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Capital Allowances |
9 |
For sources other the trades professions or vocations, eg a property business, the period taken is the tax year.45 For Schedule A and overseas property businesses, see sections 379A and 379B (see above at §10.3.2 ) |
24A.1.6.2 Other Allowances Given by Repayment |
Other allowances, where there is no available trade, eg for agricultural buildings, must be claimed and are given effect by discharge or repayment of tax on the appropriate income.46 Other examples are allowances for investment and insurance companies.47 Any excess is carried forward to the income of the same class in succeeding years. The period of account is the year of assessment.48 |
24A.1.7 Amounts: Price or Market Value? |
24A.1.7.1 Sales between Connected Persons |
The amount of a charge or allowance due on a sale clearly depends upon the amount received. Normally, the actual sale price is taken. However, CAA 2001 contains rules directing that market value is taken instead. First,49 for allowances under parts 3 (industrial buildings), 4 (agricultural buildings), 5 (mining), 6 (research and development) and 10 (assured tenancies) market value is taken in two situations. The first situation uses the control test and applies where the buyer is a body of persons50 over whom the seller has control,51 or vice versa, or both buyer and seller are under the control of some other person,52 or they are connected persons. The sale will be treated as being at market value unless the parties elect for it to be at the alternative amount of the written down value of the assets. The purpose behind the main rule is to prevent avoidance; the purpose behind the alternative is to allow the transfer of the property between such persons in such a way that no balancing adjustment is necessary. Hence this election is available only when capital allowances and charges can be made on both parties.53 The election must be made within 2 years of the sale.54 The election is not open to a dual resident investment company.55 |
The second situation in which market value is
taken is whenever it appears that the sole or main benefit which might
have been expected to accrue was the obtaining of a tax advantage ie any
allowance under CAA 2001 other than Plant and Machinery (which has its
own rules).56 No election is possible here.57 |