Autumn Statement puts in place new anti-avoidance measure for capital allowances

With the Autumn Statement bringing in many new measures that affect the UK accountancy sector, one that has an immediate effect is a two-part measure to protect the UK Exchequer by closing a loophole relating to capital allowances and lease payment deductions.

Artificial and contrived arrangements used to circumvent the existing rules have fallen under the spotlight, namely schemes using artificially low disposal values for capital allowances purposes and sale-and-lease-back arrangements that are tax deductible.

Tax advantage

One of the main aims of the arrangement is to stop anyone from using a disposal value that is artificially low for capital allowances, in respect of disposing of plant or machinery when gaining a tax advantage.

Where a company takes over the obligations of another person under a lease and becomes entitled to tax deductions, the company will now always be chargeable to tax on any consideration that may be received.

'Consideration' will have a wide definition that will include any payment or valuable benefit that refers to the agreement either directly or indirectly.

When the individual taking over the lease obligations is not a company, there will also be parallel provisions for the purposes of income taxation.

Level playing field

The Treasury says that the new changes will level the playing field for businesses that enter into avoidance arrangements by exploiting relevant tax rules and compliant businesses.

The Government estimates that the changes will be worth an extra £140 million to the Treasury coffers starting 2015-16 up until 2020-21.