CA23660 - 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 the Inland Revenue 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 4 year cut off as the person disposing of the asset;
• the anti-avoidance rules about connected person transfers and sale and finance leaseback CA28000 do not apply.