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Sale and HP Back agreement - Super Tax Deduction

What is the tax treatment in these circumstances

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I took a telephone call this morning from a commercial asset provider who I have previously networked with.

He is in the process of structuring a deal where his client purchases 'new' Plant & Machinery for £350k and then sells the equipment to a HP provider. The company is then due to purchase the equipment under a Hire Purchase agreement.

In this scenario would the asset would still qualify for the super tax deduction allowance? Due to the chain of events on the transaction would the asset still be classed as new and unused?

Thank you for taking the time to read this question and appreciate any help with this matter.

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By Wilson Philips
24th Jun 2021 18:19

You will need to rely on a 'substance over form' argument, ie that the purchaser has not parted with ownership of the asset and that the HP agreement is nothing more than borrowing secured on the asset. This would obviously need to come with a health warning to the client.

I haven't (can't be bothered to) read the anti-avoidance legislation but I don't think it should apply here -it doesn't appear that the purpose of the arrangement is to secure allowances that would not otherwise be due.

What is preventing a straightforward acquisition under HP?

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