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The government has bought forward the removal of a loophole that allowed businesses to accelerate capital allowances claims for plant and machinery and obtain advantageous early tax relief under CAA 2001, s 230.
The closure, which was originally proposed for April 2012, took effect from 12 August 2011, following evidence that suggested not doing so could lead to the loss of significant revenue to the Exchequer.
The change to the law partially repeals the ‘exception for manufacturers and suppliers’.
Where expenditure is incurred on or after 12 August to buy or hire-purchase plant or machinery, AIA or FYA is denied, without exception, where the buyer and seller of the plant or machinery are connected, the transaction was put in place solely or mainly to get the benefit of capital allowances, or the plant or machinery was sold and then leased back to the seller and the seller continues to use the plant or machinery for the purposes of a qualifying activity.
Should it emerge that similar schemes exploiting the s 230 exception have been used, the government will consider whether the repeal should be retrospective: have effect before 12 August.
Responses to the original consultation, Changes to the Capital Allowances Anti-Avoidance Rules for Plant and Machinery, which closes on 31 August 2011, can still be made and will be taken into account by the government when finalising the legislative changes required to give effect to the repeal.
