Commentary

B3.340ZB Long funding leases of plant and machinery—anti-avoidance provisions

Business tax
Business tax | Commentary

B3.340ZB Long funding leases of plant and machinery—anti-avoidance provisions

Business tax | Commentary

B3.340ZB Long funding leases of plant and machinery—anti-avoidance provisions

For the latest New Development, see ND.1907.

Anti-avoidance provisions relating to long funding leases are contained in CAA 2001, ss 70V–70YD.

Avoidance involving international leasing

The first1 is designed to prevent the use of cross-border international leasing structures to extract value from the capital allowances which would otherwise be available. It applies where a non-resident leases plant or machinery (whether directly or indirectly) to a UK resident, the lease to the latter is a long funding lease or a contract within CAA 2001, s 67 (see B3.340A), the UK resident uses the plant or machinery to lease it under a lease which would not (apart from the anti-avoidance provision) be a long funding lease, and the asset in question is leased or sub-leased to a non-resident2. If the sole or main purpose of arranging matters in that way is to obtain a tax advantage3 by obtaining capital allowances for a UK resident in respect either of a hire purchase or similar contract, or a long funding lease, the lease of the asset from the UK resident is deemed to be a long funding lease4. The anti-avoidance provision does not apply where the non-resident uses the plant or machinery exclusively for earning profits chargeable to UK tax5.

Transfers and assignments

Transfers, assignments and similar transactions such as novations are also subject to anti-avoidance rules6. The intended effect is that the taxation position of the old and new lessors (or in appropriate cases, lessees) is

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