Capital Allowances Act 2001 section 89

Disposal to connected person

Section 89 deals with the special rules that apply when a short-life asset is transferred to a connected person before the short-life asset cut-off date, and an election is made by both parties for the transfer to take place at tax written-down value.

• Where a short-life asset is disposed of to a connected person before the relevant cut-off date, both parties may jointly elect for the transfer to be treated as taking place at the asset's remaining qualifying expenditure (its tax written-down value), rather than at market value.
• If the election is made, the connected person is treated as having acquired the asset for the same amount of qualifying expenditure as remained in the transferor's short-life asset pool, and certain anti-avoidance restrictions on allowances that would normally apply to transactions between connected persons or sale and finance leaseback arrangements are disapplied.
• Immediately after the disposal, the connected person is automatically treated as having made a short-life asset election, so the asset continues to be held in a separate short-life asset pool in their hands, and the relevant cut-off date for the connected person remains the same date that applied to the original transferor.
• The joint election must be submitted to HMRC no later than two years after the end of the chargeable period in which the disposal took place.