Capital Allowances Act 2001
This Act provides for allowances in respect of capital expenditure (and for charges in connection with those allowances).
The allowances for which this Act provides are those under—
Part 2 (plant and machinery allowances);
Part 3 (industrial buildings allowances);
Part 4 (agricultural buildings allowances);
Part 5 (mineral extraction allowances);
Part 6 (research and development allowances);
Part 7 (know-how allowances);
Part 8 (patent allowances);
Part 9 (dredging allowances);
Part 10 (assured tenancy allowances).
This Act also provides for allowances in respect of contributions to expenditure incurred on plant or machinery, industrial buildings or agricultural buildings, for the purposes of a mineral extraction trade or on dredging (see Part 11).
Allowances and charges are to be given effect—
for income tax purposes, in calculating income for a chargeable period, and
for corporation tax purposes, in calculating profits for a chargeable period.
For the meaning of “chargeable period”, see section 6.
Subsection (1) needs to be read with the following provisions about giving effect to allowances and charges— sections 247 to 262 (plant and machinery allowances); sections 352 to 355 (industrial buildings allowances); sections 391 and 392 (agricultural buildings allowances); section 432 (mineral extraction allowances); section 450 (research and development allowances); section 463 (know-how allowances); sections 478 to 480 (patent allowances); section 489 (dredging allowances); section 529 (assured tenancy allowances).
In subsection (1)(b) “profits” has the same meaning as in section 6 of ICTA.
No allowance is to be made under this Act unless a claim for it is made.
The claim must be included in a tax return.
In this Act “tax return” means—
for income tax purposes, a return required to be made under TMA 1970, and
for corporation tax purposes, a company tax return required to be made under Schedule 18 to FA 1998 (company tax returns, assessments and related matters).
Subsection (2) does not apply for income tax purposes to a claim for an allowance under— which is instead subject to section 42 of TMA 1970 (procedure for making claims and claims not included in returns).
section 258 (claim for allowance in respect of special leasing of plant or machinery),
section 355 (claim to carry back balance of allowance in respect of buildings for miners etc.), or
section 479 (claim for patent allowance in respect of non-trading expenditure),
Subsection (2) does not apply for corporation tax purposes to a claim for an allowance under— which is instead subject to paragraphs 54 to 60 of Schedule 18 to FA 1998 (general provisions as to claims).
section 260(3)(b) (claim to carry back allowance in respect of special leasing of plant or machinery), or
section 355 (claim to carry back balance of allowance in respect of buildings for miners etc.),
This section is subject to section 42(6) and (7) of TMA 1970 (special provisions relating to partnerships).
In this Act “capital expenditure” and “capital sums” are used in the sense given in this section.
“Capital expenditure” and “capital sums” do not include, in relation to a person incurring the expenditure or paying the sums—
any expenditure or sum that may be deducted in calculating the profits or gains of a trade, profession or vocation or property business carried on by the person, or
any expenditure or sum that may be deducted in calculating the emoluments of an employment or office held by the person.
“Capital expenditure” and “capital sums” do not include, in relation to a recipient of the expenditure or sums—
any amounts that are to be added in calculating the profits or gains of a trade, profession or vocation or property business carried on by the recipient, or
any amounts that are emoluments of an employment or office held by the recipient.
“Capital expenditure” and “capital sums” do not include, in relation to— any expenditure or sum in the case of which a deduction of income tax falls or may fall to be made under section 348 or 349(1) of ICTA (annual payments).
a person incurring the expenditure or paying the sums, or
a recipient of the expenditure or sums,
Subsection (4) does not apply to any expenditure or sum in the case of which a deduction of income tax falls or may fall to be so made as a result of section 524(3)(b) of ICTA (receipts from sale of patent rights by person not resident in the UK).
For the purposes of this Act, the general rule is that an amount of capital expenditure is to be treated as incurred as soon as there is an unconditional obligation to pay it.
The general rule applies even if the whole or a part of the expenditure is not required to be paid until a later date.
There are the following exceptions to the general rule.
If under an agreement— the expenditure is to be treated as incurred immediately before the end of that chargeable period.
the capital expenditure is expenditure on the provision of an asset,
an unconditional obligation to pay an amount of the expenditure comes into being as a result of the giving of a certificate or any other event,
the giving of the certificate, or other event, occurs within the period of one month after the end of a chargeable period, and
at or before the end of that chargeable period, the asset has become the property of, or is otherwise under the agreement attributed to, the person subject to the unconditional obligation to pay,
If under an agreement an amount of capital expenditure is not required to be paid until a date more than 4 months after the unconditional obligation to pay has come into being, the amount is to be treated as incurred on that date.
If under an agreement— the amount is to be treated as incurred on the date on or before which it is required to be paid.
there is an unconditional obligation to pay an amount of capital expenditure on a date earlier than accords with normal commercial usage, and
the sole or main benefit which might have been expected to be obtained thereby is that the amount would be treated, under the general rule, as incurred in an earlier chargeable period,
This section—
is subject to any provision of this Act which has the effect that expenditure is to be treated as incurred on a date later than would result from the application of this section, and
does not apply to expenditure treated as incurred as a result of a person incurring an additional VAT liability.
In this Act “chargeable period” means—
for income tax purposes, a period of account, or
for corporation tax purposes, an accounting period of a company.
“Period of account” means—
in the case of a person entitled to an allowance or liable to a charge in calculating the profits of his trade, profession or vocation, a period for which accounts are drawn up for the purposes of the trade, profession or vocation, and
in the case of any other person entitled to an allowance or liable to a charge, a tax year.
Subsection (2)(a) is subject to subsections (4) to (6).
If— the period common to both is to be treated as part of the first period of account only.
two periods of account overlap, or
one period of account includes another,
If there is a gap between two periods of account, the gap is to be treated as part of the first period of account.
If a period of account would (apart from this subsection) be longer than 18 months, that period must be treated as divided into separate periods of account— so as to ensure that none of the periods of account is longer than 12 months.
the first beginning with the start date of the original period, and
each subsequent one beginning with an anniversary of that date,
If an allowance is made under any Part of this Act to a person in respect of capital expenditure, no allowance is to be made to him under any other Part in respect of—
that expenditure, or
the provision of any asset to which that expenditure related.
This section does not apply in relation to Parts 7 and 8 (know-how and patent allowances).
Subsection (2) applies if, under Part 2—
any capital expenditure has been allocated to a pool, and
an allowance or charge has been made to or on any person in respect of the pool.
The person to or on whom the allowance or charge has been made is not entitled to an allowance under any Part other than Part 2 in respect of—
the expenditure allocated to the pool, or
the provision of any asset to which the allocated expenditure related.
Subsection (4) applies if under any Part other than Part 2 an allowance has been made to a person in respect of any capital expenditure.
The person to whom the allowance has been made is not entitled to allocate to any pool—
that expenditure, or
any expenditure on the provision of any asset to which the expenditure mentioned in paragraph (a) related.
This section does not apply in relation to Parts 7 and 8 (know-how and patent allowances).
A person is not entitled to make a fixtures claim in respect of any capital expenditure relating to an asset if—
any person entitled to do so has at any previous time claimed an allowance under any Part other than Part 2, and
the claim was for an allowance in respect of capital expenditure relating, in whole or part, to the asset.
Subsection (1) does not prevent a person making a fixtures claim in respect of capital expenditure if—
the only previous claim was under Part 3 or 6 (industrial buildings and research and development allowances), and
section 186(2) or 187(2) (limit on amount of expenditure that may be taken into account) applies to that expenditure.
If a person entitled to do so has made a fixtures claim in respect of capital expenditure relating to an asset, no one is entitled to an allowance on a later claim under any Part other than Part 2 in respect of any capital expenditure relating to the asset.
A person makes a fixtures claim in respect of expenditure if he makes a claim (in the sense given in section 202(3)) under Chapter 14 of Part 2 in respect of the expenditure as expenditure on the provision of a fixture.
In this Chapter “capital expenditure” includes any contribution to capital expenditure.
For the purposes of this Chapter—
expenditure relates to an asset only if it relates to its provision, and
the provision of an asset includes its construction or acquisition.
Allowances are available under this Part if a person carries on a qualifying activity and incurs qualifying expenditure.
“Qualifying activity” has the meaning given by Chapter 2.
Allowances under this Part must be calculated separately for each qualifying activity which a person carries on.
The general rule is that expenditure is qualifying expenditure if—
it is capital expenditure on the provision of plant or machinery wholly or partly for the purposes of the qualifying activity carried on by the person incurring the expenditure, and
the person incurring the expenditure owns the plant or machinery as a result of incurring it.
But the general rule is affected by other provisions of this Act, and in particular by Chapter 3.
For the purposes of this Part, expenditure incurred for the purposes of a qualifying activity by a person about to carry on the activity is to be treated as if it had been incurred by him on the first day on which he carries on the activity.
This section applies if a person—
brings plant or machinery into use for the purposes of a qualifying activity carried on by him, and
on the date when he does so, owns the plant or machinery as a result of having incurred capital expenditure (“actual expenditure”) on its provision for purposes other than those of that qualifying activity.
The person is to be treated—
as having incurred capital expenditure (“notional expenditure”) on the provision of the plant or machinery for the purposes of the qualifying activity on the date on which it is brought into use for those purposes, and
as owning the plant or machinery as a result as having incurred that expenditure.
