Capital Allowances Act 2001 section 216

Sale and leaseback, etc

Section 216 restricts capital allowances where plant or machinery is sold but effectively remains in use by the seller or a connected person — the classic sale and leaseback arrangement.

• Where a buyer (B) enters into a relevant transaction with a seller (S) and the plant or machinery continues to be used by S or a person connected with S, capital allowances available to B are restricted.
• The restriction also applies where the plant or machinery is used by S or a connected person after the transaction date, even if there was no continuous use, provided it has not been used for any other qualifying activity in the meantime (other than leasing).
• The transaction date is defined as the date of the sale, the making of the hire-purchase contract, or the assignment — whichever is relevant.
• A qualifying activity for these purposes includes any activity listed in section 15(1) of the Act, even if the profits or gains from that activity are not chargeable to tax.