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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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General: successions: company reconstructions

CTA 2010/ Part 22/ Chapter 1/Ss938 - 953 (formerly ICTA88/S343)

If the whole of a trade is transferred under a company reconstruction without change of ownership and Chapter 1 of Part 22 of CTA 2010 applies the transfer is ignored for capital allowance purposes. The successor company gets the same allowances and suffers the same charges as the predecessor would have got if it had continued to carry on the trade.

Where the whole of a trade is transferred to a company which takes it on as its own trade treat the predecessor as having a chargeable period which ends on the transfer date and the successor as having a chargeable period which begins on that date.

Where only part of a trade is transferred, treat that part as a separate notional trade of the predecessor from the beginning of the accounting period in which the transfer takes place. Apportion capital allowance assets between that part and the balance of the trade on a just and reasonable basis. Allowances in respect of the part being transferred should be computed as though a notional chargeable period ended on the transfer date. Allowances in respect of the balance of the trade should be computed in the normal way.

If the trade (or part) transferred from the predecessor to the successor expands a pre-existing trade, or if the successor has no pre-existing trade but acquires a trade (or part) from another person at the same time, the transferred trade (or part) should be treated as a separate notional trade of the successor. The successor should be treated as having a notional chargeable period that commences on the transfer date and runs to the end of the successor’s accounting period.