Capital Allowances Act 2001 section 70C

Long funding finance lease: amount of capital expenditure

Section 70C sets out how to calculate the amount of capital expenditure that a lessee can claim for plant and machinery allowances under a long funding finance lease.

• Capital expenditure equals the present value of minimum lease payments at commencement (commencement PVMLP), plus any unrelievable pre-commencement rentals (UPR), but excluding any "relievable amounts" from the PVMLP calculation
• If the lessee or a connected person guarantees all or part of the residual value of the asset, and that guarantee would give rise to separate tax relief if called upon, the guaranteed amount is a "relievable amount" and must be stripped out of the PVMLP figure
• Pre-commencement rentals are added to the capital expenditure only where those rentals cannot obtain tax relief by any other route, whether as a trading deduction, a capital allowance, or any other deduction for income tax or corporation tax purposes
• An anti-avoidance rule caps the total capital expenditure at the market value of the leased asset where a main purpose of the lease or related transactions is to generate allowances materially exceeding that market value