Legalize / United Kingdom / Public General Act

Capital Allowances Act 2001

Type Public General Act

Publication 2001-03-22

Last updated 2026-03-18

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

[^key-cd2c387e9122247ba4b8932910107548]: S. 33(8)(da) omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(6)(d), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-e3f1a0af8bc8bab7c35583d7667dc044]: Word in s. 35(1)(a) substituted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by Finance Act 2025 (c. 8), Sch. 5 paras. 8(7)(a), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-e7d85506d1294b91d2912e2e2d758420]: Word in s. 35(1)(b) omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(7)(b), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-2ea1d1c82975186ef4d714c9d6fdb123]: Words in s. 45D(1)(a) substituted (20.3.2025) by Finance Act 2025 (c. 8), s. 23(2)

[^key-6810038c42028a6adc27be80272c9191]: S. 45D(1A) omitted (20.3.2025) by virtue of Finance Act 2025 (c. 8), s. 23(3)

[^key-e4d08a98e58f67dd22988a5c4ad4801d]: S. 45D(1B)(1C) inserted (20.3.2025) by Finance Act 2025 (c. 8), s. 23(4)

[^key-38fa54829671cf1a5b3a5f33b6853d53]: Words in s. 59(4A) substituted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by Finance Act 2025 (c. 8), Sch. 5 paras. 8(8)(a), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-f83dbb70dd331a0748f6418a6b983b91]: S. 59(7A) omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(8)(b), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-0bfae1eb7ea4a8465f3ff93d83b6911e]: Word in s. 63(3)(b) substituted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by Finance Act 2025 (c. 8), Sch. 5 paras. 8(9)(a), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-e4d80e7da6397ef44853a459b57d29c5]: S. 63(3)(c) omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(9)(b), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-54dd5cd145a4f8f8aab9bcb198a4bba5]: Word in s. 63(3)(d) omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(9)(c), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-e6cfa8ac88ea4731da0d433e74b77d74]: S. 63(3)(da) omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(9)(d), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-1155e19163a89ff1b0a5e08e24ab4938]: Word in s. 248 substituted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by Finance Act 2025 (c. 8), Sch. 5 paras. 8(10)(b), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-4985a29328b8bded749a5758e576b7dc]: S. 249 omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(11), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-1dd12aa8584f7ec42e3a7628588accef]: Word in s. 250 omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(12)(b), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-1c237436fb8f2f633a3f28e7ca3f8f92]: S. 250A omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(13), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-026b9cfcd05d01e79b4880c87bf00568]: Word in s. 270CA(b) substituted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by Finance Act 2025 (c. 8), Sch. 5 paras. 8(14)(a), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-a582db9240ee127a1f323f489c15aca5]: Word in s. 270CA(c) omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(14)(b), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-b543c699426e693421893e5e303e7322]: S. 270CB omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(15), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-1b232e918d2ce3a5c775d48bf8f34fd9]: Words in s. 270CG(1) substituted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by Finance Act 2025 (c. 8), Sch. 5 paras. 8(16)(a), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-4bef283af6ed9286c7be7be27a606989]: Words in s. 270CG(1) substituted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by Finance Act 2025 (c. 8), Sch. 5 paras. 8(16)(b), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-5c4cda66a4ffe03a29603b81846797ec]: Word in s. 270HB(a) substituted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by Finance Act 2025 (c. 8), Sch. 5 paras. 8(17)(b), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-f3ecaabbe15154e2c3a5c7af122f33c4]: Word in s. 270HB(b) omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(17)(c), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-bb1fc6d38854a80b124e8782dce0c6db]: Word in s. 536(5)(a)(i) substituted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by Finance Act 2025 (c. 8), Sch. 5 paras. 8(18)(a), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-f2a908ee1f35c6c6655a378080900ddb]: S. 536(5)(a)(ii) omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(18)(b), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-f683fa245dbe022670f5b983567dd0d6]: Word in s. 536(5)(a)(iii) omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(18)(c), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-23a7ae63aa2e37ee89ad497c73bcc56b]: S. 536(5)(a)(iiia) omitted (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 8(18)(d), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-f62eb88c2f9afd299b51a1d998112e4e]: Sch. 2 para. 13 repealed (for the purposes of corporation tax, in relation to accounting periods beginning on or after 1.4.2025 and, for the purposes of income tax, in relation to periods of account beginning on or after 6.4.2025) by Finance Act 2025 (c. 8), Sch. 5 paras. 9(a), 12(3) (with Sch. 5 paras. 15, 18, 19)

[^key-1e8e43742ee3ad9dcf26e18f5a5b6246]: Ss. 45U, 45V inserted (18.3.2026) by Finance Act 2026 (c. 11), s. 29(3)

[^key-57b76a63dbb97653972c78845dd7c740]: Words in s. 39 inserted (18.3.2026) by Finance Act 2026 (c. 11), s. 29(2)

