Capital Allowances Act 1990

42Assets leased outside the United Kingdom

(1)This section has effect with respect to expenditure on the provision of machinery or plant for leasing where the machinery or plant is at any time in the requisite period used for the purpose of being leased to a person who—

(a)is not resident in the United Kingdom, and

(b)does not use the machinery or plant for the purposes of a trade carried on there or for earning profits or gains chargeable to tax by virtue of section 830(4) of the principal Act,

and where the leasing is neither short-term leasing nor the leasing of a ship, aircraft or transport container which is used for a qualifying purpose by virtue of section 39(6) to (9).

(2)In their application to expenditure falling within subsection (1) above, sections 24, 25 and 26 as they have effect—

(a)in accordance with section 41, or

(b)in accordance with section 80, or

(c)in accordance with section 34, or

(d)with respect to any motor car to which section 35(1) applies, or

(e)with respect to machinery or plant to which section 61 applies,

shall have effect, subject to subsection (3) below, as if the reference in section 24(2) to 25 per cent. were a reference to 10 per cent.

(3)No balancing allowances or writing-down allowances shall be available in respect of expenditure falling within subsection (1) above if the circumstances are such that the machinery or plant in question is used otherwise than for a qualifying purpose and—

(a)there is a period of more than one year between the dates on which any two consecutive payments become due under the lease; or

(b)any payments other than periodical payments are due under the lease or under any agreement which might reasonably be construed as being collateral to the lease; or

(c)disregarding variations made under the terms of the lease which are attributable to—

(i)changes in the rate of corporation tax or income tax, or

(ii)changes in the rate of capital allowances, or

(iii)changes in any rate of interest where the changes are linked to changes in the rate of interest applicable to inter-bank loans, or

(iv)changes in the premiums charged for insurance of any description by a person who is not connected with the lessor or the lessee,

any of the payments due under the lease or under any such agreement as is referred to in paragraph (b) above, expressed as monthly amounts over the period for which that payment is due, is not the same as any other such payment expressed in the same way; or

(d)either the lease is expressed to be for a period which exceeds 13 years or there is, in the lease or in a separate agreement, provision for extending or renewing the lease or for the grant of a new lease so that, by virtue of that provision, the machinery or plant could be leased for a period which exceeds 13 years; or

(e)at any time the lessor or a person connected with him will, or may in certain circumstances, become entitled to receive from the lessee or any other person a payment, other than a payment of insurance moneys, which is of an amount determined before the expiry of the lease and which is referable to a value of the machinery or plant at or after that expiry (whether or not the payment relates to a disposal of the machinery or plant).

(4)Where a balancing allowance or a writing-down allowance has been made in respect of expenditure incurred in providing machinery or plant and, at any time in the requisite period, an event occurs such that, by virtue of subsection (3) above, there is no right to that allowance, an amount equal to any such allowance which has previously been given (less any excess reliefs previously recovered by the operation of section 46) shall, in relation to the person to whom the machinery or plant belongs immediately before the occurrence of that event, be treated as if it were a balancing charge to be made on him for the chargeable period in which, or in the basis period for which, the machinery or plant is used at the time that event occurs.

(5)For the purposes of subsection (4) above, the allowances that have been made in respect of expenditure on any item of machinery or plant shall be determined as if that item were the only item of machinery or plant in respect of which sections 24, 25 and 26 had effect.

(6)Subsection (7) below applies where—

(a)by virtue of subsection (4) above any amount falls to be treated as if it were a balancing charge, and

(b)the person on whom the balancing charge is, by virtue of subsection (4), to be made acquired the machinery or plant in question as a result of a transaction which was, or a series of transactions each of which was, between connected persons, and

(c)a first-year allowance, a balancing allowance or a writing-down allowance in respect of expenditure on the provision of that machinery or plant has been made to any of those persons;

except that it does not apply where section 113(2), 114(1) or 343(2) of the principal Act or section 77(1)(a) or (b) of this Act applied on the occasion of the transaction or transactions referred to in paragraph (b) above.

(7)Where this subsection applies—

(a)subsection (4) above shall have effect as if it referred to the allowances specified in subsection (6)(c) above; and

(b)for the purposes of subsection (4) any consideration paid or received on a disposal of the machinery or plant between connected persons shall be disregarded; and

(c)if a balancing allowance or balancing charge is made in respect of the machinery or plant, there shall be made such adjustments of the relief falling to be taken into account by virtue of paragraph (a) above as are just and reasonable in the circumstances.

(8)For the purposes of the application of this section to old expenditure, this section shall have effect subject to the following modifications—

(a)in subsection (1) for the words from “neither” to the end there shall be substituted the words “not short-term leasing”;

(b)subsection (4) above shall have effect as if—

(i)it included a reference to a first-year allowance made in respect of old expenditure, and, for this purpose, subsection (3) above shall be deemed to include a reference to first-year allowances; and

(ii)for the reference to section 46 there were substituted a reference to section 47; and

(c)subsection (5) shall be omitted.