Legislation – Finance Act 2026

“45UExpenditure on plant or machinery in cases not falling with section 45S etc

Expenditure is first-year qualifying expenditure if—

(a)

it is incurred on or after 1 January 2026,

(b)

it is not special rate expenditure,

(c)

it is expenditure on plant or machinery which is unused and not second-hand, and

(d)

it is not excluded by section 45V (exclusion of expenditure under disqualifying arrangements) or 46 (general exclusions).

45VExclusion of expenditure incurred under disqualifying arrangements

(1)

Expenditure is not first-year qualifying expenditure under section 45U if the expenditure is incurred directly or indirectly in consequence of, or otherwise in connection with, disqualifying arrangements.

(2)

Arrangements are “disqualifying arrangements” for the purposes of this section if—

(a)

the main purpose, or one of the main purposes, of the arrangements is to secure a tax advantage connected with expenditure being first-year qualifying expenditure under section 45U, and

(b)

it is reasonable, taking account of all the relevant circumstances—

(i)

to conclude that the arrangements are, or include steps that are, contrived, abnormal or lacking a genuine commercial purpose, or

(ii)

to regard the arrangements as circumventing the intended limits of relief under this Act or otherwise exploiting shortcomings in this Act.

(3)

In this section “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).”

(4)

In section 46 (general exclusions)—

(a)

in subsection (1), after the entry relating to section 45S insert—

“section 45U

(expenditure on plant or machinery in cases not falling within section 45S etc)”, and

(b)

after subsection (4A) insert—

“(4B)

General exclusion 6 does not prevent expenditure being first-year qualifying expenditure under section 45U if—

(a)

the plant or machinery is provided for leasing to a lessee for use by the lessee wholly, or almost wholly, for the purpose of earning income which is within the charge to tax, or

(b)

the plant or machinery is provided for leasing to a lessee who is resident in the United Kingdom where the circumstances are such that the plant or machinery is not for use (to a significant extent) by the lessee for the purpose of earning income which is from a source outside the United Kingdom and which is outside the charge to tax.

(4C)

For the purposes of subsection (4B) income is to be regarded as being outside the charge to tax if the income arises to a person who under—

(a)

double taxation arrangements, or

(b)

unilateral relief arrangements,

is afforded or is entitled to claim any relief from the tax chargeable on the income.

(4D)

For this purpose “double taxation arrangements” and “unilateral relief arrangements” have the same meaning as they have in Part 2 of the Taxation (International and Other Provisions) Act 2010 (see sections 2(4) and 8(1) respectively).

(4E)

For the purposes of subsection (4B) it is to be presumed that, unless the contrary is shown, a lessee has made every claim or election for relief from tax, and every claim or election for an exemption from tax, which the lessee is entitled to make.

(4F)

For the purposes of subsection (4B), if there is more than one lessee, references to the lessee are to each of the lessees.

(4G)

For the purposes of subsections (4B) to (4F), any reference to leasing or a lessee includes sub-leasing and a sub-lessee.”

(5)

In section 52 (first-year allowances), in subsection (3), in the table, at the end insert—

“Expenditure qualifying under section 45U (expenditure on plant or machinery in cases not falling within section 45S etc)

40%”.