[^key-f1857408ef08d4d7b0d2ae58283db5b0]: Word in s. 45D(1B)(a) substituted (18.3.2026) by Finance Act 2026 (c. 11), s. 30(a)

[^key-c3db4828f78494985383f4b110c9b9ca]: Word in s. 45D(1B)(b) substituted (18.3.2026) by Finance Act 2026 (c. 11), s. 30(a)

[^key-94793a0fa35c4dc990cadbb8878aba40]: Word in s. 45EA(3)(a) substituted (18.3.2026) by Finance Act 2026 (c. 11), s. 30(b)

[^key-597439c0f97e61b1beb68b76806d5923]: Word in s. 45EA(3)(b) substituted (18.3.2026) by Finance Act 2026 (c. 11), s. 30(b)

[^key-dc772ec918f74e1522fc00355fb14a2c]: Words in s. 46(1) inserted (18.3.2026) by Finance Act 2026 (c. 11), s. 29(4)(a)

[^key-cbcfd5f20bf0472a9972db864c718ba2]: S. 46(4B)-(4G) inserted (18.3.2026) by Finance Act 2026 (c. 11), s. 29(4)(b)

[^key-9da48d32f3e6ce3c79e9633125cd099a]: Words in s. 52(3) table inserted (18.3.2026) by Finance Act 2026 (c. 11), s. 29(5)

[^key-62f2653317df257251b5a56757870bd3]: Word in s. 56(1) substituted (with effect in accordance with s. 28(2)-(6) of the amending Act) by Finance Act 2026 (c. 11), s. 28(1)

[^key-3ccce61df2bab983ae90da73db6ef045]: Words in s. 63(4)(b) substituted (with effect in accordance with s. 56(8) of the amending Act) by Finance Act 2026 (c. 11), s. 56(8), Sch. 9 para. 20(a)

[^key-4bfa3272936f4d7b50f338cc53cf6b89]: Words in s. 63(4)(b) substituted (with effect in accordance with s. 56(8) of the amending Act) by Finance Act 2026 (c. 11), s. 56(8), Sch. 9 para. 20(b)

Disposal values in avoidance cases

Restrictions on writing-down allowances: section 215

Effect of election: relaxation of restriction on B’s qualifying expenditure, etc.

Interest acquired on completion of conversion

Lessor’s income or profits

Entitlement to writing-down allowances

Sections 228A to 228G: supplementary

Plant or machinery subject to further operating lease

Introduction

Purchase of building within 2 years of first use

Balancing adjustment on realisation of capital value

Introduction

Buildings temporarily out of use

Entitlement to writing-down allowances

Additional VAT rebates and balancing adjustments

Amount of allowance

Calculation of balancing adjustments

When balancing adjustments are made

Grants affecting entitlement to allowances

Introduction

Meaning of “decommissioning expenditure”

Persons having qualifying trade expenditure

Requirements relating to the landlord

Additional VAT liabilities and writing off initial allowances

Additional VAT rebates and balancing adjustments

Amount of allowances and charges

The general rule excluding contributions

Exception for manufacturers and suppliers

Expenditure on research and development

Ceasing to work mineral deposits

Abandonment expenditure within 3 years of ceasing ring fence trade

Transfer of a UK trade to a company in another member State

Abandonment expenditure incurred before cessation of ring fence trade

Trades

Flat conversion allowances

Meaning of “freehold interest”, “lease”, etc.

Time when expenditure is incurred

Meaning of “qualifying building”

Amount of allowances and charges

Tax agreements for income tax purposes

Section 411 (exclusion of double allowance)

Election to treat sale as being for alternative amount

Meaning of “dwelling-house”, “lease” etc.

Appeals etc.

Reduction of first-year allowances

S's income or profits: termination of leaseback

Effect of successions

Purchase of building within 2 years of first use

Section 530 (disposal of know-how)

References to sale of property and time of sale

Elections: supplementary

Meaning of “qualifying expenditure”

Sales treated as being for alternative amount: introductory

Companies not resident in the United Kingdom

Plant or machinery subject to further operating lease

Meaning of “control”

Schedule 1 (certification of films as British films)

Schedule 2 (taxation)

Amount of allowance

Orders and regulations made by Treasury or Commissioners

Meaning of “control”

Schedule 24 (assumptions for calculating chargeable profits, creditable tax and corresponding United Kingdom tax of foreign companies)

Section 37 (consideration chargeable to tax on income)

Schedule 4 (taxation provisions)

Section 43 (interpretation of sections 41 and 42)

Apportionment of sums partly referable to non-qualifying assets

Meaning of “qualifying building”

Section 400 (write-off of government investment)

Section 93 (use of currency other than sterling)

Schedule 2 (provisions relating to carrying out approved schemes or reorganisation)

Schedule 24 (provisions relating to the Railways Act 1993)

Schedule 4 (taxation provisions)

Determination of entitlement or liability

Section 105 (corporation tax: use of currencies other than sterling)

Section 393A (losses: set off against profits of the same, or an earlier, accounting period)

Expenditure which is not first-year qualifying expenditure

When capital expenditure is incurred

Production animals etc.

