Capital Allowances Act 2001 section 243

Restriction on B's qualifying expenditure: sale and finance leaseback

Section 243 restricts the amount of qualifying expenditure that the buyer (B) can claim when a sale and finance leaseback transaction involves a VAT element, ensuring that VAT is properly taken into account in limiting the available capital allowances.

• This section replaces the standard restriction rules in section 224 whenever VAT is involved in a sale and finance leaseback arrangement.
• The buyer's qualifying expenditure is capped by reference to two amounts: D (broadly the seller's disposal or notional value) and E (which includes any additional VAT).
• If the seller must bring a disposal value into account, D is calculated using the rules in section 222; if the seller is outside the UK tax net or otherwise not required to account for a disposal value, D is the smallest of three specified amounts.
• Where D is determined as market value that already includes VAT, the amount E is adjusted to include that VAT element as well.

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