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Anti-avoidance legislation¹ targets changes in the economic ownership of a plant or machinery leasing business carried on by a company on its own or in partnership. It applies to both simple sales of shares in a leasing company and changes in partnership sharing arrangements, in addition to any other route by which the economic ownership of a business could be changed.

Although the legislation does not affect the capital allowances position of the company directly, the charge arising under it is calculated by reference to capital allowances and the legislation is aimed at perceived avoidance using capital allowances. It had previously been possible for a leasing company to generate losses in the early years of a long leasing contract as a consequence of the availability of capital allowances, such losses being available for group relief. In the later years of the lease the capital allowances would be reduced and the company would become profitable. If the leasing company was sold in the interim to a loss-making company or group, the leasing company's