Subject to subsection (4), the amount of the notional expenditure is the market value of the plant or machinery on the date when it is brought into use for the purposes of the qualifying activity.
If the market value is greater than the actual expenditure, the amount of the notional expenditure is the amount of the actual expenditure, less any amount required to be deducted under subsection (5).
The amount to be deducted is any amount that under section 218 or 224 would have been left out of account in determining the person’s available qualifying expenditure if the actual expenditure had been incurred on the provision of the plant or machinery for the purposes of the qualifying activity.
The question whether the provision of the plant or machinery is to be treated as wholly or only partly for the purposes of the qualifying activity is to be determined according to whether the use referred to in subsection (1)(a) is wholly or only partly for those purposes.
This section is subject to section 161 (pre-trading expenditure on mineral exploration and access).
This section applies if a person—
is the owner of plant or machinery as a result of a gift, and
brings the plant or machinery into use for the purposes of a qualifying activity carried on by him.
The person is to be treated—
as having incurred capital expenditure on the provision of the plant or machinery for the purposes of the qualifying activity on the date on which it is brought into use for those purposes, and
as owning the plant or machinery as a result of having incurred that expenditure.
The amount of that capital expenditure is to be treated as being the market value of the plant or machinery on the date when it was brought into use for the purposes of the qualifying activity.
The question whether the provision of the plant or machinery is to be treated as wholly or only partly for the purposes of the qualifying activity is to be determined according to whether the use referred to in subsection (1)(b) is wholly or only partly for those purposes.
This section is subject to section 161 (pre-trading expenditure on mineral exploration and access).
Each of the following is a qualifying activity for the purposes of this Part— but to the extent only that the profits or gains from the activity are, or (if there were any) would be, chargeable to tax.
a trade,
an ordinary Schedule A business,
a furnished holiday lettings business,
an overseas property business,
a profession or vocation,
a concern listed in section 55(2) of ICTA (mines, transport undertakings etc.),
the management of an investment company,
special leasing of plant or machinery, and
an employment or office,
Subsection (1) is subject to the following provisions of this Part.
This section, in so far as it provides for— to be a qualifying activity, needs to be read with section 35 (expenditure on plant or machinery for use in a dwelling-house not qualifying expenditure in certain cases).
an ordinary Schedule A business,
an overseas property business, or
special leasing of plant or machinery,
Also, subsection (1)(i) needs to be read with sections 36 (restriction on qualifying expenditure in case of employment or office) and 80 (vehicles provided for purposes of employment or office).
In this Part “ordinary Schedule A business” means a Schedule A business except in so far as it is a furnished holiday lettings business.
In this Part “furnished holiday lettings business” means a Schedule A business in so far as it consists of the commercial letting of furnished holiday accommodation in the United Kingdom.
All commercial lettings of furnished holiday accommodation made by a particular person or partnership or body of persons are to be treated as one qualifying activity.
“Commercial letting of furnished holiday accommodation” has the meaning given by section 504 of ICTA.
If there is a letting of accommodation only part of which is holiday accommodation, such apportionments are to be made for the purposes of this section as are just and reasonable.
For the purposes this Part, the management of an investment company consists of pursuing those purposes expenditure on which would be treated as expenses of management within section 75 of ICTA.
In this Part “investment company” has the meaning given by section 130 of ICTA.
In this Part “special leasing”, in relation to plant or machinery, means hiring out the plant or machinery otherwise than in the course of any other qualifying activity (and references to a lessor or lessee in the context of special leasing are to be read accordingly).
A qualifying activity consisting of special leasing of plant or machinery begins when the plant or machinery is first hired out in the circumstances given in subsection (1).
A qualifying activity consisting of special leasing of plant or machinery is permanently discontinued if the lessor permanently ceases to hire out the plant or machinery otherwise than in the course of any other qualifying activity.
A person who has more than one item of plant or machinery that is the subject of special leasing has a separate qualifying activity in relation to each item.
If a company carrying on any life assurance business— the company is to be treated for the purposes of subsection (1) as hiring out the plant or machinery otherwise than in the course of a qualifying activity.
hires out plant or machinery which is an investment asset (as defined by section 545(2)), and
does not do so in the course of a property business,
In section 15(1)(i) “employment” does not include an employment the performance of the duties of which is treated as the carrying on of a trade under section 314 of ICTA (divers and diving supervisors in the North Sea etc.).
Subsection (3) applies if the emoluments for any duties of an employment or office do not fall within Case I or II of Schedule E.
This Part applies in relation to— as if the performance of the duties did not belong to that employment or office.
those emoluments, or
any other emoluments of the employment or office,
For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on the provision of a building.
The provision of a building includes its construction or acquisition.
In this section, “building” includes an asset which—
is incorporated in the building,
although not incorporated in the building (whether because the asset is moveable or for any other reason), is in the building and is of a kind normally incorporated in a building, or
is in, or connected with, the building and is in list A. 1. Walls, floors, ceilings, doors, gates, shutters, windows and stairs. 2. Mains services, and systems, for water, electricity and gas. 3. Waste disposal systems. 4. Sewerage and drainage systems. 5. Shafts or other structures in which lifts, hoists, escalators and moving walkways are installed. 6. Fire safety systems.
This section is subject to section 23.
For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on—
the provision of a structure or other asset in list B, or
any works involving the alteration of land. 1. A tunnel, bridge, viaduct, aqueduct, embankment or cutting. 2. A way, hard standing (such as a pavement), road, railway, tramway, a park for vehicles or containers, or an airstrip or runway. 3. An inland navigation, including a canal or basin or a navigable river. 4. A dam, reservoir or barrage, including any sluices, gates, generators and other equipment associated with the dam, reservoir or barrage. 5. A dock, harbour, wharf, pier, marina or jetty or any other structure in or at which vessels may be kept, or merchandise or passengers may be shipped or unshipped. 6. A dike, sea wall, weir or drainage ditch. 7. Any structure not within items 1 to 6 other than— a structure (but not a building) within Chapter 2 of Part 3 (meaning of “industrial building”), a structure in use for the purposes of an undertaking for the extraction, production, processing or distribution of gas, and a structure in use for the purposes of a trade which consists in the provision of telecommunication, television or radio services.
The provision of a structure or other asset includes its construction or acquisition.
In this section—
“structure” means a fixed structure of any kind, other than a building (as defined by section 21(3)), and
“land” does not include buildings or other structures, but otherwise has the meaning given in Schedule 1 to the Interpretation Act 1978 (c. 30).
This section is subject to section 23.
Sections 21 and 22 do not apply to any expenditure to which any of the provisions listed in subsection (2) applies.
The provisions are— section 28 (thermal insulation of industrial buildings); section 29 (fire safety); section 30 (safety at designated sports grounds); section 31 (safety at regulated stands at sports grounds); section 32 (safety at other sports grounds); section 33 (personal security); section 71 (software and rights to software); section 40D of F(No.2)A 1992 (election relating to tax treatment of films expenditure).
Sections 21 and 22 also do not affect the question whether expenditure on any item described in list C is, for the purposes of this Act, expenditure on the provision of plant or machinery.
But items 1 to 16 of list C do not include any asset whose principal purpose is to insulate or enclose the interior of a building or to provide an interior wall, floor or ceiling which (in each case) is intended to remain permanently in place. 1. Machinery (including devices for providing motive power) not within any other item in this list. 2. Electrical systems (including lighting systems) and cold water, gas and sewerage systems provided mainly— to meet the particular requirements of the qualifying activity, or to serve particular plant or machinery used for the purposes of the qualifying activity. 3. Space or water heating systems; powered systems of ventilation, air cooling or air purification; and any floor or ceiling comprised in such systems. 4. Manufacturing or processing equipment; storage equipment (including cold rooms); display equipment; and counters, checkouts and similar equipment. 5. Cookers, washing machines, dishwashers, refrigerators and similar equipment; washbasins, sinks, baths, showers, sanitary ware and similar equipment; and furniture and furnishings. 6. Lifts, hoists, escalators and moving walkways. 7. Sound insulation provided mainly to meet the particular requirements of the qualifying activity. 8. Computer, telecommunication and surveillance systems (including their wiring or other links). 9. Refrigeration or cooling equipment. 10. Fire alarm systems; sprinkler and other equipment for extinguishing or containing fires. 11. Burglar alarm systems. 12. Strong rooms in bank or building society premises; safes. 13. Partition walls, where moveable and intended to be moved in the course of the qualifying activity. 14. Decorative assets provided for the enjoyment of the public in hotel, restaurant or similar trades. 15. Advertising hoardings; signs, displays and similar assets. 16. Swimming pools (including diving boards, slides and structures on which such boards or slides are mounted). 17. Any glasshouse constructed so that the required environment (namely, air, heat, light, irrigation and temperature) for the growing of plants is provided automatically by means of devices forming an integral part of its structure. 18. Cold stores. 19. Caravans provided mainly for holiday lettings. 20. Buildings provided for testing aircraft engines run within the buildings. 21. Moveable buildings intended to be moved in the course of the qualifying activity. 22. The alteration of land for the purpose only of installing plant or machinery. 23. The provision of dry docks. 24. The provision of any jetty or similar structure provided mainly to carry plant or machinery. 25. The provision of pipelines or underground ducts or tunnels with a primary purpose of carrying utility conduits. 26. The provision of towers to support floodlights. 27. The provision of— any reservoir incorporated into a water treatment works, or any service reservoir of treated water for supply within any housing estate or other particular locality. 28. The provision of— silos provided for temporary storage, or storage tanks. 29. The provision of slurry pits or silage clamps. 30. The provision of fish tanks or fish ponds. 31. The provision of rails, sleepers and ballast for a railway or tramway. 32. The provision of structures and other assets for providing the setting for any ride at an amusement park or exhibition. 33. The provision of fixed zoo cages.
