Capital Allowances Act 2001 section 225

B's qualifying expenditure if lessor not bearing non-compliance risk

Section 225 prevents capital allowances from being claimed on expenditure in a sale and finance leaseback arrangement where the lessor's risk of loss from non-payment under the lease has been substantially removed by means other than guarantees from persons connected with the lessee.

• Where a finance lease (or wider arrangement) shifts all or most of the lessor's risk of loss from non-payment away from the lessor, and this is done other than through guarantees from persons connected with the lessee, this section applies to deny capital allowances.
• In these circumstances, the buyer's (B's) expenditure under the sale transaction does not count as qualifying expenditure for capital allowances purposes.
• If the lessor is a different person from the buyer B, the lessor's expenditure on providing the plant or machinery is also excluded from qualifying expenditure.
• When assessing whether the lessor's risk has been removed, the lessor and any persons connected with the lessor are treated as one and the same person.