Capital Allowances Act 2001 section 226

Qualifying expenditure limited in subsequent transactions

Section 226 limits the amount of qualifying expenditure that can be claimed on plant or machinery when it changes hands again after a sale and finance leaseback transaction has already restricted the original seller's disposal value.

• Where plant or machinery has previously been subject to a sale and finance leaseback, this section caps qualifying expenditure on any subsequent transaction involving that asset.
• The cap is set at the disposal value that was brought into account under the earlier sale and finance leaseback rules (section 222), plus any allowable installation costs (under section 25).
• The purpose is to prevent a subsequent buyer from claiming capital allowances on an inflated amount, given that the original seller's disposal value was already restricted by the leaseback arrangement.
• This ensures consistency in the capital allowances system so that tax relief is not generated artificially through a chain of transactions following a sale and finance leaseback.