In item 19 of list C, “caravan” includes, in relation to a holiday caravan site, anything that is treated as a caravan for the purposes of—
the Caravan Sites and Control of Development Act 1960 (c. 62), or
the Caravans Act (Northern Ireland) 1963 (c. 17 (N.I.)).
For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on the acquisition of an interest in land.
In this section “land” does not include— but otherwise has the meaning given in Schedule 1 to the Interpretation Act 1978 (c. 30).
buildings or other structures, or
any asset which is so installed or otherwise fixed to any description of land as to become, in law, part of the land,
Subject to subsection (2), “interest in land” has the meaning given by section 175 (definitions in connection with provisions about fixtures).
If a person carrying on a qualifying activity incurs capital expenditure on alterations to an existing building incidental to the installation of plant or machinery for the purposes of the qualifying activity, this Part applies as if—
the expenditure were expenditure on the provision of the plant or machinery, and
the works representing the expenditure formed part of the plant or machinery.
This section applies if—
plant or machinery is demolished, and
the last use of the plant or machinery was for the purposes of a qualifying activity.
If the person carrying on the qualifying activity replaces the plant or machinery with other plant or machinery then, for the purposes of this Part, the net cost of the demolition to that person is treated as expenditure incurred on the provision of the other plant or machinery.
If the person carrying on the qualifying activity does not replace the plant or machinery, the net cost of the demolition to that person is allocated to the appropriate pool for the chargeable period in which the demolition takes place.
In subsection (3)—
“the appropriate pool” means the pool to which the expenditure on the demolished plant or machinery has been or would be allocated in accordance with this Part, and
“the net cost of the demolition” means the amount, if any, by which the cost of the demolition exceeds any money received for the remains of the plant or machinery.
Subsection (3) is subject to section 164(4) (abandonment expenditure before cessation of ring fence trade: election for special allowance).
Subsection (2) has effect in relation to expenditure if—
it is expenditure to which any of sections 28 to 33 applies, and
an allowance under Part 2 or a deduction in respect of the expenditure could not, in the absence of this section, be made in calculating the income from the qualifying activity in question.
This Part (including in particular section 11(4)) applies as if—
the expenditure were capital expenditure on the provision of plant or machinery for the purposes of the qualifying activity in question, and
the person who incurred the expenditure owned plant or machinery as a result of incurring it.
This section applies to expenditure if a person carrying on a qualifying activity consisting of a trade has incurred it in adding insulation against loss of heat to an industrial building occupied by him for the purposes of the trade.
This section also applies to expenditure if a person carrying on a qualifying activity consisting of an ordinary Schedule A business has incurred it in adding insulation against loss of heat to an industrial building let by him in the course of the business.
“Industrial building” means a building or structure which is in use for the purposes of a qualifying trade (within the meaning of Chapter 2 of Part 3).
This section applies to expenditure if a person carrying on a qualifying activity has incurred it in taking required fire precautions in respect of premises which he uses for the purposes of the qualifying activity.
A person takes required fire precautions in respect of premises if—
he has been served with a notice under section 5(4) of the Fire Precautions Act 1971 (c. 40) specifying steps to be taken in respect of the premises, and
he takes the steps specified in the notice.
A person also takes required fire precautions in respect of premises if—
he has not been served with a notice by the fire authority under section 5(4) of the 1971 Act, but has been sent or given a document by or on behalf of the fire authority that specifies steps that might have been specified in respect of the premises in such a notice, and
he takes the steps specified in the document.
A person also takes required fire precautions in respect of premises if—
he has been served with a prohibition notice under section 10 of the 1971 Act in respect of the premises specifying matters giving rise to a risk of a kind mentioned in subsection (2) of that section, and
he takes steps to remedy the matters specified in the prohibition notice.
This section has effect in relation to Northern Ireland subject to the modifications in subsection (6).
The modifications are—
for the references to section 5(4) of the 1971 Act substitute references to Article 26(4) of the Fire Services (Northern Ireland) Order 1984 (S.I.1984/1821 (N.I.11)),
for the reference to section 10 of the 1971 Act substitute a reference to Article 33 of the 1984 Order, and
for the references to a fire authority substitute references to the Fire Authority for Northern Ireland.
This section applies to expenditure if a person carrying on a qualifying activity has incurred it in taking required safety precautions in respect of a sports ground which is—
designated under section 1 of the Safety of Sports Grounds Act 1975 (c. 52) as requiring a safety certificate, and
used by him for the purposes of the qualifying activity.
A person takes required safety precautions in respect of the sports ground if—
a safety certificate has been issued under the 1975 Act for the sports ground, and
he takes steps necessary for compliance with the terms and conditions of the safety certificate.
A person also takes required safety precautions in respect of the sports ground if—
he has been sent or given a document by or on behalf of the local authority for the area in which the sports ground is situated,
the document specifies steps which, if taken, would—
be taken into account by the local authority in deciding what terms and conditions to include in a safety certificate to be issued under the 1975 Act for the sports ground, or
lead to the amendment or replacement of a safety certificate issued or to be issued under the 1975 Act for the sports ground, and
he takes the steps specified in the document.
This section applies to expenditure if a person carrying on a qualifying activity has incurred it in taking required safety precautions in respect of a stand at a sports ground—
the use of which requires a safety certificate under Part III of the Fire Safety and Safety of Places of Sport Act 1987 (c. 27), and
which he uses for the purposes of the qualifying activity.
A person takes required safety precautions in respect of the stand at the sports ground if—
a safety certificate has been issued under the 1987 Act for the stand, and
he takes steps necessary for compliance with the terms and conditions of the safety certificate.
A person also takes required safety precautions in respect of the stand at the sports ground if—
he has been sent or given a document by or on behalf of the local authority for the area in which the sports ground is situated,
the document specifies steps which, if taken, would—
be taken into account by the local authority in deciding what terms and conditions to include in a safety certificate to be issued under the 1987 Act for the stand, or
lead to the amendment or replacement of a safety certificate issued or to be issued under the 1987 Act for the stand, and
he takes the steps specified in the document.
This section applies to expenditure if a person carrying on a qualifying activity has incurred it in taking required safety precautions in respect of a sports ground— and the expenditure is not incurred in respect of a sports ground stand which is within section 31(1)(a).
which is of a kind described in section 1(1) of the Safety of Sports Grounds Act 1975 (c. 52) but in respect of which no designation order under that section is in force at the time when he takes those precautions, and
which he uses for the purposes of the qualifying activity,
A person takes required safety precautions in respect of the sports ground if he takes steps which the relevant local authority certify would have fallen within section 30(2) or (3) if—
a designation order under section 1 of the 1975 Act had then been in force, and
a safety certificate had then been issued or applied for under the 1975 Act.
Any provision of regulations made under section 6(1)(b) of the 1975 Act (power of local authorities to charge fees) applies, with the necessary modifications, to the issue of a certificate for the purposes of subsection (2) as it applies to the issue of a safety certificate.
In subsection (2)—
“the relevant local authority” means the local authority for the area in which the sports ground is situated, and
“local authority” has the same meaning as in the 1975 Act.
This section applies to expenditure if—
it is incurred by an individual or partnership of individuals in connection with the provision for, or for use by, the individual, or any of the individuals, of a security asset,
the individual or partnership is carrying on a relevant qualifying activity, and
the special threat conditions are met.
The special threat conditions are that—
the asset is provided or used to meet a threat which—
is a special threat to the individual’s personal physical security, and
arises wholly or mainly because of the relevant qualifying activity, and
the person incurring the expenditure—
has the sole object of meeting that threat in incurring that expenditure, and
intends the asset to be used solely to improve personal physical security.
If— that other use is ignored for the purposes of this section.
the person incurring the expenditure intends the asset to be used solely to improve personal physical security, but
there is another use which is incidental to improving personal physical security,
The fact that an asset improves the personal physical security of any member of the family or household of the individual concerned, as well as that of the individual, does not prevent this section from applying.
If— this section applies only to the proportion of the expenditure attributable to the intended use to improve personal physical security.
the asset is not intended to be used solely to improve personal physical security, but the expenditure incurred on it would otherwise be expenditure to which this section applies, and
the person incurring the expenditure intends the asset to be used partly to improve personal physical security,
In this section “security asset” means an asset which improves personal security; and here “asset”—
does not include—
a car, ship or aircraft, or
a dwelling or grounds appurtenant to a dwelling, but
subject to paragraph (a), includes equipment, a structure (such as a wall) and an asset which becomes fixed to land.
Section 81 (extended meaning of “car”) does not apply in relation to subsection (6)(a).
In this section “relevant qualifying activity” means a qualifying activity consisting of—
a trade,
an ordinary Schedule A business,
a furnished holiday lettings business,
an overseas property business, or
a profession or vocation.
