Part 2

Plant and machinery allowances
Chapter 18

Additional VAT liabilities and rebates

Anti-avoidance

Restriction on B’s qualifying expenditure: general
242
1
This section applies instead of section 218 (restriction on B’s qualifying expenditure in case other than sale and finance leaseback) if—
a
apart from this subsection, section 218 would apply, and
b
an additional VAT liability has been incurred by, or an additional rebate has been made to, any of the persons mentioned in that section.
2
The amount, if any, by which E exceeds D is to be left out of account in determining B’s available qualifying expenditure.
E and D are defined in subsections (3) to (6).
3
Except where subsection (6) applies, E is the sum of—
a
B’s expenditure under the relevant transaction, and
b
any additional VAT liability incurred by B in respect of that expenditure.
4
If S is required to bring a disposal value into account under this Part because of the relevant transaction, D is that disposal value.
4A
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.
5
Otherwise, 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—
i
increased by the amount of any additional VAT liability incurred by S in respect of that expenditure, and
ii
reduced by the amount of any additional VAT rebate made to S in respect 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—
i
increased by the amount of any additional VAT liability incurred by that person in respect of that expenditure, and
ii
reduced by the amount of any additional VAT rebate made to that person in respect of that expenditure.
6
If—
a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b
subsection (5) applies and the smallest amount under that subsection is the market value of the plant or machinery, and
c
that value is determined inclusive of value added tax,
E is the amount of B’s expenditure under the relevant transaction.
7
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.
8
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.
Pt. 2 modified (24.2.2003) by Proceeds of Crime Act 2002 (c. 29), s. 458(1), Sch. 10 para. 12 (with Sch. 10 para. 17(1)); S.I. 2003/120, art. 2, Sch. (with arts. 3 4) (as amended (20.2.2003) by S.I. 2003/333, art. 14)
S. 45H(2) modified (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14) , Sch. 30 para. 7
Pt. 2 restricted (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 4 para. 4 ; S.I. 2004/2575 , art. 2(1) , Sch. 1
Pt. 2 modified (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 paras. 9(2), 21(2) (with s. 38(2)); S.I. 2004/2575, art. 2(1) , Sch. 1
Pt. 2 restricted (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 paras. 10, 22 (with s. 38(2) ); S.I. 2004/2575 , art. 2(1) , Sch. 1
Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 19
Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 35
Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 paras. 36, 37
Pt. 2 modified (21.7.2009) by Finance Act 2009 (c. 10), s. 24
Pt. 2 modified (17.7.2013) by Finance Act 2013 (c. 29), s. 73(7)-(11) (with s. 73(6))
S. 242(4A) inserted (with effect in accordance with Sch. 10 para. 5(6) of the amending Act) by Finance Act 2015 (c. 11), Sch. 10 para. 5(2)
S. 242(7)(8) inserted (with effect in accordance with Sch. 10 para. 5(6) of the amending Act) by Finance Act 2015 (c. 11), Sch. 10 para. 5(5)
Word in s. 242(5) substituted (with effect in accordance with Sch. 10 para. 5(6) of the amending Act) by Finance Act 2015 (c. 11), Sch. 10 para. 5(3)
S. 242(6)(a) omitted (with effect in accordance with Sch. 10 para. 5(6) of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 10 para. 5(4)(a)
Words in s. 242(6)(b) substituted (with effect in accordance with Sch. 10 para. 5(6) of the amending Act) by Finance Act 2015 (c. 11), Sch. 10 para. 5(4)(b)
Pt. 2 modified (10.6.2021) by Finance Act 2021 (c. 26), s. 9(1)(a)