Capital Allowances Act 2001 section 212LA

Limiting conditions

Section 212LA sets out four threshold conditions (A to D) that determine whether a qualifying change in company ownership triggers the allowance-buying anti-avoidance rules, based on the size of the excess of tax written-down value over balance sheet value and the purpose behind the arrangements.

• Condition A applies automatically where the relevant excess of allowances (the difference between the tax written-down value and the balance sheet value of plant and machinery) is £50 million or more.
• Condition B applies where the excess is between £2 million and £50 million and that excess is not insignificant compared to the total benefits obtained by relevant persons from the qualifying change or associated arrangements.
• Condition C applies where the excess is below £2 million but the qualifying change has an unallowable purpose — essentially, a tax avoidance motive.
• Condition D is an anti-avoidance backstop: it applies where arrangements have been made with the main purpose, or one of the main purposes, of keeping the excess below the thresholds in Conditions A, B, or C(a) so as to avoid triggering those conditions.