Finance Act 1988

92 Successions to trades between connected persons

(1) For paragraph 13 of Schedule 8 to the [1971 c. 68.] Finance Act 1971 (successions to trades between connected persons) there shall be substituted—

“13 (1) Where at any time a person (“the successor”) succeeds to a trade which was until that time carried on by another person (“the predecessor”) and—

(a) the two persons are connected with each other;

(b) each of them is within the charge to tax in the United Kingdom on the profits of the trade; and

(c) the successor is not a dual resident investing company within the meaning of section 404 of the Taxes Act,

those persons may, by notice in writing given to the inspector not later than two years after that time, elect that the provisions of this paragraph shall have effect.

(2) In the event of such an election—

(a) for the purpose of making allowances and charges under Chapter I of Part III of this Act, any machinery or plant which—

(i) immediately before the time when the succession took place, belonged to the predecessor and was in use for the purposes of the trade; and

(ii) immediately after that time, belonged to the successor and was in use for those purposes,

shall (notwithstanding any actual sale or transfer) be treated as sold by the predecessor to the successor at a price which does not give rise to a balancing allowance or a balancing charge; and

(b) allowances and charges shall be made under that Chapter to or on the successor as if everything done to or by the predecessor had been done to or by the successor.

(3) The predecessor and the successor are connected with each other for the purposes of this paragraph if—

(a) they are connected with each other within the meaning of section 839 of the Taxes Act;

(b) one of them is a partnership and the other has the right to a share in that partnership;

(c) one of them is a body corporate and the other has control over that body;

(d) both of them are partnerships and some other person has the right to a share in both of them; or

(e) both of them are bodies corporate, or one of them is a partnership and the other is a body corporate, and (in either case) some other person has control over both of them.

(4) All such assessments and adjustments of assessments shall be made as may be necessary to give effect to this paragraph.

(5) In this paragraph “control” shall be construed in accordance with section 840 of the Taxes Act; and any reference to the right to a share in a partnership is a reference to the right to a share of the assets or income of that partnership.”

(2) This section shall have effect in relation to successions occurring after the passing of this Act.