Readers’ forum: Plant and machinery

The query “Asset incorporation”  concerned the value that had to be transferred for plant and machinery when a sole trader incorporates. The replies suggested that market value must be shown in the accounts and used in the pool for capital allowances purposes unless an election under CAA 2001 s 266 was made. In that case the tax written down value could be used by both entities instead (noting that no allowances could be claimed by the sole trader in the period to cessation).

Under CAA 2001 s 61(2) item 1 if there are actual proceeds they are taken to be the disposal value unless item 2 overrides item 1. Surely the sole trader can raise a sales invoice charging NewCo £1 for the sale of the plant and machinery? This would crystallise a balancing allowance in the sole trader’s tax return and NewCo would...