Capital Allowances Act 2001 section 416E

Artificially inflated claims for first-year allowances

Section 416E is an anti-avoidance provision designed to prevent taxpayers from artificially inflating their claims for first-year allowances through contrived arrangements.

• Transactions attributable to arrangements entered into wholly or mainly for a disqualifying purpose are disregarded when calculating first-year allowances
• A disqualifying purpose exists where the main object, or one of the main objects, is to obtain a first-year allowance the person would not otherwise be entitled to, or to obtain a larger allowance than they would otherwise receive
• The definition of "arrangements" is deliberately broad, covering any scheme, agreement or understanding, whether or not it is legally enforceable
• The provision applies on a chargeable period basis, so any affected transaction is stripped out of the allowance calculation for the relevant period