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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Cash basis: transitional adjustments: entering the cash basis: examples: successions between connected persons

Where a person (a successor) succeeds to a business that was carried on by someone else (a predecessor) and together they have made an election under S266 CAA2001 to treat the equipment as sold to the successor by the predecessor at a price that is equal to the unrelieved balances in the predecessor’s pools; then the successor is treated as if everything done by the predecessor had been done by the successor and the amount the successor actually paid is ignored.


A is B’s mother. A and B are connected.

A has a business. The unrelieved balance in the main pool is £4,000.

B takes over the business.

A is the predecessor. B is the successor.

B elects for the cash basis.

B pays A £3,000 for the equipment.

A and B make an election under S266 CAA2001 to treat the equipment as sold by A to B for £4,000.

The amount B actually pays for the equipment is ignored. B is treated as taking over the pool with an unrelieved balance of £4,000.

B claims a deduction of £4,000 (the unrelieved balance) and the pool is reduced to nil.