325.This section is a minor change. It provides that no disposal value need be brought into account in respect of qualifying expenditure if no first-year allowances have been made and no expenditure has been allocated to a pool.
326.There is no explicit provision in CAA 1990 equivalent to this section. It is, however, in line with practice.
327.On the basis that section 25(1) of CAA 1990 requires expenditure to be allocated automatically to a pool, there would be little need for such a provision given that the disposal value is limited to the capital expenditure incurred. But a taxpayer would appear to be required to bring a disposal value into account even if they had not appreciated they had qualifying expenditure and had made no use of it. CAA 1990 also leaves unclear what taxpayers should do if a change in the accepted meaning of plant or machinery results in their having disposal values to bring into account for what they never knew was expenditure on plant or machinery.
328.In practice the Inland Revenue have accepted that expenditure which is not added to the pool, for whatever reason, may be added for a later period provided there has not been a disposal event. This more flexible approach is followed in this Act. The Inland Revenue have also accepted that no disposal value need be brought into account if no first-year allowances have been made and none of the expenditure has been allocated to a pool.
329.Subsection (1) puts this on a clearer statutory basis. It provides that no disposal value need be brought into account if no expenditure is allocated to a pool (which, when read with section 58(6), means also that no first-year allowances are made). See Change 14 in Annex 1.
330.Subsections (2) to (4) are consequential on the change in subsection (1). They require a person (“C”) who has qualifying expenditure for plant or machinery acquired from a connected person to bring into account a disposal value if:
C allocates any qualifying expenditure to a pool (or gets first-year allowances); or
any of the connected persons in the transaction or train of transactions before C brings into account a disposal value.
331.The first is no more than the general rule. The second prevents the minor change in subsection (1) being used by connected persons to escape bringing into account disposal values on plant or machinery for which allowances are claimed. See again Change 14 in Annex 1.
332.Section 575 defines a “connected person”.