Capital Allowances Act 2001 section 228

Effect of election: relaxation of restriction on B's qualifying expenditure, etc

Section 228 sets out the consequences for both buyer and seller when a joint election is made under section 227 in relation to a sale and leaseback transaction involving new and unused plant or machinery.

• Where an election is made, the buyer's qualifying expenditure is restricted by excluding any amount that exceeds the lower of the original cost incurred by the seller (or a connected person) in acquiring the plant or machinery
• This elected restriction replaces the standard restriction on the buyer's qualifying expenditure that would otherwise apply under section 218
• The seller receives no capital allowances whatsoever in respect of their original expenditure on the plant or machinery, and that expenditure is entirely excluded from their available qualifying expenditure
• The election mechanism applies to both finance lease and non-finance lease sale and leaseback arrangements involving new and unused assets