure that would reasonably be expected to have been incurred on the provision of the plant or machinery in a transaction between persons dealing with each other at arm's length in the open market, or

(b)

that is incurred by the manufacturer of the plant or machinery and is at least equal to the amount that it would have been reasonable to expect to have been the normal cost of manufacturing the plant or machinery.

F7(4)

This section does not apply if plant or machinery is the subject of a sale and finance leaseback (as defined in section 221), but see section 225.

F8(5)

This section is subject to section 218ZA(3).