Where a person dies my understanding is that the losses of any trades he carried on remain with the deceased subject to the Personal Representatives “PR” making a terminal loss relief claim to carry the loss in the 12 months to date of death back up to 3 years?
If the PR are however carrying on the trades of the deceased, who was a sole trader, before ultimately being passed on to a beneficiary, is this regarded as a cessation of trade also for capital allowance purposes with the resulting balancing adjustments? Reading CAA 2001 if the trade ceased, balancing allowances and charges are computed by reference to market value at death under section 61.
However, CA15300, whilst not discussing the PR position, states that it is possible that there may be no cessation of trade on a transfer of business to a surviving spouse, section 268 CAA2001 states that where the trade continues by a beneficiary a written election may be made by the beneficiary for the transfer of plant and machinery to be at the lower of market value and tax written down value and ,although the position at death is not dealt with, section 258 ITTOIA 2005 states that a trade can continue if there is a change in the PR.
Is it therefore the case that there is no disposal on death for capital allowance purposes and the PR can essentially step into the shoes of the deceased? The PR should therefore be able to claim capital allowances on new additions and also claim capital allowances on the unused capital allowance pool of the deceased. When they transfer the trade to the beneficiary presumably at that point a section 268 election is made and the beneficiary takes over the capital allowance pool from the PR at that time?
There does not appear to be any specific HMRC guidance regarding the treatment of PRs for capital allowances purposes where they carry on the deceased’s business prior to completing their administration of the estate. I would appreciate if there is any clarity from others.