Corporation Tax Act 2010 section 918

Cases where expenditure taken into account under Part 2, 5 or 8 of CAA 2001

Section 918 deals with the capital allowances consequences when a lessor receives a major lump sum in connection with a leased asset on which capital allowances have previously been claimed.

• Where a lessor has claimed capital allowances (plant and machinery, mineral extraction, or patent allowances) on a leased asset and a major lump sum arises, the lump sum triggers a disposal value for capital allowances purposes equal to the amount of that major lump sum.
• The disposal value is subject to any limiting provision in the Capital Allowances Act 2001, which caps disposal values by reference to the original capital expenditure incurred on the asset.
• Where a limiting provision applies, it operates not by capping any individual disposal value in isolation, but by capping the total of all disposal values brought into account by the lessor for the leased asset under the relevant part of the Capital Allowances Act 2001.
• Any disposal value arising from an event occurring at the same time as, or after, the triggering event is included when calculating whether the cumulative cap has been reached.