Commentary on Sections Glossary Structure of Part 2 Section 198: Election to apportion sale price on sale of qualifying interest
707.This section is based on part of section 59B(1) to (4) of CAA 1990. It provides that, in certain circumstances, the parties to a transaction may elect to fix a disposal and acquisition value in respect of a fixture.
708.Subsection (1) ensures that an election under this section may only apply if the disposal event is one for which item 1 of the Table in section 196 would otherwise apply. (This item applies if there is a sale of the qualifying interest, but item 2 of the Table does not apply.)
709.Subsection (2) ensures that the amount fixed by the election is to be used as the disposal value instead of the value determined by item 1. It also ensures that the amount is to be used for other purposes of this Part. In particular, if the purchaser is to claim allowances in respect of the fixture then the election will determine the expenditure treated as incurred. In all cases, this subsection provides that the election must be made jointly by the purchaser and seller.
710.Subsection (3) provides two limits for the amount that may be fixed under an election under this provision. The amount may not exceed the actual sale price. It must also not exceed the amount which was treated as incurred by the seller on the provision of the fixture.
711.Subsection (4) deals with the attribution of any part of the sale price not attributed to the fixture by the election.
712.Subsection (5) provides that an election cannot override a restriction on allowances under section 186 or 187. If appropriate, those sections still apply to limit the purchaser’s expenditure that may be brought into account under the rules for plant and machinery allowances.
713.The subsection also ensures that the seller’s disposal proceeds may still be substituted by the notional written-down value in avoidance cases (see section 197).