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HMRC internal manual

Capital Allowances Manual

General: successions: general

CAA01/S559

When a person (the successor) succeeds to a trade, property business, profession or vocation that has been carried on by another person (the predecessor), the successor may take over the business assets without having bought those assets. The treatment of assets that have qualified for capital allowances other than PMA, RDA and ATA normally follows the treatment of the business profits. There is a broadly similar rule for plant and machinery CA29030.

If the succession is treated as a cessation/commencement of the trade etc., capital allowances are calculated as if the predecessor had sold the assets taken over by the successor to the successor at market value. The successor cannot claim initial allowance. If market value has to be determined for the purposes of the successions legislation the Commissioners determine it in the same way as an apportionment that affects the liability of two or more taxpayers CA12500.

If the trade is treated as continuing when the succession takes place, capital allowances are calculated as if the successor had carried on the trade and owned the assets from the outset.

If the relevant interest in a building, structure or other works was not transferred when the succession took place, then the successor could not claim IBA or ABA even if the successor was using the building for the purposes of the trade. The successor did not hold the relevant interest in that building, structure or other works. In such a case the predecessor continued to be entitled to IBA or ABA.