Tax avoidance: plant and machinery

Action is to be taken to counter tax avoidance schemes involving capital allowances on plant and machinery the Treasury has announced.

Legislation will be introduced in the 2010 Finance Bill to prevent avoidance through the transfer of an entitlement to benefit from capital allowances on plant or machinery used for the purpose of a trade where the tax written down value of the item exceeds its balance sheet value (known as latent capital allowances).

The proposed law will apply where there is a change of ownership of a company as part of arrangements one of the main purposes of which is to transfer to the purchasing group an entitlement to benefit from the latent capital allowances available to the firm that is bought.

The legislation will also apply where there is a change in ownership or profit-shares of a consortium company or partnership involving companies ...