Capital Allowances Act 2001 section 108

Effect of disposal to connected person on overseas leasing pool

Section 108 prevents a person from generating an artificial balancing allowance on an overseas leasing pool by disposing of plant or machinery to a connected person, by requiring the disposal value to be based on market value or original qualifying expenditure (whichever is lower).

• When plant or machinery in an overseas leasing pool is disposed of to a connected person, the disposal value brought into account is the market value at the time of disposal, or the original qualifying expenditure — whichever is lower.
• The section does not apply where the disposal occurs as part of certain qualifying activity transfers, such as transfers of trade without a change of ownership under Corporation Tax Act 2010, or where specific continuity conditions are met.
• The person acquiring the plant or machinery is treated as having incurred expenditure equal to the adjusted disposal value, ensuring the correct total of allowances over the combined period of ownership.
• The overall effect is to prevent connected party disposals being used to manipulate balancing allowances in the overseas leasing pool while ensuring the acquirer's future allowances are based on the same adjusted figure.