Commentary

B3.311A Qualifying expenditure for plant and machinery allowances—restriction in case of certain leased assets

Business tax
Business tax | Commentary

B3.311A Qualifying expenditure for plant and machinery allowances—restriction in case of certain leased assets

Business tax | Commentary

B3.311A Qualifying expenditure for plant and machinery allowances—restriction in case of certain leased assets

For the latest New Development, see ND.1928.

There is legislation to counteract a notified avoidance scheme involving the leasing of plant or machinery. The scheme involved arrangements intending to create a company that is taxed on very little income from the leasing of an asset but which is potentially able to claim capital allowances on the full cost of the asset, generating a tax loss where there is a commercial profit1. The legislation addresses the avoidance in two ways. One restricts the amount allowed as a deduction for rental rebates (see B5.404) and the other restricts the amount on which capital allowances are available as outlined below.

The capital allowances legislation broadly limits the amount of capital expenditure that is treated as qualifying expenditure and so limits the amount on which the lessor may claim capital allowances. It applies where capital expenditure is incurred on the provision of plant or machinery (the asset) and at that time2:

  1.  

    •     the asset is leased or arrangements exist under which it is to be leased;

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