Capital Allowances Act 2001 section 266

Election where predecessor and successor are connected persons

Section 266 allows connected persons, where one succeeds to the other's qualifying activity, to jointly elect for special succession treatment of plant and machinery allowances rather than the normal disposal and acquisition rules applying.

• When a qualifying activity is transferred between connected persons who are both within the charge to tax, the predecessor and successor may jointly elect for special treatment under section 267, provided the successor is not a dual resident investing company.
• The election can be made regardless of whether any plant or machinery has actually been sold or transferred, and must be notified to HMRC within two years of the date the succession takes effect.
• Connected persons for this purpose includes the standard connected persons definition, but also extends to partnerships where one party has a share in the other, bodies corporate where one party has control, and situations where a third party has control over or a share in both parties.
• If this election is made, the normal rules on disposal values for special rate assets, overseas leasing pool disposals to connected persons, and general succession provisions are disapplied, though a separate restriction provision in section 267A may still apply; the election is also unavailable where the transfer or division of a UK business rules in section 561 apply instead.