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Updates from the Clayton & Brewill team.

HMRC closes plant & machinery leaseback loophole

3rd March, 2015

HMRC has closed a loophole to prevent capital allowance entitlements being claimed on some plant and machinery transcations

On Thursday 26 February the Government introduced new rules to close off certain capital allowance entitlements for plant and machinery. Clayton & Brewill's Doug Perry explains.

Prior to 26 February 2015, businesses could sell or transfer plant and machinery assets and then lease them back, giving a capital allowance entitlement on the market value of the asset.

HMRC has introduced provisions, with immediate effect, that will close off this loophole by reducing the capital allowance entitlement to nil on assets that that have been acquired without capital or revenue expenditure.

The types of transaction that will be affected include the sale and leaseback transactions mentioned above; connected party transactions; transfer and subsequent hire purchase or transfer, and long funding leaseback transactions.

HMRC has confirmed that the new restriction does not apply where a taxpayer is gifted an asset.

The new rule revises Part 2 of the Capital Allowances Act 2001 and you can find further details of this measure on HMRC's website here.

Understanding your capital allowance entitlement

If you think this change to the capital allowance entitlement might affect your business please do get in touch and we will be happy to take a look at your situation for you.

You might also be interested in this recent blog post – Capital allowance entitlement – use it or lose it!


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