Expenditure is not qualifying expenditure if it is incurred by— in or in connection with the provision or use of residential or overnight accommodation for the purpose given in subsection (2).
a member of the House of Commons,
a member of the Scottish Parliament,
a member of the National Assembly for Wales, or
a member of the Northern Ireland Assembly,
The purpose is enabling the member to perform the duties of a member of the body in or about—
the place where the body sits, or
the constituency or region for which the member has been returned.
This section applies if a person is carrying on a qualifying activity consisting of—
an ordinary Schedule A business,
an overseas property business, or
special leasing of plant or machinery.
The person’s expenditure is not qualifying expenditure if it is incurred in providing plant or machinery for use in a dwelling-house.
If plant or machinery is provided partly for use in a dwelling-house and partly for other purposes, such apportionment of the expenditure incurred in providing that plant or machinery is to be made for the purposes of subsection (2) as is just and reasonable.
Subsection (2) applies in relation to a qualifying activity consisting of an employment or office.
Expenditure is qualifying expenditure only if the plant or machinery is necessarily provided for use in the performance of the duties of the employment or office.
Subsection (2) is subject to section 80 (vehicles provided for purposes of employment or office).
Expenditure incurred by a person in providing plant or machinery for the purposes of a qualifying activity is not qualifying expenditure if it appears—
that during the period during which the plant or machinery will be used for the purposes of the qualifying activity sums are, or are to be, payable to that person directly or indirectly, and
that those sums are in respect of, or take account of, the whole of the depreciation of the plant or machinery resulting from its use for those purposes.
Subsection (1) does not apply if the sums fall to be taken into account as income of the person or in calculating the profits of a qualifying activity carried on by him.
Expenditure is not qualifying expenditure if it is incurred on—
animals or other creatures to which Schedule 5 to ICTA (treatment of farm animals etc. for purposes of Case I of Schedule D) applies, or
shares in such animals or creatures.
A first-year allowance is not available unless the qualifying expenditure is first-year qualifying expenditure under— section 40 expenditure incurred for Northern Ireland purposes by small or medium-sized enterprises, section 44 expenditure incurred by small or medium-sized enterprises, or section 45 ICT expenditure incurred by small enterprises.
Expenditure is first-year qualifying expenditure if—
it is incurred on or before 11th May 2002,
it is incurred by a small or medium-sized enterprise,
it is incurred on the provision of plant or machinery for use primarily in Northern Ireland, and
it is not excluded by—
section 41 (miscellaneous exclusions from this section),
section 42 (plant or machinery partly for use outside Northern Ireland), or
section 46 (general exclusions).
This section is subject to section 43 (effect of plant or machinery subsequently being primarily for use outside Northern Ireland).
Expenditure is not first-year qualifying expenditure under section 40 if—
it is long-life asset expenditure,
it is expenditure on the provision of an aircraft or hovercraft, or
it is expenditure on the provision of a goods vehicle for the purposes of a trade which consists primarily of the conveyance of goods.
Expenditure is not first-year qualifying expenditure under section 40 if it is incurred on the provision of plant or machinery for use primarily in— unless it is authorised for the purposes of this section by the Department of Agriculture and Rural Development in Northern Ireland.
agriculture, fishing or fish farming, or
any relevant activity carried out in relation to agricultural produce, fish or any fish product for the purpose of bringing it to market,
An authorisation given by the Department— and, if the authorisation is given generally, it may be modified by the Department.
may be given either generally or specially, and
may in any case be absolute or conditional;
An authorisation is given specially if it is given so as to apply only to a specified item of expenditure or a specified person; otherwise, it is given generally.
In this section—
“agriculture” and “agricultural produce” have the same meaning as in section 6 of the European Communities Act 1972 (c. 68),
“fish” includes shellfish,
“fish farming” means the intensive rearing, on a commercial basis, of fish intended for human consumption,
“fishing” means a trade, or part of a trade, which consists of the catching or taking of fish,
“goods vehicle” has the same meaning as in the Road Traffic (Northern Ireland) Order 1995 (S.I.1995/2994 (N.I.18)),
Expenditure on plant or machinery is not first-year qualifying expenditure under section 40 if—
at the time when it is incurred, the person incurring it intends the plant or machinery to be used partly outside Northern Ireland, and
the main benefit, or one of the main benefits, which could reasonably be expected to arise from the relevant arrangements is the obtaining of a first-year allowance, or a greater first-year allowance, in respect of the part of the expenditure that is attributable to that intended use outside Northern Ireland.
For the purposes of subsection (1)—
“the relevant arrangements” means—
the transaction under which the expenditure is incurred, and
any scheme or arrangements of which that transaction forms part, and
the part of the expenditure that is attributable under subsection (1)(b) is to be determined on a just and reasonable basis.
Expenditure on the provision of plant or machinery is to be treated as never having been first-year qualifying expenditure under section 40 if, at any relevant time—
the primary use to which the plant or machinery is put is a use outside Northern Ireland, or
the plant or machinery is held for use otherwise than primarily in Northern Ireland.
In subsection (1) “relevant time” means a time which—
falls within the relevant period, and
is a time when the plant or machinery is owned by—
the person who incurred the expenditure, or
a person who is, or at any time in that period has been, connected with that person.
“The relevant period” means—
if the expenditure concerned exceeds £3.5 million, the period of 5 years beginning with the date of the incurring of that expenditure;
in any other case, the period of 2 years beginning with that date.
All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (1).
If a person who has made a return becomes aware that, after making it, anything in it has become incorrect because of the operation of this section, he must give notice to the Inland Revenue specifying how the return needs to be amended.
The notice must be given within 3 months beginning with the day on which the person first became aware that anything in the return had become incorrect because of the operation of this section.
Expenditure is first-year qualifying expenditure if—
it is incurred by a small or medium-sized enterprise, and
it is not excluded by subsection (2) or section 46 (general exclusions).
Long-life asset expenditure is not first-year qualifying expenditure under subsection (1).
Expenditure is first-year qualifying expenditure if—
it is incurred on or before 31st March 2003,
it is incurred by a small enterprise,
it is expenditure on information and communications technology, and
it is not excluded by section 46 (general exclusions).
“Expenditure on information and communications technology” means expenditure on items within any of the following classes. Class A. Computers and associated equipment This class covers— computers, peripheral devices designed to be used by being connected to or inserted in a computer, equipment (including cabling) for use primarily to provide a data connection between— one computer and another, or a computer and a data communications network, and dedicated electrical systems for computers. For this purpose “computer” does not include computerised control or management systems or other systems that are part of a larger system whose principal function is not processing or storing information. Class B. Other qualifying equipment This class covers— wireless application protocol telephones, third generation mobile telephones, devices designed to be used by being connected to a television set and capable of receiving and transmitting information from and to data networks, and other devices— substantially similar to those within paragraphs (a), (b) and (c), and capable of receiving and transmitting information from and to data networks. This is subject to any order under subsection (3). Class C. Software This class covers the right to use or otherwise deal with software for the purposes of any equipment within Class A or B.
The Treasury may make provision by order—
further defining the kinds of equipment within Class B, or
adding further kinds of equipment to that class.
Expenditure within any of the general exclusions in subsection (2) is not first-year qualifying expenditure under— section 40 (expenditure incurred for Northern Ireland purposes by small or medium-sized enterprises), section 44 (expenditure incurred by small or medium-sized enterprises), or section 45 (ICT expenditure incurred by small enterprises).
The general exclusions are— General exclusion 1 The expenditure is incurred in the chargeable period in which the qualifying activity is permanently discontinued. General exclusion 2 The expenditure is incurred on the provision of a car (as defined by section 81). General exclusion 3 The expenditure is of the kind described in section 94 (ships). General exclusion 4 The expenditure is of the kind described in section 95 (railway assets). General exclusion 5 The expenditure would be long-life asset expenditure but for paragraph 20 of Schedule 3 (transitional provisions). General exclusion 6 The expenditure is on the provision of plant or machinery for leasing (whether in the course of a trade or otherwise). For this purpose, the letting of a ship on charter, or of any other asset on hire, is to be regarded as leasing (whether or not it would otherwise be so regarded). General exclusion 7 The circumstances of the incurring of the expenditure are that— the provision of the plant or machinery on which the expenditure is incurred is connected with a change in the nature or conduct of a trade or business carried on by a person other than the person incurring the expenditure, and the obtaining of a first-year allowance is the main benefit, or one of the main benefits, which could reasonably be expected to arise from the making of the change. General exclusion 8 Either of the following sections applies— section 13 (use for qualifying activity of plant or machinery provided for other purposes); section 14 (use for qualifying activity of plant or machinery which is a gift). This is subject to section 161 (pre-trading expenditure on mineral exploration and access).
Use this section to decide whether expenditure incurred by a company is, for the purposes of this Chapter, incurred by—
a small or medium-sized enterprise, or
a small enterprise.
The expenditure is incurred by a small or medium-sized enterprise if the company—
qualifies (or is treated as qualifying) as small or medium-sized under the relevant companies legislation in relation to the financial year of the company in which the expenditure is incurred, and
is not a member of a large group at the time when the expenditure is incurred.
The expenditure is incurred by a small enterprise if the company—
qualifies (or is treated as qualifying) as small under the relevant companies legislation in relation to the financial year of the company in which the expenditure is incurred, and
is not a member of a large or medium-sized group at the time when the expenditure is incurred.
Except in the case of a company formed and registered in Northern Ireland—
“the relevant companies legislation” means section 247 of the Companies Act 1985 (c. 6), and
“financial year” has the same meaning as in Part VII of the 1985 Act.
