Capital Allowances Act 2001 section 462A

Persons leaving cash basis

Section 462A deals with the transitional rules for know-how expenditure when a trader stops using the cash basis and moves to the accruals basis of accounting.

• When a trader leaves the cash basis, any expenditure on know-how that was deducted under the cash basis but would otherwise have qualified for capital allowances must be brought into the capital allowances pool
• The "relieved portion" is the higher of the amount actually deducted and the amount that would have been deductible if the expenditure had been incurred wholly and exclusively for the trade
• The full expenditure is allocated to the know-how pool, but the available qualifying expenditure is reduced by the relieved portion to avoid double relief
• For disposal value purposes, the expenditure is treated as qualifying expenditure, ensuring that any later sale or disposal of the know-how is properly brought into account