Section 131 Finance Act 2001

Section 131 Finance Act 2001

Section 131 of the Finance Act 2001: A Summary

Section 131 of the Finance Act 2001, enacted in the United Kingdom, addresses a specific aspect of corporation tax relating to the writing down allowances for long-life assets. Its primary purpose is to prevent tax avoidance schemes that sought to exploit the rules surrounding these allowances. To understand its significance, it’s necessary to first understand the context of long-life assets and writing-down allowances.

Long-life assets are typically defined as plant or machinery with an expected working life of at least 25 years. Businesses can claim ‘writing-down allowances’ on the capital expenditure incurred in acquiring these assets, essentially allowing them to deduct a portion of the cost from their taxable profits each year. This allowance reflects the depreciation of the asset over its useful life. Prior to the Finance Act 2001, there were concerns that companies were structuring transactions in a way that allowed them to artificially inflate the amount of these allowances, thereby reducing their tax liability.

Section 131 specifically targeted lease-based avoidance schemes. The issue was that certain lease arrangements were being crafted to effectively transfer the tax benefits associated with long-life assets from a party that could not fully utilize them to a party that could. This was often achieved through contrived or artificial leasing arrangements where the economic substance of the transaction differed significantly from its legal form. The goal was to generate larger writing-down allowances for the lessee than would be justifiable under normal circumstances.

The key provision of Section 131 introduces anti-avoidance rules that apply specifically to leases of plant or machinery considered to be long-life assets. If these rules apply, the lessee’s entitlement to writing-down allowances is restricted. The legislation empowers HM Revenue & Customs (HMRC) to scrutinize lease arrangements involving long-life assets and deny allowances where they believe the main purpose, or one of the main purposes, of the lease is to obtain a tax advantage. This includes arrangements designed to accelerate the claiming of writing-down allowances or to transfer those allowances to a party in a more beneficial tax position.

The determination of whether a lease falls foul of Section 131 involves a complex analysis of the specific facts and circumstances. Factors considered include the duration of the lease, the amount of the lease payments, the residual value of the asset at the end of the lease term, and the relationship between the lessor and the lessee. HMRC guidance provides more detailed information on how these provisions are applied in practice.

In essence, Section 131 of the Finance Act 2001 plays a crucial role in safeguarding the integrity of the corporation tax system by preventing artificial manipulation of writing-down allowances related to long-life assets through the use of leasing arrangements. It adds a layer of complexity to leasing transactions involving these assets, requiring careful planning and consideration to ensure compliance with the relevant tax legislation.

section     finance act     excise 768×1024 section finance act excise from www.scribd.com
laws  malaysia finance act 1500×2100 laws malaysia finance act from mdcpublishers.com

section   income tax act 1016×549 section income tax act from www.cabkgoyal.com
Section 131 Finance Act 2001 1280×720 section income tax act powers income tax department from margcompusoft.com

notice  section   income tax act 720×376 notice section income tax act from www.bankbazaar.com
amendment  section 1000×1000 amendment section from www.ccs-co.com

ipc section  abetting mutiny  attempting  seduce  soldier 1200×640 ipc section abetting mutiny attempting seduce soldier from theindianconstitution.com
format  declaration  section   tax act legal window 1200×630 format declaration section tax act legal window from legalwindow.in

section title part   filethe public finance act 791×1119 section title part filethe public finance act from dokumen.tips
notice  section    income tax act   reply 1024×1024 notice section income tax act reply from aktassociates.com

complete guide notice  section    income tax act 1280×720 complete guide notice section income tax act from www.taxsmooth.com
section  revision  financial statement  public law justice 768×1024 section revision financial statement public law justice from www.scribd.com

expert guide  section    income tax act respond effectively 1280×720 expert guide section income tax act respond effectively from www.thetaxheaven.com
400×300 from thestar3.50megs.com

chapter  part  section  qualification  election  president 403×403 chapter part section qualification election president from nigerian-constitution.com
penalty  section   finance act    imposable 225×225 penalty section finance act imposable from www.centaxonline.com

section    income tax act   section 240×320 section income tax act section from pdf4pro.com
taxation  betting lotteries  gaming act cap  wwwtaxkenyacom 1900×1425 taxation betting lotteries gaming act cap wwwtaxkenyacom from www.taxkenya.com

finance act 2048×2896 finance act from www.slideshare.net
gono  finance loans  advances department dated 400×516 gono finance loans advances department dated from www.yumpu.com

sec 1280×720 sec from seminaryresources.weebly.com
section  income tax act  issue  section  notice 1280×720 section income tax act issue section notice from brokomin.blogspot.com

act  chapter    cost accounting  control studocu 1200×1698 act chapter cost accounting control studocu from www.studocu.com
issuance  notice      income tax act 817×540 issuance notice income tax act from consultease.com

section  income tax act nathan miller 474×277 section income tax act nathan miller from dananathanmiller.blogspot.com
medical schemes act    semdsa medical schemes act 240×320 medical schemes act semdsa medical schemes act from pdf4pro.com

medical schemes act     gov medical schemes act 240×320 medical schemes act gov medical schemes act from pdf4pro.com
understanding section    income tax act marg erp blog 1280×720 understanding section income tax act marg erp blog from margcompusoft.com