When you have a sale and finance leaseback CA28500 the seller's disposal value is restricted. It is the lowest of:
The seller's disposal value is not restricted if the buyer is
not entitled to any allowances because the buyer is not bearing the
non-compliance risk
CA28600.
The buyer cannot claim FYA.
If the seller has a disposal value that is restricted as
above, the buyer's qualifying expenditure is restricted to that
restricted disposal value.
If the seller does not have a disposal value the buyer's
qualifying expenditure is the lowest of:
This is how you calculate the
notional written down value of the capital
expenditure on an asset. Start with the qualifying expenditure.
Then deduct all the WDAs that could have been made. If the asset is
a long life asset
CA23700 use the long life asset rate when
you do the calculation. The answer is the notional written down
value. Where FYA is available for the chargeable period in which
the asset was acquired it should also be deducted in calculating
the notional written down value.
Example As in the example at
CA28500 Robert sells his yacht to Jimmy
and leases it back under a finance lease. The yacht cost Robert
£100,000 during the year ended 31 December 2000. Robert sells
it to Jimmy on 1 April 2002 for £100,000. It's market value
then is £90,000. This is the notional written down value.
| Cost | £100,000 | |
| FYA for year ended 31/12/2000 | £40,000 | |
| Value carried forward | £60,000 | |
| WDA year ended 31/12/2001 | £15,000 | |
| Value brought forward at 1/1/2002 | £45,000 |
The amount that Jimmy can treat as qualifying expenditure is
£45,000.
The amount on which any future owner can claim capital
allowances is also restricted. The maximum allowable amount is the
seller's disposal value when the asset was sold and leased back
under the finance lease plus any installation costs incurred by the
purchaser that are allowable under CAA01/S25
CA21190.
This rule limits the allowances that are given overall to the
original cost to the seller. It also prevents any allowances to
which the seller would have been entitled before the sale from
being transferred to the lessor. The limit on the allowances that
can be transferred to the lessor does not depend on whether
allowances could or have been claimed by the seller. It is
calculated by deeming the seller to be entitled to capital
allowances on the expenditure that the seller incurred.