General conditions as to availability of plant and machinery allowances

Employments and offices

Production animals etc.

EEA furnished holiday lettings businesses

Expenditure incurred for Northern Ireland purposes by small or medium-sized enterprises

Expenditure on cars with low carbon dioxide emissions

General decommissioning expenditure incurred before cessation of ring fence trade

Application of sections 228B and 228C

Sections 228A to 228G: supplementary

Plant or machinery used for less than five years in a ring fence trade

Meaning of “car” and “motor cycle”

Meaning of “short-life asset”

Expenditure on plant and machinery for use wholly in a ring fence trade

Balancing adjustment on realisation of capital value

Meaning of “mineral extraction trade” etc.

Incoming lessee where lessor entitled to allowances

Fixture on which a plant and machinery allowance has been claimed

Buildings for miners etc.: carry-back of balancing allowances

Incoming lessee where lessor entitled to allowances

Appeals etc.

Restriction on B’s qualifying expenditure: section 214 or 216

Meaning of “qualifying business premises”

The relevant interest

Plant or machinery subject to further operating lease

Meaning of “disposal receipt” and “disposal event”

Capital expenditure on construction of agricultural building

Introductory

Proceeds from balancing events

The different kinds of pools

Calculation of present value

Rental rebate

Purchase of building within 2 years of first use

Capital value provisions: application of provisions

Balancing adjustment on ending of concession

Expenditure not treated as qualifying expenditure if delay in carrying out works etc

Meaning of “qualifying business premises”

Meaning of “decommissioning expenditure”

General rule as to what is the relevant interest

Entitlement to writing-down allowances

Introduction

Expenditure on works likely to become valueless

Giving effect to allowances and charges: lessors and licensees

Introduction

Provisions applying on termination of lease

Additional VAT liabilities and initial allowances

UK property businesses

Meaning of “the residue of qualifying expenditure”

Meaning of “freehold interest”, “lease”, etc.

Additional VAT liabilities and initial allowances

Meaning of “decommissioning expenditure”

Exceptions to section 161C(2)

Additional VAT liabilities and writing-down allowances

Anti-avoidance: limit on qualifying expenditure

First-year allowances

Exceptions to section 161C(2)

Additional VAT liabilities and writing off initial allowances

General decommissioning expenditure after ceasing ring fence trade

Entitlement to writing-down allowance

Additional VAT rebates and balancing adjustments

Flat conversion allowances

Tax agreements for income tax purposes

Determination of entitlement or liability

Apportionment where property sold together

Section 407 (relationship between group relief and other relief)

Plant or machinery subject to further operating lease

Section 98 (special returns, etc.)

Hire-purchase etc.

Section 87 (taxable premiums etc.)

Section 86 (spreading of relief for acquisition expenses)

Sales treated as being at market value

Section 288 (interpretation)

Section 57 (regulations about appeals)

Buildings temporarily out of use

New sections 578A and 578B (expenditure on car hire)

The relevant interest

Meaning of “connected” persons

Schedule 12 (building societies: change of status)

Schedule 3 (assets held on 31st March 1982)

Section 41 (relief for preliminary expenditure)

Section 42 (relief for production or acquisition expenditure)

Effect of successions

Section 92 (the basic rule: sterling to be used)

Section 93 (use of currency other than sterling)

Section 151 (benefits under pilot schemes)

Schedule 7 (transfer schemes relating to BBC transmission network: taxation provisions)

Section 195 (allowance of certain drilling expenditure)

Schedule 25 (Northern Ireland Airports Limited)

Schedule 1 (certification of films as British films)

Schedule 4 (taxation provisions)

Capital allowances

Claims for capital allowances

Meaning of “chargeable period”

Managing the investments of a company with investment business

Exclusions from allowances under section 45DA

Expenditure incurred for Northern Ireland purposes by small or medium-sized enterprises

Plant or machinery used for less than five years in a ring fence trade

General decommissioning expenditure incurred before cessation of ring fence trade

Lessor’s income or profits: termination of leaseback

Application of sections 228B and 228C

Expenditure on environmentally beneficial plant or machinery

45H

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certification of environmentally beneficial plant and machinery

45I

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Environmentally beneficial components of plant or machinery

45J

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General exclusions applying to sections 40, 44 and 45

Introduction

Restriction of qualifying expenditure

Introduction

Professions and vocations

Limit where part of expenditure met by another person

Recovery of allowances in case of joint lessees

Additional VAT liabilities and writing-down allowances

Amount of allowance

Proceeds from balancing events

Calculation of balancing adjustments

Interest acquired on completion of conversion

Additional VAT rebates and writing off qualifying expenditure

Persons leaving cash basis

Anti-avoidance

570A

(1) This section applies where an event occurs in relation to an asset (a “ balancing event ”) as a result of which a balancing allowance would (but for this section) fall to be made to a person (“the taxpayer”) under Part ..., 3A ... ... 5 or 10.

