Chapter 5: Sales of lessors: anti–avoidance provisions
Overview
1298.This Chapter contains two sets of anti–avoidance provisions.
Section 432: Restrictions on relief for Chapter 3 or 4 expenses: introduction
1299.This section provides for the circumstances in which section 433 applies. It is based on paragraph 38(1), (2), (6) and (7) of Schedule 10 to FA 2006.
1300.Section 433 applies if a company incurs an expense under Chapter 3 or 4 which arises in consequence of or in connection with arrangements the main purpose, or one of the main purposes, of which is to secure that the company is treated as incurring the expense (see subsection (1)).
Section 433: Restrictions applying to the restricted loss amount
1301.This section is an anti–avoidance provision. It is based on paragraph 38(2) to(5), (8) and (9) of Schedule 10 to FA 2006.
1302.The section restricts the manner in which the loss derived from the expense referred to in section 432 may be utilised. It ensures that the loss can only be set against income from certain leases of plant or machinery entered into before the day on which the company is treated as incurring the expense.
Section 434: Introduction to sections 435 and 436
1303.This section explains when sections 435 and 436 apply and what is meant by a question as to the application of Chapter 3 or 4. It is based on paragraphs 38A(1) and (4) and 38B(1) of Schedule 10 to FA 2006.
1304.A question as to the application of Chapter 3 or 4 is one which concerns:
whether a company carries on a business of leasing plant or machinery (whether alone or in partnership); or
the amount (if any) of any income or expense treated as received or incurred.
Section 435: Disregard of increases and decreases in balance sheet amounts
1305.This section is an anti–avoidance provision. It is based on paragraph 38A(1) to(3) and (5) of Schedule 10 to FA 2006.
1306.The section targets arrangements that increase or reduce the amounts shown in a company’s balance sheet in respect of plant or machinery.
1307.Subsection (1) provides that this section applies if:
there is a question as to the application of Chapter 3 or 4 and the answer to the question relies on amounts in respect of plant or machinery shown in any balance sheet of any company;
there has been an arrangement that results in an increase or reduction of the amount that would otherwise have been shown on the balance sheet; and
that arrangement had as its main purpose, or one of its main purposes, securing a relevant tax advantage (see subsection (2)).
1308.If this section applies the increase or decrease in the amount in respect of plant or machinery is to be ignored (see subsection (3)).
Section 436: Balance sheet amounts determined on assumption company has no liabilities
1309.This section is an anti–avoidance provision. It is based on paragraph 38B of Schedule 10 to FA 2006.
1310.The section targets situations where the amount shown in a company’s balance sheet in respect of plant or machinery is affected by the liabilities of the company.
1311.It applies if, apart from this section, on any day:
no amount would fall to be shown in the company’s balance sheet in respect of plant or machinery (see subsection (2)); or
the amount which would fall to be shown in the balance sheet of the company in respect of plant or machinery is less than the amount which would fall to be shown on the assumption that the company had no liabilities of any kind on that day (see subsections (3) and (4)).
1312.In either of those cases, a question as to the application of Chapter 3 or 4 is to be answered applying the assumption that the company had no liabilities of any kind on that day (see subsection (5)).