In the case of such a company—
“the relevant companies legislation” means Article 255 of the Companies (Northern Ireland) Order 1986 (S.I.1986/1032 (N.I.6)), and
“financial year” has the same meaning as in Part VIII of the 1986 Order.
“Company” means—
a company, or an oversea company, within the meaning of the 1985 Act, or
a company, or a Part XXIII company, within the meaning of the 1986 Order.
Use this section to decide whether expenditure incurred by a business is, for the purposes of this Chapter, incurred by—
a small or medium-sized enterprise, or
a small enterprise.
In this section “business” means—
an individual,
a partnership of which all the members are individuals,
a registered friendly society within the meaning of Chapter II of Part XII of ICTA, or
a body corporate which is not a company but is within the charge to corporation tax.
The expenditure is incurred by a small or medium-sized enterprise if—
the expenditure is incurred for the purposes of a qualifying activity carried on by the business, and
the business passes the hypothetical company test, in relation to that expenditure, as a small or medium-sized company.
The expenditure is incurred by a small enterprise if—
the expenditure is incurred for the purposes of a qualifying activity carried on by the business, and
the business passes the hypothetical company test, in relation to that expenditure, as a small company.
To apply the hypothetical company test, assume that—
the qualifying activity is carried on by a company (“the hypothetical company”),
every trade, business, profession or vocation carried on by the business is carried on by the business as part of that activity,
the financial years of the hypothetical company coincide with the chargeable periods of the business, and
accounts of the hypothetical company for any relevant chargeable period have been duly drawn up as if that period were a financial year of the company.
The business passes the hypothetical company test as a small or medium-sized company in relation to the expenditure in question if, on the assumptions in subsection (5), the company would qualify (or be treated as qualifying) as small or medium-sized under the relevant companies legislation in relation to the financial year in which the expenditure is assumed to be incurred.
The business passes the hypothetical company test as a small company in relation to the expenditure in question if, on the assumptions in subsection (5), the company would qualify (or be treated as qualifying) as small under the relevant companies legislation in relation to the financial year in which the expenditure is assumed to be incurred.
Except in the case of a business carrying on a qualifying activity wholly or mainly in Northern Ireland— and the reference in subsection (5)(d) to accounts being duly drawn up is to their being drawn up in accordance with that Act.
“the relevant companies legislation” means section 247 of the Companies Act 1985 (c. 6), and
“financial year” has the same meaning as in Part VII of that Act;
In the case of such a business— and the reference in subsection (5)(d) to accounts being duly drawn up is to their being drawn up in accordance with that Order.
“the relevant companies legislation” means Article 255 of the Companies (Northern Ireland) Order 1986 (S.I.1986/1032 (N.I.6)), and
“financial year” has the same meaning as in Part VIII of that Order;
Use this section to decide whether, for the purposes of section 47, a company is—
a member of a large group, or
a member of a large or medium-sized group.
Subject to subsection (4), a company is a member of a large group at the time when any expenditure is incurred if—
it is at that time the parent undertaking of a group which does not qualify as small or medium-sized in relation to the financial year of the parent undertaking in which that time falls, or
it is at that time a subsidiary undertaking in relation to the parent undertaking of such a group.
Subject to subsection (4), a company is a member of a large or medium-sized group at the time when any expenditure is incurred if—
it is at that time the parent undertaking of a group which does not qualify as small in relation to the financial year of the parent undertaking in which that time falls, or
it is at that time a subsidiary undertaking in relation to the parent undertaking of such a group.
If, at the time when any expenditure is incurred by a company, any arrangements exist which are such that, had effect been given to them immediately before that time, the company or a successor of the company— the company incurring the expenditure is to be treated as a member of a large group or (as the case may be) a large or medium-sized group at that time.
would, at that time, have been a member of a large group, or
would, at that time, have been a member of a large or medium-sized group,
For the purposes of subsections (2) and (3), the question whether— is to be decided by reference to the relevant companies legislation (but reading references in that legislation to a parent company as references to a parent undertaking).
a group qualifies as small or medium-sized, or
a group qualifies as small,
In subsection (5) “the relevant companies legislation” means—
except in the case of a company formed and registered in Northern Ireland, section 249 of the Companies Act 1985 (c. 6);
in the case of such a company, Article 257 of the Companies (Northern Ireland) Order 1986 (S.I.1986/1032 (N.I.6)).
For the purposes of subsection (4) a company is the successor of another if— and “arrangements” means arrangements of any kind (whether or not in writing or legally enforceable).
it carries on a trade which, in whole or in part, the other company has ceased to carry on, and
the circumstances are such that section 343 of ICTA (company reconstructions without a change of ownership) applies in relation to the two companies as the predecessor and the successor within the meaning of that section,
In this section “financial year”, “group”, “parent undertaking” and “subsidiary undertaking” have the same meaning as in—
except in the case of a company formed and registered in Northern Ireland, Part VII of the 1985 Act;
in the case of such a company, Part VIII of the 1986 Order.
In determining whether expenditure is first-year qualifying expenditure under this Chapter, any effect of section 12 on the time at which it is to be treated as incurred is to be disregarded.
No obligation as to secrecy or other restriction on the disclosure of information imposed by statute or otherwise prevents—
the Inland Revenue from disclosing information, for the purpose given in subsection (2), to the Department of Agriculture and Rural Development in Northern Ireland (“the Department”) or an authorised officer of the Department, or
the Department or an authorised officer of the Department from disclosing information for that purpose to the Inland Revenue.
The purpose is assisting—
the Board of Inland Revenue, in carrying out its functions relating to allowances made because of section 40 (expenditure incurred for Northern Ireland purposes by small or medium-sized enterprises), or
the Department, in carrying out its functions under this Chapter.
Information obtained as a result of a disclosure authorised by this section must not be disclosed except—
to the Inland Revenue, the Department or an authorised officer of the Department, or
for the purposes of any proceedings connected with a matter in relation to which the Board of Inland Revenue or the Department carry out the functions mentioned in subsection (2)(a) or (b).
A person is entitled to a first-year allowance in respect of first-year qualifying expenditure if—
the expenditure is incurred in a chargeable period to which this Act applies, and
the person owns the plant or machinery at some time during that chargeable period.
Any first-year allowance is made for the chargeable period in which the first-year qualifying expenditure is incurred.
The amount of the allowance is a percentage of the first-year qualifying expenditure in respect of which the allowance is made, as shown in the Table— Type of first-year qualifying expenditure Amount Expenditure qualifying under section 40 (expenditure incurred for Northern Ireland purposes by small or medium-sized enterprises) 100% Expenditure qualifying under section 44 (expenditure incurred by small or medium-sized enterprises) 40% Expenditure qualifying under section 45 (ICT expenditure incurred by small enterprises) 100%
A person who is entitled to a first-year allowance may claim the allowance in respect of the whole or a part of the first-year qualifying expenditure.
Subsection (1) needs to be read with section 236 (first-year allowances in respect of additional VAT liabilities) and is subject to— section 205 (reduction of first-year allowance if plant or machinery provided partly for purposes other than those of qualifying activity), section 210 (reduction of first-year allowance if it appears that a partial depreciation subsidy is or will be payable), and sections 217, 223 and 241 (anti-avoidance: no first-year allowance in certain cases).
Qualifying expenditure has to be pooled for the purpose of determining a person’s entitlement to writing-down allowances and balancing allowances and liability to balancing charges.
If a person carries on more than one qualifying activity, expenditure relating to the different activities must not be allocated to the same pool.
There are single asset pools, class pools and the main pool.
A single asset pool may not contain expenditure relating to more than one asset.
The following provide for qualifying expenditure to be allocated to a single asset pool— section 74 (car above the cost threshold); section 86 (short-life asset); section 127 (ship); section 206 (plant or machinery provided or used partly for purposes other than those of qualifying activity); section 211 (payment of partial depreciation subsidy); section 538 (contribution allowances: plant and machinery).
A class pool is a pool which may contain expenditure relating to more than one asset.
The following provide for qualifying expenditure to be allocated to a class pool— section 101 (long-life assets); section 107 (overseas leasing).
Qualifying expenditure may be allocated to the main pool only if it does not fall to be allocated to a single asset pool or a class pool.
Whether a person is entitled to a writing-down allowance or a balancing allowance, or liable to a balancing charge, for a chargeable period is determined separately for each pool of qualifying expenditure and depends on—
the available qualifying expenditure in that pool for that period (“AQE”), and
the total of any disposal receipts to be brought into account in that pool for that period (“TDR”).
If AQE exceeds TDR, the person is entitled to a writing-down allowance or a balancing allowance for the period.
If TDR exceeds AQE, the person is liable to a balancing charge for the period.
The entitlement under subsection (2) is to a writing-down allowance except for the final chargeable period when it is to a balancing allowance.
The final chargeable period is given by section 65.
Subsection (2) is subject to section 110(1) (overseas leasing: allowances prohibited in certain cases).
The amount of the writing-down allowance to which a person is entitled for a chargeable period is 25% of the amount by which AQE exceeds TDR.
Subsection (1) is subject to—
section 102 (long-life asset expenditure: 6%), and
section 109 (overseas leasing: 10%).
If the chargeable period is more or less than a year, the amount is proportionately increased or reduced.
