A person who has been treated as the owner of an asset by CAA01/S67 CA23310 is treated as ceasing to own the asset if they cease to be entitled to the benefit of the contract without becoming the owner of the asset. The cessation of ownership happens when the person ceases to be entitled to the benefit of the contract. This means that that person is required to bring a disposal value to account. These are the rules about disposal values:
Example Mary buys a combine harvester for £70,000 on hire purchase. She pays a deposit of £30,000 and then four annual instalments of £10,000. She brings it into use immediately. After she has paid the deposit and the first instalment she sells the combine harvester to Neil by assigning the contract to him for £35,000. When Mary brought the combine harvester into use she was treated as incurring all four annual instalments of £10,000. When she assigns the contract she has still to incur three annual instalments. Her disposal value is £65,000 = £35,000 received for assigning the contract + £30,000, the three instalments yet to be incurred.
Example If Mary had not brought the combine harvester into use before she assigned the contract to Neil, the disposal value would have been £35,000, the amount she received for assigning the contract.
