Capital Allowances Act 2001 section 165E

Transaction to obtain tax advantage

Section 165E restricts decommissioning capital allowances where a transaction between parties involved in a ring fence trade has a tax avoidance purpose.

• Where a person carrying on (or who has ceased to carry on) a ring fence trade enters into a transaction with another person for services, and some or all of the consideration is decommissioning expenditure, allowances may be restricted if the transaction has an avoidance purpose
• A transaction, scheme or arrangement has an "avoidance purpose" if a main purpose of any party is to obtain a capital allowance under this Part that would not otherwise be available, including obtaining a more favourable allowance than would otherwise arise
• The avoidance condition can be met whether the scheme or arrangement was made before or after the transaction, and regardless of whether it is legally enforceable
• Where the rule applies, the expenditure disallowed is the amount needed to cancel out the tax advantage obtained (by any person and whether relating to the transaction or something else), capped at the total expenditure under the transaction