HMRC internal manual

Capital Allowances Manual

CA23030 - Plant and Machinery Allowances (PMA): qualifying expenditure: change of use of asset

CAA01/S13 & S13A

A person may bring an asset that the person acquired for some other purpose into use for the purposes of a qualifying activity. If that happens treat the market value of the asset when it is brought into use for the qualifying activity as qualifying expenditure unless that market value is more than the cost. Where the market value is more than the cost, the qualifying expenditure is the cost less any deductions that have to be made under the anti-avoidance provisions CA28000.

There are special rules where a person:

  • has been using an asset for leasing under a long funding lease (see CA23800 onwards) stops using it for that, but
  • continues to use it for the purposes of a qualifying activity.

The person will want to claim PMA but the expenditure on the asset will not have been qualifying expenditure - CA23090. Treat the person as incurring capital expenditure (notional expenditure) on the provision of a new asset for the purposes of the qualifying activity that the person now carries on and as owning the new asset as a result of incurring that expenditure. This means that the person will be able to claim PMA. The amount of the notional capital expenditure is the termination payment (CA23830) for the long funding lease.