Pre-Budget Report – Plant and Machinery leasing – Anti-Avoidance
The Chancellor has announced a clampdown on companies that seek to avoid tax through arrangements that involve the leasing of plant or machinery whereby a tax loss is created without a corresponding commercial loss.
Legislation will be introduced in Finance Bill 2010 to counter two types of avoidance involving the leasing of plant or machinery. It will ensure that:
– lessor companies are unable to generate tax losses using arrangements intended to result in tax relief in excess of the value of the taxable income; and
– companies and other businesses are prevented from turning a tax-timing advantage into a permanent advantage by ceasing to be within the charge to tax following the sale of the right to income from a lease of plant or machinery.
This announcement will be effective from 9 December 2009 and will apply where:
- Expenditure on plant or machinery is incurred, or a rebate of rentals becomes payable on or after this dateor
- The business ceases to be within the charge to tax on or after this date.