Capital allowances 鈥� sale and leaseback arrangements

Produced by Tolley in association with and

Owner-Managed Businesses

Guidance

Background

Allowances are available to a person leasing plant to a third party, whether that is as part of a plant hire business or merely incidental to some other activity. Most commonly, fixtures and other plant may effectively be leased to the tenant of a property by the landlord. In such cases, it is of no consequence whether or not there is a separate lease of the fixtures, nor indeed whether the fixtures are mentioned in the lease.

Sale and leaseback arrangements were unsuccessfully challenged by HMRC in Barclays Mercantile Business Finance Ltd v Mawson and BMBF (No 24) Ltd v IRC. As a result of the taxpayer鈥檚 success in this case, it is accepted that allowances are available, even where the availability of those allowances is a fundamental reason for the acquisition of the plant by the lessor.

The transaction in BMBF which relied on the future lease payments being deposited as cash collateral was specifically blocked in 1998 by a risk-based test in what is now

Continue reading the full document

To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+鈩�

TAKE A FREE TRIAL NOW

Martin Wilson

Martin Wilson, specialised in capital allowances for 25 years before retirement. He is the author of numerous published works on the subject, including Bloomsbury's Capital Allowances: Transactions & Planning, and the capital allowances content of LexisPSL, Tolley's Tax Guidance, Tolley's Tax Planning and Simon's Tax Planning.

Steven Bone

Director at Gateley Capitus

Steven is a tax-qualified Chartered Surveyor who has specialised in tax incentives, including capital allowances and land remediation relief for over 20 years. Previously he held senior specialist positions in 'Big 4' and national mid-tier accountancy firms. Capital allowances underpin income tax and corporation tax calculations by giving tax relief for money spent to buy, build or alter commercial property.Steven works with owner-occupiers, investors and their advisers to provide capital allowances opinions, transaction support and specialist valuations for all types of property.聽聽This includes resolving HM Revenue capital allowances enquiries and giving expert evidence to tribunals and courts.Steven has contributed to many articles and books, including: Bloomsbury Professional's Capital Allowances, Tolley's Tax Planning, RICS's official Guidance Note for surveyors on Capital Allowances and Land Remediation Relief, and Practical Law Company's Practice Note on Commercial Property Standard Enquiry 32 dealing with capital allowances.

Popular Articles

Owner-Managed Businesses

Wholly and exclusively

Wholly and exclusivelyFor both income tax and corporation tax purposes, one of the fundamental conditions that must be satisfied for an item of expenditure to be deductible, is that it must incurred 鈥榳holly and exclusively鈥� for the purposes of the trade, profession or vocation. References to CTA

14 Jul 2020 14:00 | Produced by Tolley Read more

Corporation Tax

Foreign exchange issues

Foreign exchange issuesOverview of foreign exchange provisionsForeign exchange (FX) movements are generally taxed following the rules applicable to the underlying income, expenditure, asset or liability on which they arise, broadly as follows:Capital assetsOn a realisation basis (ie on disposal)

14 Jul 2020 11:44 | Produced by Tolley Read more

Corporation Tax

Qualifying charitable donations

Qualifying charitable donationsCompanies can obtain corporation tax relief for qualifying payments or certain transfers of assets to charity under the qualifying charitable donations regime. Definition of qualifying charitable donationThe definition of 鈥榪ualifying charitable donations鈥�

14 Jul 2020 13:03 | Produced by Tolley Read more