295 Option in case of succession under will or intestacy

Since the death of a person carrying on a trade constitutes the permanent discontinuance of the trade (see section 67(2)), it is an event which may give rise to a balancing allowance or a balancing charge.

Section 295 provides that a successor to a trader who has died may make an election in writing to the inspector to have the machinery or plant which was owned by the deceased and used for the purposes of the trade treated in a certain manner in relation to the succession and any previous succession occurring on or after the death (for example, where executors carry on a trade for a period before transferring it to the beneficiary).

In effect, the successor may elect to have that machinery or plant treated as if the successor had purchased it at a price equal to the amount of the expenditure unallowed immediately before the succession, or the open market value, if lower. Where such an election is made, there is to be no balancing charge on the deceased (or on the executors) but, where the market value basis applies, there may be a balancing allowance.

If a balancing allowance or a balancing charge is later to be made to or on the successor (for example, on the sale of the machinery or plant), the allowance or charge is to be computed as it would have been computed if the deceased had lived, had continued to own the machinery or plant and carry on the trade and had been allowed all such allowances as were allowed to the successor up to the time of the event giving rise to the balancing allowance or balancing charge.

Relevant Date: Finance Act 2019