Capital Allowances Act 2001 section 228MA

Restriction of qualifying expenditure

Section 228MA restricts the amount of qualifying expenditure a lessor can claim for capital allowances purposes where lease payment arrangements have the effect of reducing the value of the asset to the lessor.

• Where an asset is leased and arrangements around lease payments reduce the asset's value to the lessor, the lessor's qualifying expenditure is capped at that reduced value (V)
• V is calculated as the sum of the present value of the lessor's expected lease income (VI) plus the present value of the asset's residual value less any rental rebate (VR)
• The lessor's income includes amounts received or expected to be received under the lease and recognised as taxable income, but excludes disposal receipts, service charges, and qualifying UK or foreign tax payable by the lessor
• The term "lease" is broadly defined to include any arrangement under which plant or machinery is leased or otherwise made available by one person to another