(2) The taxpayer is not entitled to any balancing allowance if, as a result of a tax avoidance scheme, the amount to be brought into account as the proceeds from the event is less than it would otherwise have been.

(3) In subsection (2) a “ tax avoidance scheme ” means a scheme or arrangement the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage by the taxpayer.

(4) Where this section applies to deny a balancing allowance, the residue of qualifying expenditure immediately after the balancing event is nevertheless calculated as if the balancing allowance had been made.

(5) In this section as it applies for the purposes of Part 5 (mineral extraction allowances)—

(a) the references to the proceeds from the balancing event that are to be brought into account shall be read as references to the disposal value to be brought into account, and

(b) the reference to the residue of qualifying expenditure shall be read as a reference to the unrelieved qualifying expenditure.

Meaning of “freehold interest”, “lease”, etc.

UK property businesses

Determination of entitlement or liability

Meaning of “disposal receipt”

Disposal of, or ceasing to use, asset

Expenditure on research and development

Election to treat sale as being for alternative amount

Limit on amount of disposal value

Schedule 21 (tax relief in connection with schemes for rationalising industry and other redundancy schemes)

Meaning of “disposal receipt”

Research and development allowances

Ceasing to work mineral deposits

“Additional VAT liability” and “additional VAT rebate”

Elections: supplementary

Schedule 5 (transitional provisions and savings)

Schedule 11 (taxation provisions)

Balancing adjustment on ending of concession

Application of Act to parts of assets

Schedule 3 (assets held on 31st March 1982)

Section 41 (relief for preliminary expenditure)

Election to treat sale as being for alternative amount

Schedule 12 (leasing arrangements: finance leases and loans)

Entitlement to writing-down allowances

Schedule 33 (taxation)

Schedule 25 (Northern Ireland Airports Limited)

Section 42 (relief for production or acquisition expenditure)

“Additional VAT liability” and “additional VAT rebate”

Section 105 (corporation tax: use of currencies other than sterling)

Schedule 22 (tonnage tax)

Calculation of amount after relevant event

When balancing adjustments are made

Section 105 (corporation tax: use of currencies other than sterling)

Schedule 22 (tonnage tax)

Section 91 (cemeteries)

Investment assets

Purchaser of land giving consideration for fixture

Section 384 (restrictions on right of set-off)

Giving up exploration, search or inquiry

Sales treated as being at market value

Meaning of “control”

Other definitions

Commencement and transitional provisions and savings

Elections: supplementary

Section 195 (allowance of certain drilling expenditure)

Additional VAT rebates and balancing adjustments

Balancing events

Schedule 24 (provisions relating to the Railways Act 1993)

Schedule 17 (Northern Ireland electricity)

Schedule 24 (provisions relating to the Railways Act 1993)

Schedule 2 (taxation)

Section 384 (restrictions on right of set-off)

Section 43 (interpretation of sections 41 and 42)

Schedule 4 (taxation provisions)

Schedule 25 (Northern Ireland Airports Limited)

Finance leaseback: parties' income and profits

228A

(1) Sections 228B and 228C apply where plant or machinery is the subject of a lease and finance leaseback.

(2) Plant or machinery is the subject of a lease and finance leaseback if—

(a) a person (“S”) leases the plant or machinery to another (“B”),

(b) after the date of that transaction, the use of the plant or machinery falls within sub-paragraph (i), (ii) or (iii) of section 221(1)(b), and

(c) it is directly as a consequence of having been leased under a finance lease that the plant or machinery is available to be so used after that date.

(3) For the purposes of subsection (2), S leases the plant or machinery to B only if—

(a) S grants B rights over the plant or machinery,

(b) consideration is given for that grant, and

228B

(1) For the purpose of income tax or corporation tax, in calculating S's income or profits for a period of account the amount deducted in respect of amounts payable under the leaseback may not exceed the permitted maximum.

(2) The permitted maximum is the amount of the finance charges shown in the accounts.

(3) In relation to a period of account during which the leaseback terminates, the permitted maximum shall also include an amount calculated in accordance with subsection (4).

(4) The calculation is—

$$CurrentBookValue×OriginalConsiderationOriginalBookValue$where—“Current Book Value” means the net book value of the leased plant or machinery immediately before the termination,“Original Consideration” means the consideration payable to S for granting B rights over the plant or machinery, and“Original Book Value” means the net book value of the leased plant or machinery at the beginning of the leaseback.$

(5) If the use mentioned in section 228A(2)(b) includes use by a person (other than B) who is connected with S, this section applies in relation to that person as it applies in relation to S.

