CA23195E - Plant and Machinery Allowance (PMA): First-Year Allowance (FYA): 40% First-Year Allowance: Anti-avoidance

Section 45V CAA01

Anti-avoidance

The targeted anti-avoidance rules in Chapter 17 of Part 2 CAA01 apply to the 40% FYA. There is guidance about these rules at CA28000. Those rules are supplemented by additional anti-avoidance rules introduced for the purposes of the 40% FYA.

Expenditure is not first-year qualifying expenditure under Section 45U CAA01, thus cannot qualify for the 40% FYA, if the expenditure is incurred directly or indirectly in consequence of, or otherwise in connection with, “disqualifying arrangements”.

Arrangements are “disqualifying arrangements” if both of the following conditions are met:

  • the main purpose, or one of the main purposes, of the arrangements is to secure a tax advantage connected with expenditure being first-year qualifying expenditure under Section 45U, and
  • it is reasonable, taking account of all the relevant circumstances, to do one of the following–
    • to conclude that the arrangements are, or include steps that are, contrived, abnormal or lacking a genuine commercial purpose, or
    • to regard the arrangements as circumventing the intended limits of relief under CAA01 or otherwise exploiting shortcomings in CAA01.

“Tax advantage” is defined by Section 577(4) CAA01 (CA11850).

“Arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

HMRC does not provide clearance on the application of anti-avoidance provisions and whether those provisions apply in a certain set of circumstances will be entirely dependent on the facts.