Capital Allowances Act 2001 section 125

Other qualifying purposes

Section 125 defines when plant or machinery is treated as being used for a "qualifying purpose", which is relevant to determining whether capital allowances remain available — essentially, the asset must be used in a qualifying activity without being leased out.

• Plant or machinery is used for a qualifying purpose when the original purchaser, a connected person, or certain successors to the qualifying activity use it directly without leasing it out.
• Where the asset has passed to a new owner through a change in the persons carrying on the qualifying activity, that use still counts as qualifying provided continuity conditions are met (Condition A for income tax payers, Condition B for corporate partnerships).
• A lessee who uses the plant or machinery directly for a qualifying activity (without sub-leasing it) is also treated as using it for a qualifying purpose, provided the expenditure would have qualified for capital allowances had the lessee incurred it.
• The key principle throughout is that the asset must be actively employed in a qualifying activity rather than held passively or leased onward to someone else.