Corporation Tax Act 2010 section 879

Disposal of interest to associate

Section 879 determines the amount a company is deemed to obtain when it disposes of an interest in an asset to an associated person, ensuring the disposal is valued at the highest of three possible measures.

• When a company disposes of any interest in an asset to an associate, special valuation rules apply — the interest can be a lessee's interest, a lessor's interest, or any other type of interest in the asset.
• The company must be treated as obtaining the greatest of: the sum actually received, the open market value of the interest, or the value of the interest to the person to whom it is effectively transferred.
• The disposal can be direct or indirect, and may be carried out through a single transaction or a series of transactions.
• This rule prevents companies from transferring interests in assets to associates at undervalue, thereby avoiding or reducing tax liabilities that would otherwise arise under the leased assets capital sums provisions.