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HMRC internal manual

Capital Allowances Manual

PMA: Anti-avoidance: Restriction on allowances

CAA01/S214 - S218 & S230

There are restrictions if there is a relevant transaction CA28200:

  • between connected persons (Section 214), or
  • for the sole or main benefit of getting plant and machinery allowances (Section 215), or
  • where the “buyer” leases the asset back to the “seller” or to a person connected with the seller (a sale and leaseback transaction) (Section 216). Do not read “buyer” and “seller” literally here as the transaction may, for example, be an assignment of a contract.


In such circumstances:

  • the “buyer” is not entitled to first-year allowances (Section 217), and
  • there is a limit on the qualifying expenditure the buyer can allocate to a pool.

The limit is the seller’s disposal value if any CA28550.

If the seller does not have to bring a disposal value to account the buyer’s allowances are restricted to the lowest of:

  • the market value of the asset;
  • if the seller incurred capital expenditure on the asset, that capital expenditure;
  • if a person connected with the seller incurred capital expenditure on the asset, that person’s capital expenditure.


There are different rules about the buyer’s qualifying expenditure where there is a sale and finance leaseback CA28500.

These restrictions do not apply if the asset is new, the seller’s business includes manufacturing or supplying assets of that class and the asset is sold as part of the seller’s normal business. For example, a man who runs an electrical store may sell his sister a new computer from his stock. If his sister claims PMAs on the computer the restrictions on allowances do not apply. She can claim PMAs on the price she pays.