If the qualifying activity has been carried on for part only of the chargeable period, the amount is proportionately reduced.
A person claiming a writing-down allowance may require the allowance to be reduced to a specified amount.
The amount of the balancing charge to which a person is liable for a chargeable period is the amount by which TDR exceeds AQE.
The amount of the balancing allowance to which a person is entitled for the final chargeable period is the amount by which AQE exceeds TDR.
The general rule is that a person’s available qualifying expenditure in a pool for a chargeable period consists of—
any qualifying expenditure allocated to the pool for that period in accordance with section 58, and
any unrelieved qualifying expenditure carried forward in the pool from the previous chargeable period under section 59.
A person’s available qualifying expenditure in a pool for a chargeable period also includes any amount allocated to the pool for that period under— section 26(3) (net costs of demolition); section 86(2) or 87(2) (allocation of expenditure in short-life asset pool); section 111(3) (overseas leasing: standard recovery mechanism); section 129(1), 132(2), 133(3) or 137 (provisions relating to operation of single ship pool and deferment of balancing charges in respect of ships); section 165(3) (abandonment expenditure incurred after cessation of ring fence trade); section 206(3) (plant or machinery used partly for purposes other than those of the qualifying activity); section 211(4) (partial depreciation subsidy paid).
A person’s available qualifying expenditure does not include any expenditure excluded by— section 8(4) or 9(1) (rules against double relief); section 166(2) (transfers of interests in oil fields: anti-avoidance); section 185(2), 186(2) or 187(2) (restrictions where other claims made in respect of fixture); section 218(1), 224(1), 228(2), 242(2), or 243(2) (general anti-avoidance provisions).
Subsection (1) is also subject to section 220 (allocation to chargeable periods of expenditure incurred on plant or machinery for leasing under finance lease).
The following rules apply to the allocation of a person’s qualifying expenditure to the appropriate pool.
An amount of qualifying expenditure is not to be allocated to a pool for a chargeable period if that amount has been taken into account in determining the person’s available qualifying expenditure for an earlier chargeable period.
Qualifying expenditure is not to be allocated to a pool for a chargeable period before that in which the expenditure is incurred.
Qualifying expenditure is not to be allocated to a pool for a chargeable period unless the person owns the plant or machinery at some time in that period.
If a first-year allowance is made in respect of an amount of first-year qualifying expenditure—
subject to subsection (6), none of that amount is to be allocated to a pool for the chargeable period in which the expenditure is incurred, and
the amount that may be allocated to a pool for any chargeable period is limited to the balance left after deducting the first-year allowance.
If— the balance (or some of it) must be allocated to a pool for the chargeable period in which the disposal event occurs.
a first-year allowance is made in respect of an amount of first-year qualifying expenditure,
a disposal event occurs in respect of the plant or machinery in any chargeable period, and
none of the balance left after deducting the first-year allowance has been allocated to a pool for an earlier chargeable period,
Subsection (6) applies even if the balance is nil (because of a 100% first-year allowance).
“The appropriate pool” means whichever pool is applicable under the provisions of this Part apart from this section.
A person has unrelieved qualifying expenditure to carry forward from a chargeable period if for that period AQE exceeds TDR.
The amount of the unrelieved qualifying expenditure is—
the excess less the writing-down allowance made for the period, or
if no writing-down allowance is claimed for the period, the excess.
No amount may be carried forward as unrelieved qualifying expenditure from the final chargeable period.
In this Part “disposal receipt” means a disposal value that a person is required to bring into account in accordance with— when read with sections 64 and 264(3) (cases in which no disposal value need be brought into account).
sections 61, 62 and 63 (disposal events, disposal values and the general limit on the amount of a disposal value),
any of the provisions of this Part listed in section 66, or
paragraph 11 of Schedule 12 to FA 1997 (finance lease or loan: receipt of major lump sum) or any other enactment,
In this Part “disposal event” means any event of a kind that requires a disposal value to be brought into account under this Part (whether under section 61(1) or otherwise).
If— a disposal value is required to be brought into account in the pool in connection with the first event only.
qualifying expenditure has been allocated to a pool, and
more than one disposal event occurs in respect of the plant or machinery,
In subsection (3) “disposal event” does not include a disposal event arising under— section 72 (computer software), sections 140 and 143 (attribution of deferred balancing charge), or section 238(2) (additional VAT rebates).
A person who has incurred qualifying expenditure is required to bring the disposal value of the plant or machinery into account for the chargeable period in which—
the person ceases to own the plant or machinery;
the person loses possession of the plant or machinery in circumstances where it is reasonable to assume that the loss is permanent;
the plant or machinery has been in use for mineral exploration and access and the person abandons it at the site where it was in use for that purpose;
the plant or machinery ceases to exist as such (as a result of destruction, dismantling or otherwise);
the plant or machinery begins to be used wholly or partly for purposes other than those of the qualifying activity;
the qualifying activity is permanently discontinued.
The disposal value to be brought into account depends on the disposal event, as shown in the Table— 1. Disposal event 2. Disposal value 1. Sale of the plant or machinery, except in a case where item 2 applies. The net proceeds of the sale, together with— any insurance money received in respect of the plant or machinery as a result of an event affecting the price obtainable on the sale, and any other compensation of any description so received, so far as it consists of capital sums. 2. Sale of the plant or machinery where— the sale is at less than market value, there is no charge to tax under Schedule E, and the condition in subsection (4) is met by the buyer. The market value of the plant or machinery at the time of the sale. 3. Demolition or destruction of the plant or machinery. The net amount received for the remains of the plant or machinery, together with— any insurance money received in respect of the demolition or destruction, and any other compensation of any description so received, so far as it consists of capital sums. 4. Permanent loss of the plant or machinery otherwise than as a result of its demolition or destruction. Any insurance money received in respect of the loss and, so far as it consists of capital sums, any other compensation of any description so received. 5. Abandonment of the plant or machinery which has been in use for mineral exploration and access at the site where it was in use for that purpose. Any insurance money received in respect of the abandonment and, so far as it consists of capital sums, any other compensation of any description so received. 6. Permanent discontinuance of the qualifying activity followed by the occurrence of an event within any of items 1 to 5. The disposal value for the item in question. 7. Any event not falling within any of items 1 to 6. The market value of the plant or machinery at the time of the event.
The amounts referred to in column 2 of the Table are those received by the person required to bring the disposal value into account.
The condition referred to in item 2 of the Table is met by the buyer if—
the buyer’s expenditure on the acquisition of the plant or machinery cannot be qualifying expenditure under this Part or Part 6 (research and development allowances), or
the buyer is a dual resident investing company which is connected with the seller.
In this section “mineral exploration and access” has the same meaning as in Chapter 13 (provisions affecting the mining and oil industries) and Part 5 (mineral extraction allowances).
The amount of any disposal value required to be brought into account by a person in respect of any plant or machinery is limited to the qualifying expenditure incurred by the person on its provision.
Subsection (3) applies if a person who is required to bring a disposal value into account has acquired the plant or machinery as a result of a transaction which was, or a series of transactions each of which was, between connected persons.
The amount of the disposal value is limited to the amount of the qualifying expenditure on the provision of the plant or machinery incurred by whichever party to the transaction, or to any of the transactions, incurred the greatest such expenditure.
This section is subject to section 239 (limit on disposal value where additional VAT rebate or rebates has or have been made in respect of original expenditure).
If a person disposes of plant or machinery by way of gift in circumstances such that there is a charge to tax under Schedule E, the disposal value of the plant or machinery is nil.
If a person carrying on a relevant qualifying activity makes a gift of plant or machinery used in the course of the activity— the disposal value of the plant or machinery is nil.
to a charity within the meaning of section 506 of ICTA (charities: qualifying and non-qualifying expenditure),
to a body listed in section 507(1) of ICTA (various heritage bodies and museums), or
for the purposes of a designated educational establishment within the meaning of section 84 of ICTA (gifts to educational establishments),
In subsection (2) “relevant qualifying activity” means a qualifying activity consisting of—
a trade,
an ordinary Schedule A business,
a furnished holiday lettings business,
an overseas property business, or
a profession or vocation.
Subsection (2) needs to be read with sections 83A(4) and 84(4) of ICTA (which provide for a charge to tax if subsection (2) applies in circumstances in which the donor or a connected person receives a benefit attributable to the gift).
If expenditure is treated under section 27(2) (expenditure on thermal insulation, safety measures, etc.) as having been incurred on plant or machinery, the disposal value of the plant or machinery is nil.
A person is not required to bring a disposal value into account in a pool for a chargeable period in respect of plant or machinery if none of the qualifying expenditure is or has been taken into account in a claim in determining the person’s available qualifying expenditure in the pool for that or any previous chargeable period.
Subsection (3) applies if—
a person (“C”) has incurred qualifying expenditure on plant or machinery,
C acquired the plant or machinery as a result of a transaction which was, or a series of transactions each of which was, between connected persons,
any connected person (apart from C) who was a party to the transaction, or one of the series of transactions, is or has been required to bring a disposal value into account as a result of the transaction,
a disposal event (“the relevant disposal event”) occurs in respect of the plant or machinery at a time when it is owned by C, and
none of C’s qualifying expenditure is or has been taken into account in a claim in determining C’s available qualifying expenditure for the chargeable period in which the relevant disposal event occurs or any previous chargeable period.
