(1)Section 111 applies with the modifications in subsections (2) to (4) in a case in which—
(a)the owner acquired the plant or machinery as a result of a transaction between connected persons (or a series of transactions each of which was between connected persons),
(b)none of the relevant provisions of ICTA under which the qualifying activity might have been treated as continuing has applied in respect of the transaction (or transactions), and
(c)any of the connected persons is a person to whom—
(i)a first-year allowance or a normal writing-down allowance has been made in respect of expenditure on the provision of the plant or machinery, or
(ii)a balancing allowance has been made in respect of such expenditure without a first-year allowance or normal writing-down allowance having been claimed.
(2)For the purposes of section 111(2) and (3)—
E is the amount of the expenditure in respect of which an allowance within subsection (1)(c) has been made,
F is the amount of any first-year allowance within subsection (1)(c), and
N is the amount of any normal writing-down allowance or balancing allowance within subsection (1)(c).
(3)For the purposes of section 111(2) and (3), any consideration paid or received on a disposal of the plant or machinery between the connected persons is to be disregarded.
(4)If a balancing allowance or a balancing charge has been made in respect of any of the transactions, the amount representing F + N is to be adjusted in a just and reasonable manner.
(5)“The relevant provisions of ICTA” means section 113(2), 114(1) or 343(2) (effect of change in persons carrying on a trade etc. or of company reconstruction).