Capital Allowances Act 2001 section 212M

Unallowable purpose

Section 212M defines when a qualifying change of ownership or other relevant change has an "unallowable purpose", which is one of the conditions that can trigger the anti-avoidance rules on allowance buying.

• A qualifying change has an unallowable purpose if the main purpose, or one of the main purposes, of the change arrangements is to obtain a relevant tax advantage for any person.
• "Change arrangements" is defined broadly to include any agreements, understandings, schemes, transactions or series of transactions connected with the qualifying change, whether legally enforceable or not.
• A "relevant tax advantage" means becoming entitled to a reduction in taxable profits, or an increase in losses, for corporation tax purposes as a result of claiming capital allowances on the relevant plant and machinery or certain related qualifying expenditure.
• The test looks at the purpose behind the arrangements as a whole, not just the qualifying change itself, and catches situations where tax advantage is even one of several main purposes.