Taxes Consolidation Act 1997 section 403

Restriction on use of capital allowances for certain leased assets

Section 403 ring-fences capital allowances arising from leasing machinery or plant so that losses attributable to those allowances can be set off only against leasing income or certain closely related income, and not against general profits or gains of the business or group. Note: as accelerated capital allowances were generally withdrawn in 1992, this section is largely spent in practice.

• Where leasing of machinery or plant is carried on alongside other activities, any losses attributable to "specified capital allowances" on leased assets are ring-fenced and can only be set off against income from the leasing trade, not against other income or profits.
• For dedicated leasing businesses where 90% or more of activities consist of leasing or closely related "lease-adjacent" activities, the ring-fence is relaxed to allow losses to be offset against a broader range of leasing business income, including certain group income.
• The ring-fence applies to both individual (non-corporate) and corporate lessors, with corporate lessors subject to additional restrictions on group relief for relevant leasing losses.
• Companies subject to these restrictions must include detailed information in their annual corporation tax return about specified capital allowances claimed, relevant leasing losses, and disposals of leased assets.