Capital Allowances Act 2001 section 258

Special leasing: income tax

Section 258 sets out how capital allowances and balancing charges are given effect for income tax purposes when a person's qualifying activity is special leasing of plant or machinery.

• Allowances are deducted from the person's income from any special leasing qualifying activity in the current tax year, unless the lessee did not use the plant or machinery for a qualifying activity for the whole or part of the year, in which case the allowance (or a proportionate part) is restricted to income from that particular special leasing only.
• Any balancing charge is treated as income assessable to income tax, and such charges are themselves counted as special leasing income against which allowances can be set.
• Where allowances exceed the relevant income for the current tax year, the excess is carried forward and deducted from income of the same description in the next tax year, and so on for subsequent years.
• The allowance or proportionate part is given effect at Step 2 of the income tax calculation under section 23 of the Income Tax Act 2007.