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HMRC internal manual

Capital Allowances Manual

PMA: Anti-avoidance: Introduction

You may have a case where the taxpayer is using the capital allowance legislation in away 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 FYA at 40% 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 allowances, that is a transaction where the sole or main benefit is expected to be the obtaining of a PMA.


There are further restrictions where an asset is sold and leased back under a finance lease. The amount on which the finance lessor can claim capital allowances is restricted to the seller’s notional written down value. The amount on which any future owner can claim capital allowances is also restricted. The legislation prevents any allowances being given at all where an asset is sold and leased back under a finance lease if the risk that the lessee’s obligations under the lease will not be met has been substantially divested by the lessor.