Introduction Background Note
14.At Budget 2010, the Government announced that the maximum amount of the AIA was to be increased from £50,000 per annum to £100,000 per annum. The AIA is a relief that is available to most businesses and covers most expenditure on plant and machinery (the main exclusion being cars).
The AIA is available to:
	any individual carrying on a qualifying activity (this includes trades, professions, vocations, ordinary and overseas property businesses and individuals having an employment or office);
	any partnership consisting only of individuals; and
	any company (subject to certain restrictions).
15.There are several anti-avoidance rules in relation to losses arising from the carrying on of a trade profession or vocation. Those rules do not apply to property businesses. Property losses can only be set off against general income if the loss has a “capital allowances connection” and or “a relevant agricultural connection”.
16.New section 127A of ITA is a targeted anti-avoidance rule (TAAR) which prevents relief against general income being given to a person for a loss from a UK or overseas property business which is attributable to the AIA and arises from “relevant tax avoidance arrangements”. These are defined as arrangements to which the person is a party and the main purpose, or one of the main purposes, of which is to put the person in a position to make use of an AIA in the obtaining of a reduction in tax liability by means of property loss relief against general income.
17.The legislation is specifically targeted at persons who enter into tax avoidance arrangements with a main purpose of obtaining a tax reduction by way of property relief attributable to the AIA. It will have no relevance for the vast majority of taxpayers who do not enter into such arrangements.
18.The restriction applies to property losses attributable to the AIA which arise as a result of tax avoidance arrangements entered into on or after 24 March 2010.