Capital Allowances Act 2001 section 112

Excess allowances: connected persons

Section 112 modifies the standard excess allowances recovery rules in section 111 where plant or machinery has been acquired through transactions between connected persons.

• Where plant or machinery is acquired between connected persons and capital allowances have been claimed, the standard excess allowances recovery mechanism in section 111 is modified to prevent manipulation of allowances within connected groups.
• The expenditure figure used for the recovery calculation is that of the first connected person to have claimed an allowance, and any consideration passing between the connected persons on disposals of the asset is ignored.
• Any balancing allowance made to a connected person is also brought into the calculation, even though section 111 would normally only consider first-year and normal writing-down allowances.
• If a balancing allowance or balancing charge has already arisen on any of the connected-person transactions, the combined total of first-year and writing-down allowances used in the formula must be adjusted on a just and reasonable basis.