Capital Allowances Act 2001 section 104E

Disposal value of special rate assets

Section 104E is an anti-avoidance provision that overrides the normal disposal value rules for special rate pool assets where a disposal is linked to a tax avoidance scheme.

• Where special rate expenditure has qualified for writing-down allowances at 6% or 10%, and a disposal event occurs, the normal disposal value may be overridden if the disposal is part of a tax avoidance arrangement
• The override applies when the disposal value that would normally be brought into account is less than the notional written-down value of the asset, and the disposal is connected to a scheme whose main purpose (or one of its main purposes) is obtaining a tax advantage
• When the provision applies, the taxpayer must bring into account the notional written-down value instead of the actual disposal value, which prevents an artificial reduction in the disposal value
• The notional written-down value is calculated as QE minus A, where QE is the qualifying expenditure on the asset and A is the total allowances that could have been claimed assuming that expenditure was the only expenditure in the pool and all allowances were claimed in full