Income Tax (Trading and Other Income) Act 2005 section 825A

Deemed disposal event

Section 825A creates a deemed disposal event in a foster carer's capital allowances pool when they move back into the foster care relief system after a period outside it, ensuring that any previously unrelieved capital expenditure and notionally allocated expenditure is effectively neutralised.

• A deemed disposal event is triggered at the start of a relevant chargeable period if the immediately preceding period was not a relevant chargeable period (i.e. the carer was outside the foster care relief regime in the prior period).
• The deemed disposal generates disposal receipts equal to the sum of two amounts: Amount A (expenditure treated as allocated to the pool under section 825, whether or not actually allocated) and Amount B (any unrelieved qualifying expenditure carried forward from the previous period).
• The effect is to wash out the pool balance so that old, unrelieved expenditure and notional allocations do not create inappropriate capital allowances claims on re-entry to the relief.
• If neither Amount A nor Amount B exists, the deemed disposal receipts are nil, meaning the provision has no practical effect for that period.