Capital Allowances Act 2001

242 Restriction on B’s qualifying expenditure: general U.K.

(1) This section applies instead of section 218 (restriction on B’s qualifying expenditure in case other than sale and finance leaseback) if—

(a) apart from this subsection, section 218 would apply, and

(b) an additional VAT liability has been incurred by, or an additional rebate has been made to, any of the persons mentioned in that section.

(2) The amount, if any, by which E exceeds D is to be left out of account in determining B’s available qualifying expenditure.

E and D are defined in subsections (3) to (6).

(3) Except where subsection (6) applies, E is the sum of—

(a) B’s expenditure under the relevant transaction, and

(b) any additional VAT liability incurred by B in respect of that expenditure.

(4) If S is required to bring a disposal value into account under this Part because of the relevant transaction, D is that disposal value.

(5) If S is not required to bring a disposal value into account under this Part because of the relevant transaction, D is whichever of the following is the smallest—

(a) the market value of the plant or machinery;

(b) if S incurred capital expenditure on the provision of the plant or machinery, the amount of that expenditure—

(i) increased by the amount of any additional VAT liability incurred by S in respect of that expenditure, and

(ii) reduced by the amount of any additional VAT rebate made to S in respect of that expenditure;

(c) if a person connected with S incurred capital expenditure on the provision of the plant or machinery, the amount of that expenditure—

(i) increased by the amount of any additional VAT liability incurred by that person in respect of that expenditure, and

(ii) reduced by the amount of any additional VAT rebate made to that person in respect of that expenditure.

(6) If—

(a) S is not required to bring a disposal value into account under this Part because of the relevant transaction,

(b) the smallest amount under subsection (5) is the market value of the plant or machinery, and

(c) that value is determined inclusive of value added tax,

E is the amount of B’s expenditure under the relevant transaction.