Capital Allowances Act 2001 section 70S

The disqualifications

Section 70S sets out the two disqualifications that, if either applies, prevent a lease of background plant or machinery for a building from being treated as an excluded lease under section 70R.

• Disqualification A applies where lease payments or payments under any other arrangement vary, or may vary, by reference to the value to the lessor of capital allowances on the background plant or machinery
• Disqualification B applies where the main purpose, or one of the main purposes, of the lease or a related series of transactions is to secure capital allowances for the lessor on background plant or machinery
• Both disqualifications focus on preventing arrangements designed to exploit the capital allowances system in connection with background plant or machinery for a building
• If either disqualification is triggered, the lease cannot qualify as an excluded lease and will instead fall within the long funding lease rules