28 |
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instances of permanent loss, for example theft, the disposal value is simply any insurance or compensation. In all other cases, market value is taken.247 |
24A.2.7.1.3 End of Trade If the event is the permanent discontinuance of the trade, which is followed by the sale, demolition, destruction or permanent loss of the asset, the disposal value on discontinuance is that specified for the event.248 A special election may apply if there is a succession to a trade by a connected person,249 in which case the predecessor’s written down value will override other provisions referring to market value.250 No election may be made if the buyer is a dual resident investment company.251 The right to elect is restricted to cases where both parties are within the charge to UK tax on the profits of the trade, and is subject to a time limit of 2 years starting with the date of the transaction.252 The election can be made by a partnership.253 In all other cases market value is taken.254 For the period in which permanent discontinuance occurs neither first year nor writing down allowances are given, everything being settled by the balancing allowance or charge. |
In appropriate cases, the disposal proceeds may be apportioned.255 |
Where the disposal comprises certain qualifying gifts, eg to an educational establishment within TA 1988, section 84, there is a nil disposal value.256 |
24A.2.8 Short Life Assets—The Non-Pooling Option |
The effect of the 25% writing down allowance is that, thanks to its reducing balance basis, approximately 90% of the cost will be written off over 8 years. Because some assets have a shorter life expectancy, rules allow such assets to be kept out of the general pool.257 If the asset is disposed of, any balancing allowance is given immediately instead of waiting for the overall effect on a pool—but only if it is disposed of within, approximately, 5 years. |
The asset will be kept in a pool of its own and the normal 25% writing down allowance applied on a reducing basis.258 The (irrevocable) election to treat the asset as a short life asset must be made within 2 years of the year of acquisition.259 The election is not available in relation to assets which seem to have in common the fact that they are required to be pooled separately in any case.260 |
In practice assets which have an expected useful life of less than 2 years are depreciated over the life span, and are not pooled.261 |