Capital Allowances Act 2001 section 117

Recovery of allowances in case of joint lessees

Section 117 provides for the recovery of capital allowances where plant or machinery is leased to joint lessees and the actual taxable use by those lessees falls short of what was originally assumed when allowances were granted.

• Where plant or machinery is leased to joint lessees and none of them uses it for a UK tax-qualifying activity during the designated period, the excess allowances recovery mechanism is triggered as though the asset had begun to be used for non-protected overseas leasing.
• If allowances were originally given at the normal rate or as a first-year allowance and the asset is subsequently leased to joint lessees with no lessee earning UK-taxable profits from it, the same excess allowances recovery rules apply to the full expenditure.
• Where the joint lease continues to the end of the designated period but the actual extent of UK-taxable use turns out to be less than was assumed when the normal writing-down allowance was calculated, a proportionate part of the expenditure is treated as though it related to a separate asset used for non-protected overseas leasing, triggering a downward adjustment.
• On any subsequent disposal of the plant or machinery, the disposal value must be apportioned by reference to the extent of UK-taxable use determined at the end of the designated period, and the normal apportionment rule in section 116(6) is switched off.