7.—(1) This regulation applies if—
(a)there is a transfer of plant or machinery, and
(b)the plant or machinery would be treated for the purposes of CAA 2001 as disposed of by the transferor to the transferee on the transfer taking effect.
(2) If the plant or machinery will be used by the transferee for the purposes of a qualifying activity, the disposal value of the plant or machinery is to be treated for the purposes of CAA 2001 as such amount as is determined by the Secretary of State.
(3) The consent of the Treasury is required for the making of a determination under paragraph (2).
(4) If an amount is determined under paragraph (2) then for the purposes of CAA 2001—
(a)the transferee is to be treated as having incurred capital expenditure of that amount on the provision of the plant or machinery for the purposes for which it is used by the transferee on and after the taking effect of the transfer, and
(b)the property is to be treated as belonging to the transferee as a result of the transferee having incurred that expenditure.
(5) The expenditure treated as incurred under paragraph (4)(a) is to be treated as not being AIA qualifying expenditure for the purposes of CAA 2001.
(6) If the plant or machinery will not be used by the transferee for the purposes of a qualifying activity, the disposal value of the plant or machinery is to be treated for the purposes of CAA 2001—
(a)if a capital sum is received by the transferor by way of consideration or compensation in respect of the transfer, as an amount equal to that sum, or
(b)if no such sum is received, as nil.
(7) For the purposes of paragraph (5) a sum received by a person connected with the transferor is to be treated as received by the transferor.
(8) Section 88 of CAA 2001 (sales at an undervalue)(1) is to be disregarded.
(9) This regulation is subject to sections 63(5) and 68 of CAA 2001 (cases in which disposal value is nil and disposal value on cessation of notional ownership).
Section 88 was amended by paragraph 252 of Schedule 6 to the Income Tax (Earnings and Pensions) Act 2003 (c. 1).