The capital allowances legislation under Part 2 CAA 2001 defines different types of ‘disposal events’ and for each disposal event how the disposal value should be calculated. As well as the main legislation, there are additional rules for different circumstances, for example under HP agreements. In certain circumstances it is possible to use a disposal value for capital allowance purposes that is lower than the true economic value of the asset disposed of.
There is already anti-avoidance legislation for leases in Part 20 CTA 2010/ITA 2007 Part 13, which can either restrict losses or tax certain capital payments as income.
For both of these areas, gaps in the legislation which have historically enabled tax-advantaged leasing structures, have been identified by HMRC.
With effect from 25 November 2015 the anti-avoidance legislation for capital allowance purposes will be amended for two additional scenarios:
- Firstly, it will prevent a person using an artificially low disposal value for capital allowances purposes on the disposal of plant & machinery where a tax advantage is one of the main purposes of the arrangements which include that disposal;
- Secondly, where consideration is receivable by a person for agreeing to take over obligations under a lease for which a tax deduction is claimed, such consideration will now be taxed as income.
These measures are clearly aimed at specific tax advantaged leasing structures and should only impact those businesses which have undertaken such planning.