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HMRC internal manual

Capital Allowances Manual

From
HM Revenue & Customs
Updated
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PMA: Short life assets: Anti avoidance

CAA01/S88 - S89

There is legislation that stops a person creating a balancing allowance by selling an asset at less than market value. If a person sells a short life asset (SLA) at less than market value disposal value is market value unless:

  • There is an ITEPA charge on the buyer, or
  • It is a connected person transfer and an election is made to have the sale treated as taking place at the pool value.

 

A person who disposes of a SLA to a connected person may elect to have the sale treated as taking place at the value in the pool. The election should be made by giving notice to HMRC within 2 years of the end of the chargeable period in which the disposal takes place.

If an election is made:

  • the disposal is treated as taking place at the value in the pool;
  • the connected person is treated as incurring expenditure equal to the pool value on the SLA;
  • the connected person is treated as making a SLA election when the person disposing of the SLA did; this means that the connected person has the same cut off period ( 4 or 8 years depending on when the expenditure is incurred) CA23650 as the person disposing of the asset;

 

the anti-avoidance rules about connected person transfers and sale and finance leaseback CA28000 do not apply.