Capital Allowances Act 2001 section 228B

S's income or profits etc: deductions

Section 228B limits the tax deductions that the seller (S) can claim for payments made under a sale and finance leaseback arrangement.

• When calculating S's taxable income or profits, the deduction for leaseback payments is capped at the "permitted maximum"
• The permitted maximum is normally the finance charges shown in S's accounts — not the full rental payments under the leaseback
• If the leaseback ends during a period of account, an additional amount is added to the permitted maximum, calculated as: Current Book Value × (Original Consideration ÷ Original Book Value)
• Where a person connected with S also uses the leased plant or machinery, the same deduction restrictions apply to that connected person