S343 ICTA 1988 Applies on Sale

Introduction

Where one company succeeds to a trade formerly carried out by another company and the two are under common ownership s343 ICTA 1988 applies.

The first company is not treated as having discontinued the trade, the succeeding company is not treated as starting a new trade nor do balancing adjustments arise.  Instead:

• the original company receives allowances up until the date of the transfer

• the succeeding company receives allowances from the date of transfer to the end of its accounting period.

Example:

A company has a 31 October year end

It owns a building that cost £100,000 on 28 January 1995

The residue brought forward is £68,000

Building transferred on the last day of the period

The building was transferred, with a trade, to a subsidiary for £64,000 on 31 October 2003.

Complete the disposal section of the Building Maintenance screen as follows:

Business Tax will calculate a full year's annual allowance of £4,000 as the building was transferred at the end of the period.

Building transferred part way through the period

The building was transferred, with a trade, to a subsidiary for £67,332 on 31 December 2003.

Complete the disposal section of the Building Maintenance screen as follows:

Business Tax will calculate an annual allowance of £668 as the company is only entitled to the two months allowances up to the date of transfer (61/365 days).