Additional VAT liabilities and writing off initial allowances

228C

(1) Subsection (2) applies where the leaseback terminates.

(2) For the purpose of the calculation of income tax or corporation tax, the income or profits of S from the relevant qualifying activity for the period in which the termination occurs shall be increased by an amount calculated in accordance with subsection (3).

(3) The calculation is—

$$Original Consideration×CurrentBookValueOriginalBookValue$ where— “Original Consideration” means the consideration payable to S for granting B rights over the plant or machinery, “Current Book Value” means the net book value of the leased plant or machinery immediately before the termination, and“Original Book Value” means the net book value of the leased plant or machinery at the beginning of the leaseback.$

(4) In this section “relevant qualifying activity” means the qualifying activity for the purposes of which the leased plant or machinery was used immediately before the termination.

(5) Section 228B has no effect on the treatment for the purposes of income tax or corporation tax of amounts received by way of refund on the termination of a leaseback of amounts payable under it.

(6) In subsection (5), “amounts received by way of refund” includes any amount that would be so received in respect of S's interest under the leaseback if any amounts due to B (or, where appropriate, an assignee of B) under the leaseback were disregarded.

228D

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lease and finance leaseback

228E

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

228F

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

228G

(1) Sections 228B and 228C are subject to this section in their application in relation to a leaseback that is not accounted for as a finance lease in the accounts of S.

(2) Subsection (3) applies where the leaseback is accounted for as a finance lease in the accounts of a person connected with S; and in that subsection “ relevant calculation ” means the calculation of—

(a) the permitted maximum for the purposes of section 228B, or

(b) the amount by which the income or profits of S are to be increased in accordance with section 228C.

(3) Where an amount that falls to be used for the purposes of a relevant calculation—

(a) cannot be ascertained by reference to S's accounts because the leaseback is not accounted for as a finance lease in those accounts, but

(b) can be ascertained by reference to the connected person’s accounts for one or more periods,

that amount as ascertained by reference to the connected person’s accounts shall be used for the purposes of the relevant calculation.

(4) Subsections (5) and (6) apply in a case where the leaseback is not accounted for as a finance lease in the accounts of a person connected with S.

(5) Sections 228B and 228C do not apply in relation to the leaseback.

(6) If the term of the leaseback begins on or after 18 May 2004 then, for the purposes of income tax or corporation tax, the income or profits of S from the relevant qualifying activity for the period of account during which the term of the leaseback begins shall be increased by the consideration payable to S for granting B rights over the plant or machinery.

(7) For the purposes of this section the leaseback is accounted for as a finance lease in a person’s accounts if—

(a) the leaseback falls, under generally accepted accounting practice, to be treated in that person’s accounts as a finance lease or loan, or

(b) in a case where the leaseback is comprised in other arrangements, those arrangements fall, under generally accepted accounting practice, to be so treated.

228H

(1) In sections 228A to 228G—

“consideration” does not include rentals;

the “ net book value ”of leased plant or machinery means the book value of the plant or machinery having regard to any relevant entry in S's accounts, but— also having regard to depreciation up to the time in question, anddisregarding any revaluation gains or losses and any impairments;

“S” does not include an assignee of S;

“ termination ” in relation to a leaseback includes ...— the assignment of S's interest,the making of any arrangements (apart from an assignment of S's interest) under which a person other than S becomes liable to make some or all payments under the leaseback, anda variation as a result of which the leaseback ceases to be a finance lease.

(1A) For the purposes of sections 228A to 228G, references to consideration given (or payable to S) for the grant to B of rights over the plant or machinery do not include—

(a) rentals payable under that grant, or

(b) any relevant capital payment (within the meaning of section 890 of CTA 2010 or section 809ZA of ITA 2007) to which either of those sections applies.

(1B) In relation to a case where some but not all of the consideration mentioned in subsection (1A) falls within paragraph (b) of that subsection, sections 228B to 228G or section 228J have effect subject to such modifications as are just and reasonable.

(2) In a case where accounts drawn up are not correct accounts, or no accounts are drawn up—

(a) the provisions of sections 228A to 228G apply as if correct accounts had been drawn up, and

(b) amounts referred to in any of those sections as shown in accounts are those that would have been shown in correct accounts.

(3) In a case where accounts are drawn up in reliance upon amounts derived from an earlier period of account for which correct accounts were not drawn up, or no accounts were drawn up, amounts referred to in sections 228A to 228G as shown in the accounts for the later period are those that would have been shown if correct accounts had been drawn up for the earlier period.

(4) In subsections (2) and (3) “ correct accounts ” means accounts drawn up in accordance with generally accepted accounting practice.

