Capital Allowances Act 2001 section 260

Special leasing: corporation tax (excess allowance)

Section 260 deals with what happens when a company's plant and machinery allowances from special leasing exceed its income of the relevant type for the current accounting period, including options to carry the excess forward, set it against other profits, or carry it back.

• Where allowances exceed the relevant category of income, the excess is carried forward and deducted from income of the same type in the next accounting period (and so on), provided the company remains within the charge to tax.
• The company may instead claim to set the excess against any profits of the current accounting period or carry it back to a previous accounting period ending within a carry-back period equal in length to the current accounting period.
• Where the allowance was restricted under section 259(3) — because the lessee did not use the plant or machinery for a qualifying activity throughout the whole period — the carry-back, sideways set-off, and group relief options are not available for that allowance or the restricted part of it.
• Any claim to carry back or set off the excess against other profits must be made within two years of the end of the current accounting period.