Capital Allowances Act 2001 section 222

Disposal value restricted

Section 222 restricts the disposal value that a seller must bring into account when a sale and finance leaseback arrangement is involved, ensuring that the disposal value cannot exceed certain limits.

• When plant or machinery is sold and leased back under a finance leaseback, the disposal value the seller must recognise is capped
• The disposal value is determined by comparing several specified amounts and taking the lowest appropriate figure
• One of the comparison figures is the "notional written-down value," which is calculated as if the asset had been the only item in the seller's capital allowances pool, reflecting the original cost reduced by all allowances that would have been claimed
• This restriction does not apply where more than half of the risk normally borne by the lessor has been removed — in those higher-risk cases, stricter restrictions under section 225 apply instead