228J

(1) This section applies where—

(a) plant or machinery is the subject of—

(i) a sale and finance leaseback, or

(ii) a lease and finance leaseback, and

(b) some or all of the plant or machinery becomes, while the subject of the leaseback, also the subject of a lease in relation to which the following conditions are met—

(i) the term of the lease begins on or after 18 May 2004;

(ii) S, or a person connected with S, is the lessee under the lease;

(iii) the lease is not accounted for as a finance lease in the accounts of the lessee.

(2) For the purpose of income tax or corporation tax, in calculating the lessee’s income or profits for a period of account the amount deducted in respect of amounts payable under the operating lease shall not exceed the relevant amount.

(3) Subsections (4) and (5) apply in relation to the calculation of the lessor’s income or profits for a period of account for the purpose of income tax or corporation tax.

(4) Where—

(a) an amount receivable in respect of the lessor’s interest under the operating lease falls to be taken into account in that calculation, and

(b) that amount is reduced by an amount due to the lessee under the operating lease,

that reduction shall be disregarded when taking the amount receivable into account.

(5) The amounts receivable in respect of the lessor’s interest under the operating lease that fall to be taken into account in that calculation may be disregarded to the extent that they exceed the relevant amount (whether or not subsection (4) applies).

(6) Where only some of the plant or machinery is the subject of the operating lease, subsections (2) to (5) shall apply subject to such apportionments as may be just and reasonable.

(7) For the purposes of this section a lease is accounted for as a finance lease in a person’s accounts if—

(a) the lease—

(i) falls, under generally accepted accounting practice, to be treated in that person's accounts as a finance lease or loan, or

(ii) if that person is a lessee under a right-of-use lease, would fall to be treated in that person's accounts as a finance lease were that person required under generally accepted accounting practice to determine whether the lease falls to be so treated,

(b) in a case where the lease is comprised in other arrangements, those arrangements —

(i) fall, under generally accepted accounting practice, to be treated as a finance lease or loan, or

(ii) if that person is a lessee under a right-of-use lease, would fall to be treated in that person's accounts as a finance lease were that person required under generally accepted accounting practice to determine whether the arrangements fall to be so treated.

(8) In this section—

“ lease and finance leaseback ” has the meaning given in section 228A;

“ lessee ” means the lessee under the operating lease;

“ lessor ” means the lessor under the operating lease;

“ operating lease ” means the lease referred to in subsection (1)(b);

“ relevant amount ” means an amount equal to the permitted maximum under section 228B as it applies in relation to the leaseback.

Giving effect to allowances and charges: lessors and licensees

Apportionment of sums partly referable to non-qualifying assets

Time when additional VAT liability or rebate is incurred or made

Meaning of “qualifying expenditure”

Person with interest in relevant land having fixture for purposes of qualifying activity

Flat conversion allowances

Proceeds from balancing events

Introduction

Meaning of “the residue of qualifying expenditure”

Plant or machinery subject to further operating lease

Sales treated as being at market value

Plant or machinery subject to further operating lease

Limit on amount of disposal value

Other definitions

Election to treat sale as being for alternative amount

Meaning of “qualifying building”

Introduction

Schedule 5 (transitional provisions and savings)

Schedule 1 (certification of films as British films)

Commencement and transitional provisions and savings

Schedule 2 (taxation)

Sections 434D and 434E (capital allowances: management assets; investment assets)

Schedule 2 (taxation)

Schedule 12 (building societies: change of status)

Schedule 11 (taxation provisions)

Schedule 24 (assumptions for calculating chargeable profits, creditable tax and corresponding United Kingdom tax of foreign companies)

Proceeds from balancing events

Section 98 (special returns, etc.)

Section 195 (allowance of certain drilling expenditure)

Schedule 3 (assets held on 31st March 1982)

Section 42 (relief for production or acquisition expenditure)

Meaning of “disposal receipt”

Schedule 12 (building societies: change of status)

Section 43 (interpretation of sections 41 and 42)

Section 42 (relief for production or acquisition expenditure)

Transfer of asset by reason of cross-border merger

Tax agreements for income tax purposes

Schedule 17 (Northern Ireland electricity)

Section 41 (relief for preliminary expenditure)

Section 92 (the basic rule: sterling to be used)

Companies not resident in the United Kingdom

Section 92 (the basic rule: sterling to be used)

Schedule 24 (provisions relating to the Railways Act 1993)

Section 42 (procedure for making claims etc.)

