Commentary on Sections Glossary Structure of Part 2 Section 265: Successions: general
911.This section is based on section 78(1) of CAA 1990. It deals with successions to trades which are deemed to be discontinued by either section 113(1) or 337(1) of ICTA.
912.It provides a general rule that if plant or machinery is transferred without sale on the succession to a trade which is deemed to discontinue under section 113(1) or 337(1) of ICTA, then the transfer will be at market value.
913.This rule is of little practical significance to the predecessor because, since 1994, section 113(1) of ICTA will deem there to be a discontinuance only if all the persons carrying on a trade change, so there will normally be an arm’s length sale. If there is not a sale then there will be a permanent loss to the old partnership anyway and a disposal event because of section 61(1)(b). There will also be a disposal event because of section 61(1)(f) just because the trade is deemed to be permanently discontinued. Section 61(3) will substitute market value.
914.Similarly the company discontinuance rule in section 337(1) of ICTA will trigger a disposal event within section 61(1)(f).
915.The rule is useful to the successor however because it clarifies that the property is acquired at market value.
916.Subsection (1) states when the section applies and subsection (2) deals with the deemed sale at market value. It also clarifies that the successor is deemed to acquire the property at market value as the other leg of the deemed sale.
917.Subsection (3) defines “relevant property”. Subsection (3)(a) requires that the property has to have been previously owned by the predecessor immediately before the succession. See Change 30 in Annex 1.
918.Subsection (4) denies the successor any right to claim first-year allowances.
919.If the succession is between connected persons then an election to substitute a figure that will lead to no balancing allowance or charge may be available. See section 266 and paragraph 920 below.