Capital Allowances Act 2001 section 70V

Tax avoidance involving international leasing

Section 70V is an anti-avoidance provision that targets international leasing arrangements designed to exploit capital allowances on plant or machinery by routing assets through a UK-resident intermediary.

• The section applies where a non-resident provides plant or machinery to a UK resident (via a long funding lease or hire purchase), who then leases it on to another non-resident under a lease that would not normally be a long funding lease
• If the sole or main purpose of structuring the arrangement this way is to secure capital allowances for the UK resident, the onward lease to the non-resident is deemed to be a long funding lease for the UK-resident lessor
• The effect of deeming the onward lease a long funding lease is to restrict or remove the capital allowances that the UK resident would otherwise have claimed as lessor
• A "resident" means a person who is UK-resident or who uses the asset exclusively for earning UK-taxable profits; a "non-resident" is a person who is not UK-resident and does not use the asset exclusively for earning UK-taxable profits