Schedule 12 (building societies: change of status)

Schedule 11 (taxation provisions)

Section 126 (pools payments for football ground improvements)

Schedule 4 (taxation provisions)

Section 43 (interpretation of sections 41 and 42)

Schedule 4 (taxation provisions)

Schedule 33 (taxation)

Schedule 4 (taxation provisions)

Meaning of “qualifying flat”

Amount of allowance

Sections 434D and 434E (capital allowances: management assets; investment assets)

Introduction

Proceeds from balancing events

Section 518 (harbour reorganisation schemes)

Section 105 (corporation tax: use of currencies other than sterling)

Schedule 22 (tonnage tax)

Section 151 (benefits under pilot schemes)

Schedule 7 (transfer schemes relating to BBC transmission network: taxation provisions)

Schedule 26 (transfers: tax)

Section 137 (expenditure met by regional development plans to be disregarded for certain purposes)

Transfer of asset by reason of cross-border merger

Section 42 (relief for production or acquisition expenditure)

Section 43C (transfer of rent: exceptions, etc.)

Section 43E (interposed lease: exceptions, etc.)

Section 65A (Case V income from land outside UK: income tax)

Section 84 (gifts to educational establishments)

Section 768B (change in ownership of investment company: deductions generally)

Section 828 (orders and regulations made by the Treasury or the Board)

Giving effect to allowances and charges: NI rate activity cases

Special leasing of plant or machinery

Effect of plant or machinery subsequently being primarily for use outside Northern Ireland

Energy-saving components of plant or machinery

Effect of plant or machinery subsequently being primarily for use outside Northern Ireland

Effect of changes in ownership of a fixture

Lessor’s income or profits: termination of leaseback

Plant or machinery used for less than five years in a ring fence trade

Purchaser of land discharging obligations of client under energy services agreement

The different kinds of pools

Plant or machinery subject to further operating lease

When balancing adjustments are made

Restriction of qualifying expenditure

Meaning of “car” and “motor cycle”

Determining the net present value of the rentals for purposes of s.228K

Additional VAT liabilities and writing-down allowances

Meaning of “qualifying business premises”

General rule as to what is the relevant interest

Use of asset otherwise than for permitted development etc.

Apportionment of sums partly referable to non-qualifying assets

Meaning of “qualifying building”

Agricultural buildings allowances

Interest acquired on completion of conversion

Entitlement to writing-down allowances

Equipment lessors

Calculation of balancing adjustments

Giving effect to allowances and charges

Introduction

Appeals etc.

Introduction

Provisions applying on termination of lease

The relevant interest

Transfers of trade without a change of ownership

Mineral extraction allowances

Disposal values in avoidance cases

Hire-purchase etc.

Transfer of asset by reason of cross-border merger

Avoidance affecting proceeds of balancing event

Time when expenditure is incurred

Transfer of asset by reason of cross-border merger

Section 91C (mineral exploration and access)

Companies not resident in the United Kingdom

Amount of allowances and charges

When balancing adjustments are made

Section 389 (supplementary provisions relating to carry-back of terminal losses)

Section 575: supplementary

Investment assets

Elections: supplementary

Section 98 (special returns, etc.)

Schedule 24 (assumptions for calculating chargeable profits, creditable tax and corresponding United Kingdom tax of foreign companies)

Section 768B (change in ownership of investment company: deductions generally)

Meaning of “qualifying expenditure”

Section 37 (consideration chargeable to tax on income)

Transfers of trade without a change of ownership

Meaning of “qualifying flat”

High value flats

Meaning of “control”

Section 37 (consideration chargeable to tax on income)

Grants affecting entitlement to allowances

Election to treat sale as being for alternative amount

Section 57 (regulations about appeals)

Schedule 1 (certification of films as British films)

Schedule 2 (taxation)

Section 195 (allowance of certain drilling expenditure)

Determination of entitlement or liability

Schedule 12 (building societies: change of status)

Section 288 (interpretation)

New sections 40A to 40D (films)

Avoidance affecting proceeds of balancing event

Research and development allowances

Transfer or division of UK business

Schedule 3 (taxation provisions)

Section 92 (the basic rule: sterling to be used)

Section 93 (use of currency other than sterling)

Section 116 (arrangements for transferring relief)

Schedule 12 (leasing arrangements: finance leases and loans)

Meaning of “connected” persons

Schedule 12 (building societies: change of status)

Section 48 (films: relief for production or acquisition expenditure)

Section 65 (reimbursement by defaulter in respect of certain abandonment expenditure)

Companies not resident in the United Kingdom

Section 118 (claims for income tax purposes)

Managing the investments of a company with investment business

Production animals etc.

Plant or machinery used for less than five years in a ring fence trade

Energy-saving components of plant or machinery

Production animals etc.

Incoming lessee where lessor not entitled to allowances

Expenditure on plant and machinery for use wholly in a ring fence trade

Fixture on which a research and development allowance has been made

Proceeds from balancing events

Successions by beneficiaries

Purchase of building within 2 years of first use

Writing off initial allowances

Meaning of “qualifying building”

Flat conversion allowances

Sales treated as being for alternative amount: introductory

Limit on amount of disposal value

Amount of allowance

Elections: supplementary

Introduction

Section 98 (special returns, etc.)

