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HMRC internal manual

Capital Allowances Manual

Plant and Machinery Allowances (PMA): cars: expenditure incurred before 1 or 6 April 2009 - anti-avoidance


A person could create a balancing allowance to get round the £3,000 limit on WDA by selling the car to a connected person for a nominal amount. There is legislation that prevents this. It applies where a person sells a car, sells a car on hire purchase or assigns a hire purchase contract to buy a car and the transaction is a connected person transaction, a sale and leaseback or a transaction to obtain allowances CA28300.

Where the legislation applies the disposal value is the lower of the market value of the car and its cost to the person selling it. The person who acquires the car is treated as incurring capital expenditure on its provision equal to the seller’s disposal value.


Bruce buys a car for £150,000 and claims PMAs. Two years later, when the market value of the car is £125,000, he sells it to Steve for £25,000. Bruce’s disposal value is £125,000 and that is the amount that Steve can claim PMAs on. If the market value of the car when it was sold had been £160,000, the disposal value would have been £150,000, the cost, and Steve would have been able to claim PMAs on £150,000.

CAA01/S79 does not apply to expenditure on a car incurred on or after 1 April (corporation tax) or 6 April (income tax) 2009 but will continue to apply to expenditure incurred before that date until the end of the business’s transitional period. The transitional period is defined at CA23530.