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HMRC internal manual

Capital Allowances Manual

Plant and Machinery Allowances (PMA): cars: anti-avoidance - disposals to a connected person


Where a person disposes of a car, which is in a single asset pool because it is partly used for non-business purposes, to a connected person then the disposal value that is brought into account is the lower of the market value of a car and its cost to the person selling it.

This rule is to prevent the generation of a balancing allowance by the sale of a car in a single asset pool at undervalue.

The legislation also applies to contracts, other than sales, and any transactions to obtain allowances between connected persons (for example sales and leasebacks, assignment of hire purchase contracts etc).

Where this legislation applies, the qualifying expenditure of the person acquiring the car is the seller’s disposal value.

This new legislation mirrors the anti-avoidance rule in the old capital allowances rules for cars described at CA23527.


A buys a car for £100,000 on 1 May 2009. It has emissions of 185g/km and is used for non-business purposes 50% of the time. The expenditure is allocated to a single asset pool and WDA is given at 10%, restricted for the private use element. A sells the car to his son B on 1 January 2011 for £5,000, although the market value of the car is £95,000 on that date. A’s disposal value is £95,000 rather than £5,000 and if B is able to claim capital allowances, his qualifying expenditure is also £95,000.