Special leasing: income tax

Schedule 11 (taxation provisions)

Schedule 1 (certification of films as British films)

Section 37 (consideration chargeable to tax on income)

Schedule 2 (taxation)

Capital value provisions: application of provisions

Schedule 3 (assets held on 31st March 1982)

Schedule 17 (Northern Ireland electricity)

Tax agreements for income tax purposes

Section 195 (allowance of certain drilling expenditure)

Meaning of “control”

Companies not resident in the United Kingdom

Tax agreements for income tax purposes

Schedule 24 (provisions relating to the Railways Act 1993)

Additional VAT rebates and balancing adjustments

Flat conversion allowances

Section 92 (the basic rule: sterling to be used)

Section 43E (interposed lease: exceptions, etc.)

Section 195 (allowance of certain drilling expenditure)

Avoidance affecting proceeds of balancing event

Schedule 2 (levy of Class 4 contributions with income tax)

Schedule 24 (provisions relating to the Railways Act 1993)

Section 92 (the basic rule: sterling to be used)

Schedule 24 (provisions relating to the Railways Act 1993)

Section 151 (benefits under pilot schemes)

Section 407 (relationship between group relief and other relief)

Section 831 (interpretation of Act)

Amount of allowance

Schedule 26 (transfers: tax)

Schedule 24 (assumptions for calculating chargeable profits, creditable tax and corresponding United Kingdom tax of foreign companies)

Schedule 3 (taxation provisions)

Investment assets

Schedule 2 (levy of Class 4 contributions with income tax)

Tax agreements for income tax purposes

Introduction

Section 781 (assets leased to traders and others)

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Capital Allowances Act 2001

Disposal values in avoidance cases

Restrictions on writing-down allowances: section 215

Effect of election: relaxation of restriction on B’s qualifying expenditure, etc.

Interest acquired on completion of conversion

Lessor’s income or profits

Entitlement to writing-down allowances

Sections 228A to 228G: supplementary

Sections 228A to 228G: supplementary

Plant or machinery subject to further operating lease

Introduction

Purchase of building within 2 years of first use

Balancing adjustment on realisation of capital value

Introduction

Buildings temporarily out of use

Entitlement to writing-down allowances

Additional VAT rebates and balancing adjustments

Amount of allowance

Amount of allowance

Calculation of balancing adjustments

When balancing adjustments are made

Grants affecting entitlement to allowances

Introduction

Introduction

Expenditure related to reuse etc. qualifies for writing-down allowances

Meaning of “decommissioning expenditure”

Persons having qualifying trade expenditure

Requirements relating to the landlord

Additional VAT liabilities and writing off initial allowances

Additional VAT rebates and balancing adjustments

Amount of allowances and charges

Expenditure related to reuse etc. qualifies for writing-down allowances

The general rule excluding contributions

Exception for manufacturers and suppliers

Expenditure on research and development

Ceasing to work mineral deposits

Abandonment expenditure within 3 years of ceasing ring fence trade

Transfer of a UK trade to a company in another member State

Abandonment expenditure incurred before cessation of ring fence trade

Trades

Flat conversion allowances

Meaning of “freehold interest”, “lease”, etc.

Time when expenditure is incurred

Meaning of “qualifying building”

Amount of allowances and charges

Tax agreements for income tax purposes

Section 411 (exclusion of double allowance)

Election to treat sale as being for alternative amount

Meaning of “dwelling-house”, “lease” etc.

Appeals etc.

Reduction of first-year allowances

S's income or profits: termination of leaseback

Effect of successions

Purchase of building within 2 years of first use

Section 530 (disposal of know-how)

References to sale of property and time of sale

Elections: supplementary

Meaning of “qualifying expenditure”

Sales treated as being for alternative amount: introductory

Companies not resident in the United Kingdom

Plant or machinery subject to further operating lease

Meaning of “control”

Meaning of “control”

Schedule 1 (certification of films as British films)

Schedule 2 (taxation)

Amount of allowance

Orders and regulations made by Treasury or Commissioners

Meaning of “control”

Schedule 24 (assumptions for calculating chargeable profits, creditable tax and corresponding United Kingdom tax of foreign companies)

Section 37 (consideration chargeable to tax on income)

Schedule 4 (taxation provisions)

Section 43 (interpretation of sections 41 and 42)

Apportionment of sums partly referable to non-qualifying assets

Meaning of “qualifying building”

Section 400 (write-off of government investment)

Section 93 (use of currency other than sterling)

Schedule 2 (provisions relating to carrying out approved schemes or reorganisation)

Schedule 24 (provisions relating to the Railways Act 1993)

Schedule 4 (taxation provisions)

Determination of entitlement or liability