CA23750 - Plant & Machinery Allowances (PMA): Long-life assets: Second-hand assets

CAA01/S103

Once an asset has been treated as a long-life asset it continues to be treated as one even if its ownership changes except where the use by the new owner comes within the exclusions CA23730. This means that you do not need to reconsider the life of the asset once it has been determined that it is long-life. Treat expenditure on a second-hand asset as expenditure on a long-life asset if the asset has been a long-life asset in the hands of a previous owner. Include expenditure on a second-hand long-life asset in the overall expenditure in deciding whether the monetary limit has been exceeded. Where the limit has not been exceeded, the long-life asset rules apply only to the expenditure on the second-hand asset.

Example

In the year ended 31 December 2025 Jackson buys a new printer with an expected life of 30 years for £40,000 and a binder from Lowell for £50,000. The binder was treated as a long- life asset when Lowell owned it. Jackson's total expenditure is £90,000, which is less than the monetary limit. The printer is not treated as a long-life asset because Jackson's total expenditure is less than the monetary limit, but the binder is treated as a long-life asset as it was treated as one in Lowell's hands. If the printer had cost Jackson £60,000, it would also have been treated as a long-life asset as Jackson's total expenditure of £110,000 would then have exceeded the monetary limit.


The new owner of a second-hand asset is only required to adopt the previous owner’s treatment if the previous owner determined that the asset was long-life. If the previous owner did not treat the asset as long-life, the new owner should follow the guidance in CA23720 to determine whether the new expenditure is long-life asset expenditure, which means that it will be necessary to decide whether it would have been reasonable to expect the asset to have a useful economic life of at least 25 years when it was new. However, you should accept that an asset is not long-life if we accepted for the previous claimant, after consideration of the facts, that it had an expected useful economic life when new of less than 25 years.

Example

In the year ended 31 December 2020 Tony bought a printer with an expected useful economic life of 30 years for £80,000. In the following year, he bought a binder with an expected useful economic life of 30 years for £70,000. Tony’s total expenditure was £80,000 in 2020 and £70,000 in 2021, which was less than the monetary limit in each year therefore Tony did not treat the assets as long-life assets. In the year ended 31 December 2021, Neville bought both assets from Tony for a total of £110,000. Neville’s expenditure is long-life asset expenditure.


You should only expect the taxpayer to establish whether a second-hand asset was treated as long-life in the hands of the previous claimant where:

  • the asset is of a type that is clearly likely to have been treated as long-life, or
  • it is reasonable to expect that the information will be readily available to the taxpayer, for instance on a sale between connected persons, the sale of a business as a going concern or a sale and leaseback.

If it is not reasonable to expect that such information will be readily available to the taxpayer, you should consider whether the asset falls to be treated as a long-life asset under the rules explained in CA23720. If it doesn't, you should let the buyer claim allowances at the main rate on a provisional basis provided that 

  • the buyer has taken reasonable steps to establish that the seller did not treat the asset as a long-life asset, and
  • the buyer will make any revisions to returns and accept any assessments needed to withdraw any excess allowances claimed if it turns out that the seller did treat the asset as a long-life asset.

Apply the long-life asset legislation to a second-hand asset brought into the UK from abroad if it was reasonable to expect that the asset would have a useful economic life of at least 25 years when it was new. This applies even if the remaining life when it is imported is less than 25 years.