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Taxation: Avoidance

My right honourable friend the Financial Secretary to the Treasury (Stephen Timms) has made the following Written Ministerial Statement. The Government are taking action today to counter tax avoidance schemes involving the leasing of plant or machinery. Action is being taken against schemes that have been disclosed to HM Revenue and Customs (HMRC) under the avoidance disclosure regulations and which: involve the lease or sale and leaseback of plant or machinery to obtain relief for more than the original cost of the asset; seek to avoid tax on the granting of a long funding lease; and involve the sale of a company that is an intermediate lessor of plant or machinery. In addition, the Government are taking action to remedy a technical defect in the Capital Allowances Act that could lead to a loss of tax when a long funding lease ends. The Government have also become aware that partnerships that have in the past invested in films are attempting to avoid tax by means of converting existing leases into long funding leases of plant or machinery. This continued abuse of the tax rules on leased plant and machinery and by film partnerships is unfair on the majority of taxpayers, who comply fully with their tax obligations, and can undermine the funding of public services. The Government are determined to act to ensure that tax avoidance is effectively countered and will therefore introduce appropriate legislation in the 2009 Finance Bill which will be effective from today. Technical notes explaining the material that will be contained in Finance Bill 2009 will be published on HMRC’s website today. Copies of today’s HMRC technical notes have been deposited in the Libraries of both Houses and are accessible on the HMRC web site at www.hmrc.gov.uk.