Capital Allowances Act 2001 section 45N

Effect of plant or machinery subsequently being primarily for use outside designated assisted areas

Section 45N provides a clawback mechanism that removes the enhanced first-year allowance under section 45K where plant or machinery originally used in a designated assisted area is subsequently moved or primarily used outside that area within five years.

• If, at any point during the five-year monitoring period, the plant or machinery is primarily used or held for use outside the designated assisted area that qualified it for the enhanced allowance, the expenditure is treated as never having been first-year qualifying expenditure under section 45K
• The five-year monitoring period runs from the date the asset is first brought into use for a qualifying activity by the company, or if earlier, the date it is first held for such use, and applies while the asset is owned by the original purchaser or a connected person
• The definition of "relevant area" depends on the type of expenditure — for certain expenditure that would otherwise be excluded by section 45M, the relevant area is limited to designated assisted areas falling within Article 107(3)(a) of the Treaty on the Functioning of the European Union; for all other expenditure, it is any designated assisted area as defined in section 45K
• Where the clawback applies, all necessary tax assessments and adjustments must be made, and the taxpayer must notify HMRC within three months of becoming aware that a return has become incorrect as a result of this provision