Capital Allowances Act 2001 section 229A

Transfer followed by hire-purchase etc: restrictions on hirer's allowances

Section 229A restricts the capital allowances available to a hirer where plant or machinery has been transferred away and then made available back to the original transferor (or a connected person) under a hire-purchase or similar contract.

• No annual investment allowance or first-year allowance is available on expenditure incurred under the hire-purchase contract by the original transferor or their connected person
• Writing-down allowances are restricted: only the portion of hire-purchase expenditure up to a capped amount (the "disposal value" or equivalent) qualifies — any excess is disregarded
• The cap is set at the disposal value brought into account on the original transfer, or if none was required and the asset was previously obtained without capital or qualifying revenue expenditure, the cap is nil
• In other cases, the cap is the smallest of the asset's market value, the capital expenditure originally incurred by the transferor, or the capital expenditure originally incurred by a connected person