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HMRC internal manual

Business Leasing Manual

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HM Revenue & Customs
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Sale of lessor companies and similar arrangements: anti-avoidance: liabilities used to reduce balance sheet values Section 436 CTA2010

Section 436 CTA2010

Section 436 deals with situations where the plant or machinery asset is matched with a liability, so that the two figures are netted off and take the value of the plant or machinery asset off the balance sheet.

It applies to a change of ownership that happens on or after 22 November 2006.

To prevent this, the value of the plant or machinery is calculated on the assumption that the company has no liabilities at all. If the alternative calculation produces a plant or machinery amount that is greater than the amount presented in the accounts then the greater amount is substituted.

The paragraph covers not only situations where the balance sheet figure is smaller than the adjusted figure but also situations where there is no amount shown on the balance sheet because the whole of the value of the asset has been matched with a liability.

There is no need to prove that there is a tax avoidance motive for this paragraph to operate. The paragraph applies whenever a question arises as to the operation of the legislation. Thus, for the purposes of the sale of lessor company legislation, plant or machinery asset values must be judged as if the company has no liabilities.