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HMRC internal manual

Capital Allowances Manual

IBA: miscellaneous: arrangements having an artificial effect on pricing: outline

Budget 2007 announced a business tax reform package including the gradual withdrawal of IBAs and ABAs over four years. Legislation was introduced in FA08 to give effect to those changes. The phased withdrawal of IBA writing down allowances had effect for chargeable periods ending on or after 1 April 2008 for businesses within the charge to CT and 6 April 2008 for businesses within the charge to IT. There are no IBA writing down allowances for the financial year beginning on 1 April 2011 and subsequent years.


You may have a case where a person buys a building and the price is more than the market value of the building itself. For example, a lease may be created at an artificially high rent before the building is sold. The price paid for the relevant interest is higher than it would have been if the lease had not existed. An example is the case of Regina v CIR ex parte Matrix Securities Ltd. 66TC587.

There is anti-avoidance legislation to deal with cases like that. It limits the expenditure qualifying for allowances in cases where allowances are given by reference to the capital sum paid for the relevant interest and the price paid has been increased by arrangements which have an artificial effect on pricing. It restricts the qualifying expenditure to an amount that reflects open market conditions. Excess expenditure reflecting the effect of the arrangements does not qualify for IBA.