Capital Allowances Act 2001 section 111

Excess allowances: standard recovery mechanism

Section 111 sets out the standard mechanism for recovering excess capital allowances when plant or machinery, which originally received allowances at the normal rate, is subsequently used for non-protected overseas leasing.

• Where plant or machinery that received first-year allowances or normal writing-down allowances (at 25%) is later used for overseas leasing that is not protected leasing, the excess allowances are clawed back
• The owner at the time the overseas leasing begins faces a balancing charge equal to the excess of allowances already given over what would have been available at the reduced 10% overseas leasing rate
• A disposal value is also required, removing the remaining expenditure from the original pool so that future allowances at the higher 25% rate cease
• In the following period, the total of the balancing charge and the disposal value is reallocated to the appropriate overseas leasing pool, so the expenditure continues to be relieved but at the slower 10% rate going forward