Mr Maker owns a company, Company A, which manufactures and sells computers.
He also owns Company B, an investment company which invests in shares and property for rent. They are connected company’s, but not in a group. Both companies are SME’s and so are exempt from the transfer pricing rules.
Company B requires 10 computers, which will be fixed assets in this company. It costs Company A £1,000 to manufacture these. The Market value of the 10 computers is £5,000.
Company B buys the 10 computers for £1,000, meaning there is no trade profit in Company A, and Company B can only claim capital allowances on £1,000.
Can anyone point me towards any legislation that says we have to use the £5,000 value rather than the £1,000 value for tax purposes?
I can find plenty or references for capital gains purposes, and transfer pricing rules for larger entities, but I’m struggling to find anything that compels an SME to use MV for trade purposes.
Would your answer be any different if Company A was in fact a property developer, and Company B was buying the properties to rent out?