Taxation (International and Other Provisions) Act 2010 section 371SM

Capital allowances

Section 371SM deals with how capital allowances on plant and machinery are calculated when a controlled foreign company (CFC) first becomes subject to the UK CFC rules, where that plant and machinery was acquired before the CFC regime applied.

• The section applies where a CFC bought plant or machinery for its trade before its first accounting period under the CFC rules.
• The plant or machinery is treated as if it had originally been acquired for non-trade purposes and only brought into trade use at the start of the CFC's first accounting period.
• This deemed change of use triggers a market value basis, so the opening value for capital allowances purposes is the market value of the plant and machinery at the start of the first CFC accounting period.
• The section operates as if it were part of the capital allowances legislation (Part 2 of the Capital Allowances Act 2001).