Capital Allowances Act 2001 section 208

Effect of significant reduction in use for purposes of qualifying activity

Section 208 is an anti-avoidance rule that triggers a special disposal event when there is a significant reduction in the use of a single-pool asset for qualifying activity purposes, and the asset's market value substantially exceeds the pool's available qualifying expenditure.

• Where an asset held in a single asset pool sees a significant drop in qualifying use, and the market value of the asset exceeds the pool's available qualifying expenditure by more than £1 million, a disposal event is triggered
• A disposal value (at market value) must be brought into account in the single asset pool for the chargeable period in which the change of circumstances occurs
• The effect is that the existing single asset pool is closed and a new pool begins, as if fresh expenditure equal to the disposal value had been incurred at the start of the next chargeable period
• This rule prevents taxpayers from benefiting from continued high capital allowances on an asset whose use for the qualifying activity has been substantially reduced