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HMRC internal manual

Capital Allowances Manual

General: successions: EU transfers


There is legislation that applies where

  • a UK trade, or part trade, is transferred between companies resident in different EU member states;
  • TCGA92/S140A applies to the transfer (see CG45700); and
  • immediately after the transfer the transferee company (the company to whom the trade is transferred) is resident in the UK or carries on the trade / part trade transferred in the UK through a branch or agency.

Where the legislation applies the transfer does not give rise to any allowances or charges and the transferee company is treated as doing everything to the assets transferred that the transferor company did.

The capital allowance rules do not apply unless the capital gains conditions are met. TCGA92/S140A only applies if both parties make a claim. If the claim is effective it applies for capital allowances as well as capital gains. The main rules are in the Capital Gains legislation and they are explained in CG45700 onwards. Usually, you will deal with the claim for capital gains relief first and the capital allowances relief will follow.

If you need to apportion expenditure you should do it in a just and reasonable manner between transferred and retained assets. For some assets, such as industrial buildings, there will be separate tax written-down values (residues of qualifying expenditure) for each building and apportionments should not be necessary. But where part of a trade is transferred and part is kept, the accumulation of expenditure in the general machinery and plant pool has to be split between the assets that go and the assets that stay for the purpose of computing the future allowances due to both parties.

There is anti-avoidance legislation (see CG45713) which prevents the capital gains reliefs applying and so the capital allowances relief where:

  • the transfer of the trade, or part trade, is not made for bona fide commercial reasons, or
  • the transfer is part of a scheme that has tax avoidance as a main purpose.

Thus a commercial scheme may be caught if tax avoidance is one of the main purposes of the deal. These rules bite whatever the nature of the tax avoidance; for example, it may be capital gains, capital allowances or some other kind of tax avoidance.

There is a statutory clearance procedure under which the parties can ask for confirmation from the Board that a transfer will not be caught by the avoidance rules. These applications are handled by the Clearance and Counteraction Team. contains instructions for seeking clearance or approval for a transation.  

The Board has a 30-day time limit in which to respond and so you may need to reply urgently to any request for information.