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Capital Allowances Act 2001

Chapter 9: Short-life assets

385.This Chapter provides single asset pools for some expenditure. A person elects for expenditure to be allocated to a pool of this type. Doing so means a disposal event within, broadly, four years gives rise to a balancing allowance (or charge). This gives capital allowances for the net cost of plant or machinery with a life of less than about four years earlier than if the expenditure were allocated to the main pool.

386.Section 83 defines short-life asset and section 84 gives a Table of cases in which treatment as a short-life asset is ruled out.

387.Section 85 deals with the election.

388.Section 86 sets up the single asset pool. Section 87 provides special pooling rules for leased assets.

389.Section 88 prevents avoidance by sale at under value and section 89 deals with the sale of a short-life asset to a connected person.

Section 83: Meaning of “short-life asset”

390.This section is based on section 37(1) of CAA 1990. It introduces the term “short-life asset” and gives its meaning.

Section 84: Cases in which short-life asset treatment is ruled out

391.This section is based on section 38 of CAA 1990. It rules out short-life asset treatment for some types of expenditure on plant or machinery.

Section 85: Election for short-life asset treatment: procedure

392.This section is based on section 37(2) of CAA 1990. It deals with the elections for short-life asset treatment.

Section 86: Short-life asset pool

393.This section is based on section 37(3) and (5) of CAA 1990. It requires single asset pools for short-life assets. It defines the new term “four-year cut-off”. This is used in this Chapter only.

Section 87: Short-life assets provided for leasing

394.This section is based on section 37(6) of CAA 1990. It deals with leased assets that are used other than for a qualifying purpose.

395.Section 84 permits assets provided for leasing to be short-life assets if they:

  • are cars hired to disabled persons; or

  • will be used only for qualifying purposes in the designated period.

396.If the plant or machinery starts to be used for what is not a qualifying purpose, the short-life asset pool ends. The expenditure left in the single asset pool goes to the main pool.

Section 88: Sales at under-value

397.This section is based on section 37(10) of CAA 1990. It provides a general rule that disposals of short-life assets at less than market value have a disposal value of their market value. There are exceptions if the disposal is one in which there is a charge to tax under Schedule E or an election is made under section 89.

Section 89: Disposal to connected person

398.This section is based on section 37(8) and (9) of CAA 1990. It allows connected persons to elect for a different treatment if they transfer a short-life asset between them. They can treat it like a sale at a price equal to the amount of the qualifying expenditure left in the pool. “Connected person” is defined in section 575. Both parties must make the election.

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