Pre-Budget Report – Capital Allowances Anti-Avoidance
The Chancellor has announced a clampdown on those who seek to avoid tax by transferring the entitlement to benefit from capital allowances on plant and machinery from one company to another.
This announcement follows legislation which was announced and became effective on 21 July 2009. There are to be three changes to the July legislation effective from 9 December 2009:
- The legislation will also apply where an unincorporated shareholder sells a company with an excess of allowances to a group in a tax-motivated transaction
- The legislation will contain a rule to prevent manipulation of the tax written down value
- Excess postponed first-year or writing-down allowances in respect of qualifying expenditure on ships will be treated in the same way as any other capital allowances
The legislation will apply to transfers involving the sale of companies and to transfers involving consortia and partnerships, but only where the transfers are motivated by prospective tax savings.