CA28100 - PMA: Anti-avoidance: Introduction

You may have a case where the taxpayer is using the capital allowance legislation in a way that it was not intended to be used. Here is an example.

Example

Frank and Jesse are brothers. They are both motor dealers. Frank buys a car transporter for £120,000 and adds the expenditure to his pool of qualifying expenditure. He sells the car transporter to Jesse for £200,000. Frank brings a disposal value of £120,000 (sale proceeds £200,000 restricted to cost, £120,000) to account. Jesse claims AIA on the £200,000 he has paid Frank for the car transporter. If this scheme worked the brothers would have obtained PMAs on expenditure of £200,000 for a car transporter that cost them £120,000.

The anti-avoidance legislation in Chapter 17 Part 2 CAA01 stops the scheme working. Broadly, it prevents the acceleration or uplift in capital allowances on a:

• transaction between connected persons CA28800 (a connected person transaction),
• a sale and leaseback, or
• a transaction to obtain a tax advantage.

In the above example, the effect of the anti-avoidance legislation would be to resrict Jesse’s qualifying expenditure to £120,000 (Frank’s disposal value) and to prevent Jesse from claiming AIA or FYAs in respect of the expenditure.

There are further restrictions where an asset is sold and leased back under a finance lease (see CA28400+) and where a person transfers an asset which is subsequently made available to that person or a connected person under a hire purchase or similar contract (see CA28700).