Corporation Tax Act 2010 section 954

Transfer of activities on complete cessation of trade

Section 954 prevents a company from obtaining a plant and machinery balancing allowance by arranging to cease its trade and transfer the trade activities to another company, where gaining that balancing allowance is a main purpose of the arrangement.

• Where a company ceases a trade and another company takes on those activities, and the cessation is part of a scheme whose main purpose (or one of its main purposes) is to secure a balancing allowance for the ceasing company, this section denies that allowance.
• Instead, any capital allowances or balancing charges that would have arisen for the predecessor company (had it continued trading) are redirected to the successor company, as if the successor had always carried on the trade.
• The transfer of trade assets from the predecessor to the successor does not itself trigger any capital allowances or charges, provided the assets were transferred as part of the trade transfer and were in use for that trade.
• If the successor absorbs the transferred activities into an existing trade, the transferred activities are treated as a separate trade for the purposes of calculating the redirected allowances and charges.