If this subsection applies—
subsection (1) does not apply in relation to the relevant disposal event, and
C’s qualifying expenditure is to be treated as allocated to the appropriate pool for the chargeable period in which the relevant disposal event occurs.
In subsection (3)—
“qualifying expenditure” means, if a first-year allowance has been made to C, the amount (including a nil amount) remaining after deducting the allowance, and
“the appropriate pool” means whichever pool is applicable in relation to C under the provisions of this Part.
A person takes expenditure into account in a claim if he takes it into account—
in a tax return;
by giving notice of an amendment of a tax return;
in any other claim under this Part.
The final chargeable period for— is the chargeable period in which the qualifying activity is permanently discontinued.
the main pool, or
a long-life asset pool,
The final chargeable period for a single asset pool is the first chargeable period in which any disposal event given in section 61(1) occurs.
Subsection (2) is subject to— sections 77(1) and 206(4) (no final chargeable period merely because plant or machinery begins to be used partly for purposes other than those of qualifying activity); sections 86(2) and 87(2) (ending of short-life asset pool at four-year cut-off without final chargeable period); section 132(2) (no final chargeable period for single ship pool).
The final chargeable period for a class pool under section 107 (overseas leasing) is the chargeable period at the end of which the circumstances are such that there can be no more disposal receipts in any subsequent chargeable period.
The provisions of this Part referred to in section 60(1)(b) are— section 68 hire-purchase etc.: disposal value on cessation of notional ownership sections 72 and 73 grant of new software right: disposal value section 79 cars: disposal value in avoidance cases sections 88 and 89 short-life assets: disposal at under-value or to connected person section 104 long-life assets: avoidance cases sections 108, 111 and 114 overseas leasing: disposal values in various cases sections 132 and 143 ships: ship used for overseas leasing etc.; attribution of amount where balancing charge deferred section 171 oil production sharing contracts: disposal values on cessation of ownership sections 196 and 197 fixtures: disposal values on cessation of notional ownership and in avoidance cases section 208 effect of significant reduction in use of plant or machinery for purposes of qualifying activity section 211 effect of payment of partial depreciation subsidy section 222 anti-avoidance: limit on disposal value section 229 hire-purchase: disposal values in finance leasing and anti-avoidance cases sections 238 and 239 additional VAT rebates
This section applies if—
a person carrying on a qualifying activity incurs capital expenditure on the provision of plant or machinery for the purposes of the qualifying activity, and
the expenditure is incurred under a contract providing that the person shall or may become the owner of the plant or machinery on the performance of the contract.
The plant or machinery is to be treated for the purposes of this Part as owned by the person (and not by any other person) at any time when he is entitled to the benefit of the contract so far as it relates to the plant or machinery.
At the time when the plant or machinery is brought into use for the purposes of the qualifying activity, the person is to be treated for the purposes of this Part as having incurred all capital expenditure in respect of the plant or machinery to be incurred by him under the contract after that time.
If a person— the person is to be treated as ceasing to own the plant or machinery at the time when he ceases to be entitled to the benefit of the contract.
is treated under subsection (2) as owning plant or machinery,
ceases to be entitled to the benefit of the contract in question so far as it relates to that plant or machinery, and
does not then in fact become the owner of the plant or machinery,
This section is subject to section 69 (hire-purchase and fixtures) and subsection (3) is subject to section 229 (anti-avoidance).
This section applies if a person—
is treated under section 67(4) as ceasing to own plant or machinery, and
is required to bring a disposal value into account as a result.
If the plant or machinery has been brought into use for the purposes of the qualifying activity before the person ceases to own the plant or machinery, the disposal value is the total of—
any relevant capital sums, and
any capital expenditure treated under section 67(3) as having been incurred when the plant or machinery was brought into use but which has not in fact been incurred.
If the plant or machinery has not been brought into use for the purposes of the qualifying activity before the person ceases to own the plant or machinery, the disposal value is the total of any relevant capital sums.
“Relevant capital sums” means capital sums that the person receives or is entitled to receive by way of consideration, compensation, damages or insurance money in respect of—
his rights under the contract, or
the plant or machinery.
This section is subject to section 229 (anti-avoidance).
Section 67 does not—
apply to expenditure incurred on plant or machinery which is a fixture, or
prevent Chapter 14 (fixtures) applying in relation to expenditure on plant or machinery incurred under such a contract as is mentioned in section 67(1)(b).
If— the person is to be treated for the purposes of this Part as ceasing to own the plant or machinery at the time when it becomes a fixture.
a person is treated under section 67(2) as owning plant or machinery,
the plant or machinery becomes a fixture, and
the person is not treated under Chapter 14 as being the owner of the plant or machinery,
In this section “fixture” has the meaning given by section 173(1).
This section applies if—
under the terms of a lease, a lessee is required to provide plant or machinery,
the lessee incurs capital expenditure on the provision of that plant or machinery for the purposes of a qualifying activity which the lessee carries on,
the plant or machinery is not so installed or otherwise fixed in or to a building or any other description of land as to become, in law, part of that building or other land, and
the lessee does not own the plant or machinery.
The lessee—
is to be treated as being the owner of the plant or machinery, as a result of incurring the capital expenditure, for so long as it continues to be used for the purposes of the qualifying activity, but
is not required to bring a disposal value into account because the lease ends.
Subsection (4) applies if—
the plant or machinery continues to be used for the purposes of the lessee’s qualifying activity until the lease ends,
the lessor holds the lease in the course of a qualifying activity, and
on or after the ending of the lease, a disposal event occurs in respect of the plant or machinery at a time when the lessor owns the plant or machinery as a result of the requirement under the terms of the lease.
The lessor is required to bring a disposal value into account in the appropriate pool for the chargeable period in which the disposal event occurs.
“The appropriate pool” means the pool which would be applicable under this Part in relation to the lessor’s qualifying activity if—
the expenditure incurred by the lessee had been qualifying expenditure incurred by the lessor, and
that qualifying expenditure were being allocated to a pool for the chargeable period in which the disposal event occurs.
In this section “lease” includes— but does not include a mortgage (and “lessee” and “lessor” are to be read accordingly).
an agreement for a lease if the term to be covered by the lease has begun, and
any tenancy,
For the purposes of this Part computer software is treated as plant (whether or not it would constitute plant apart from this section).
If a person carrying on a qualifying activity incurs capital expenditure in acquiring, for the purposes of the qualifying activity, a right to use or otherwise deal with computer software, this Part applies as if—
the right and the software to which it relates were plant,
the plant were provided for the purposes of the qualifying activity, and
so long as the person is entitled to the right, the person owned the plant as a result of incurring the capital expenditure.
This section applies if a person—
has incurred qualifying expenditure on the provision of plant consisting of computer software or the right to use or otherwise deal with computer software, and
grants to another a right to use or otherwise deal with the whole or part of the computer software in circumstances in which the consideration for the grant—
consists of a capital sum, or
would consist of a capital sum if the consideration were in money.
The person is required to bring a disposal value into account unless— there has been a disposal event falling within section 61(1)(e) (use for purposes other than those of the qualifying activity) or 61(1)(f) (permanent discontinuance of the qualifying activity).
while the person owned the computer software or the right to use or otherwise deal with the computer software, and
before the grant of the right referred to in subsection (1)(b),
The disposal value to be brought into account under this section depends on the circumstances of the grant of the right, as shown in the Table— 1. Circumstances of grant 2. Disposal value 1. The grant is for a consideration not consisting entirely of money. The market value of the right granted at the time of the grant. 2. The grant is made where— it is for no consideration or at less than market value, there is no charge to tax under Schedule E, and the condition in subsection (5) is met by the grantee. The market value of the right granted at the time of the grant. 3. The grant is made in circumstances other than those given in item 1 or 2. The net consideration in money received in respect of the grant, together with— any insurance money received in respect of the computer software as a result of an event affecting the consideration obtainable on the grant, and any other compensation of any description so received, so far as it consists of capital sums.
The amounts referred to in column 2 of the Table are those received by the person required to bring the disposal value into account.
The condition referred to in item 2 of the Table is met by the grantee if—
the grantee’s expenditure on the acquisition of the plant cannot be qualifying expenditure under this Part or Part 6 (research and development allowances), or
the grantee is a dual resident investing company which is connected with the grantor.
This section applies if a person is required to bring into account a disposal value in respect of—
computer software, or
the right to use or otherwise deal with computer software.
For the purpose only of— the disposal value is to be taken to be increased by the amount given in subsection (3).
determining whether the limit on the disposal value under section 62 is exceeded, and
reducing the amount of that disposal value so that the limit is not exceeded,
The amount is the total of any disposal values which, in respect of that person and that plant, fall or have fallen to be brought into account under section 72.
Qualifying expenditure incurred on the provision of a car to which this section applies, if allocated to a pool, must be allocated to a single asset pool.
This section applies to a car if—
the car is not a qualifying hire car (as defined by section 82), and
the capital expenditure incurred on its provision for the purposes of the qualifying activity exceeds £12,000.
In this Chapter “car” has the meaning given by section 81 (extended meaning of “car”).
The Treasury may by order increase or further increase the sums of money specified in subsection (2) and in sections 75 and 76.
The amount of the writing-down allowance to be made to a person for a chargeable period in respect of qualifying expenditure incurred on the provision of a car to which section 74 applies must not exceed £3,000.
