Plant and machinery leasing: anti-avoidance

This measure counters avoidance involving a leaseback following the sale or lease of plant or machinery. The objective is to ensure that a business entering into such arrangements does not gain more relief than it would have done had it obtained loan finance and that tax is not avoided when a lessor grants a long funding lease. These amendments to the legislation apply to leasebacks entered into, and long funding leases granted or ending, on or after 13 November 2008. The three changes are:

Leaseback following a sale or lease

To ensure that the amount on which the lessee can claim capital allowances under a leaseback does not exceed the amount brought in as a disposal value and that first year allowances are not available to the lessee under the leaseback.

Claw back of relief on grant of long funding finance lease

The measure will ensure that an appropriate disposal value is brought into account when a person grants a long funding finance lease of plant or machinery.

Claw back of relief at the end of a long funding lease

This measure will ensure that an appropriate disposal value is brought into account in all circumstances.