Finance Leasing Manual - FLM35.28

Contributions to lessor's capital expenditure

Paragraph 11(13) Schedule 12 FA 1997 deals with the situation where relief has been given under Section 154 CAA 1990 to a contributor for sums paid to fund a lessor's expenditure on a leased asset and a major lump sum is receivable in respect of that asset. In those circumstances allowances granted to the lessor are recaptured in the same way and to the same extent as the lessor's allowances would have been clawed back if he had been entitled to them in the first place.

Without this provision it would have been possible to side-step Paragraph 11 by arranging for, say, another member of the lessor group to claim capital allowances in respect of the lessor's expenditure rather than the lessor itself. The benefit of those capital allowances would then have been retained even though the lessor's outlay would have been recouped by means of the major lump sum.