The limit under subsection (1) is proportionately increased or reduced if the chargeable period is more or less than a year.
The amount of the writing-down allowance may be further limited under— section 76 (expenditure met by another person), section 77 (effect of use partly for other purposes), or section 78 (effect of partial depreciation subsidy).
Subsection (2) applies if, as a result of section 532 (general rule excluding contributions), only part of the capital expenditure incurred on the provision of a car to which section 74 applies is treated as incurred by a person.
The amount of the writing-down allowance to be made to that person for a chargeable period in respect of the qualifying expenditure on the car must not exceed— where— E is the amount of capital expenditure incurred on the provision of the car, and X is the amount of the expenditure excluded by section 532.
Subsection (4) applies if—
capital expenditure exceeding £12,000 is incurred on the provision of a car to which section 74 applies, and
a person (“the contributor”) is entitled to writing-down allowances as a result of section 538 (contribution allowances for plant and machinery).
The amount of the writing-down allowance to be made to the contributor for a chargeable period in respect of his contribution to the expenditure on the car must not exceed— where— E is the amount of capital expenditure incurred on the provision of the car, and C is the amount of the contribution.
The limit under subsection (2) or (4) is proportionately increased or reduced if the chargeable period is more or less than a year.
In the case of a single asset pool under section 74 there is no final chargeable period or disposal event merely because the car begins to be used partly for purposes other than those of the qualifying activity.
For any chargeable period in which the car is used partly for purposes other than those of the qualifying activity— must be reduced to an amount which is just and reasonable having regard to the relevant circumstances.
any writing-down allowance or balancing allowance to which the person is entitled, or
any balancing charge to which the person is liable,
The relevant circumstances include, in particular, the extent to which the car is used in that chargeable period for purposes other than those of the qualifying activity.
In calculating under section 59 the amount of unrelieved qualifying expenditure carried forward, a reduction of a writing-down allowance under this section is to be disregarded.
If this section applies, Chapter 15 (plant or machinery provided or used partly for purposes other than those of the qualifying activity) does not apply.
This section applies if—
a car to which section 74 applies is in use for the purposes of the qualifying activity,
there is paid to the person carrying on that activity a sum in respect of, or which takes account of, part of the depreciation of the car resulting from that use, and
the sum does not fall to be taken into account as income of that person or in calculating the profits of any qualifying activity carried on by him.
The amount of— must be reduced to an amount which is just and reasonable having regard to the relevant circumstances.
any writing-down allowance or balancing allowance to which the person is entitled, or
any balancing charge to which the person is liable,
In calculating under section 59 the amount of unrelieved qualifying expenditure carried forward, a reduction of a writing-down allowance under subsection (2) is to be disregarded.
This section has effect for the chargeable period in which any such sum as is mentioned in subsection (1)(b) is first paid and for any subsequent chargeable period.
If this section applies, Chapter 16 (partial depreciation subsidies) does not apply.
This section applies if—
a disposal value is required to be brought into account under section 61, and
the disposal event is that the person concerned ceases to own a car to which section 74 applies because of— which is a relevant transaction for the purposes of Chapter 17 (anti-avoidance).
a sale, or
the performance of a contract,
The disposal value to be brought into account is—
the market value of the car at the time of the event referred to in subsection (1), or
if less, the capital expenditure incurred, or treated as incurred, on the provision of the car by the person disposing of it.
The person acquiring the car is to be treated as having incurred capital expenditure on its provision of an amount equal to the disposal value required to be brought into account under subsection (2).
This section applies if a person who is carrying on a qualifying activity consisting of an employment or office (“the employee”)—
incurs capital expenditure on the provision of a mechanically propelled road vehicle or a cycle, and
owns the vehicle or cycle as a result of incurring that expenditure.
References in this Part to qualifying expenditure include the employee’s expenditure on the provision of the vehicle or cycle if it is provided partly for use in—
the performance of the duties of the employment or office, or
the kind of travelling in respect of which expenses would be deductible as qualifying travelling expenses under section 198 of ICTA.
The amount of any balancing allowance to which the employee is entitled for the final chargeable period is— where— AQE is the available qualifying expenditure in the pool for that period, TDR is the total of any disposal receipts to be brought into account in that pool for that period, A is the number of chargeable periods in the case of which the employee— has carried on the qualifying activity and owned the vehicle or cycle, and has claimed an allowance falling to be made to him by reference to expenditure incurred on the provision of the vehicle or cycle, and B is the number of chargeable periods in the case of which the employee— has carried on the qualifying activity and owned the vehicle or cycle, and has been entitled to an allowance by reference to expenditure incurred on the provision of the vehicle or cycle.
In this section “cycle” has the meaning given by section 192(1) of the Road Traffic Act 1988 (c. 52).
In this Part “car” means a mechanically propelled road vehicle other than one—
of a construction primarily suited for the conveyance of goods or burden of any description, or
of a type not commonly used as a private vehicle and unsuitable for such use. References to a car accordingly include a motor cycle.
For the purposes of this Part a car is a qualifying hire car if—
it is provided wholly or mainly for hire to, or the carriage of, members of the public in the ordinary course of a trade, and
the case is within subsection (2), (3) or (4).
The first case is where the following conditions are met—
the number of consecutive days for which the car is on hire to, or used for the carriage of, the same person will normally be less than 30, and
the total number of days for which it is on hire to, or used for the carriage of, the same person in any period of 12 months will normally be less than 90.
The second case is where the car is provided for hire to a person who will himself use it—
wholly or mainly for hire to, or for the carriage of, members of the public in the ordinary course of a trade, and
in a way that meets the conditions in subsection (2).
The third case is where the car is provided wholly or mainly for the use of a person in receipt of—
a disability living allowance under— because of entitlement to the mobility component,
the Social Security Contributions and Benefits Act 1992 (c. 4), or
the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7),
a mobility supplement under a scheme made under the Personal Injuries (Emergency Provisions) Act 1939 (c. 82),
a mobility supplement under an Order in Council made under section 12 of the Social Security (Miscellaneous Provisions) Act 1977 (c. 5), or
any payment appearing to the Treasury to be of a similar kind and specified by them by order.
For the purposes of subsection (2) persons who are connected with each other are to be treated as the same person.
Plant or machinery in respect of which qualifying expenditure has been incurred is a short-life asset if—
its treatment as a short-life asset is not ruled out by section 84, and
the person incurring the expenditure elects for the plant or machinery to be treated as a short-life asset.
Treatment of plant or machinery as a short-life asset is ruled out in any of the cases listed in column 1 of the Table, unless an exception listed in column 2 applies. 1. Short-life asset treatment ruled out 2. Exception (if any) 1. The expenditure is treated as incurred for the purposes of a qualifying activity under— section 13 (use for qualifying activity of plant or machinery provided for other purposes), or section 14 (use for qualifying activity of plant or machinery which is a gift). 2. The plant or machinery is the subject of special leasing (as defined by section 19). 3. The plant or machinery is a car (as defined by section 81). The car is within section 82(4) (cars hired out to persons receiving disability allowances etc.). 4. The expenditure is long-life asset expenditure (see Chapter 10). 5. The plant or machinery is provided for leasing. The plant or machinery is a car which is within section 82(4) (cars hired out to persons receiving disability allowances etc.). The plant or machinery will be used within the designated period (as defined by section 106) for a qualifying purpose (as defined by sections 122 to 125). 6. Section 109 provides only a 10% writing-down allowance in respect of expenditure on the plant or machinery. 7. The plant or machinery is leased to two or more persons jointly in circumstances such that section 116 applies. 8. The plant or machinery is a ship. 9. The expenditure was incurred partly for the purposes of a qualifying activity and partly for other purposes (see Chapter 15). 10. The expenditure is required to be allocated to a single asset pool under section 211 (partial depreciation subsidy).
An election under section 83 must specify—
the plant or machinery which is the subject of the election,
the qualifying expenditure incurred in respect of it, and
the date on which the expenditure was incurred.
An election under section 83 must be made by notice given to the Inland Revenue—
for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;
for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.
“The relevant chargeable period” means—
the chargeable period in which the qualifying expenditure was incurred, or
if the qualifying expenditure was incurred in different chargeable periods, the first chargeable period in which any of the qualifying expenditure was incurred.
An election under section 83 is irrevocable.
All such assessments and adjustments of assessments are to be made as are necessary to give effect to the election.
Qualifying expenditure in respect of a short-life asset, if allocated to a pool, must be allocated to a single asset pool (a “short-life asset pool”).
If the final chargeable period for the short-life asset pool has not occurred before the four-year cut-off—
the pool ends at the four-year cut-off without a final chargeable period,
the available qualifying expenditure in the pool is allocated to the main pool for the first chargeable period ending after the four-year cut-off, and
the asset ceases to be a short-life asset.
In this Chapter “the four-year cut-off” means the fourth anniversary of the end of—
the chargeable period in which the qualifying expenditure was incurred on the provision of the short-life asset, or
if the qualifying expenditure was incurred in different chargeable periods, the first chargeable period in which any of the qualifying expenditure was incurred.
For the purposes of subsection (2), the final chargeable period occurs before the four-year cut-off only if it ends on or before it.
This section applies if—
plant or machinery is a short-life asset on the basis that it has been provided for leasing but will be used within the designated period for a qualifying purpose (see item 5 of the Table in section 84),
in a chargeable period ending on or before the four-year cut-off, the short-life asset begins to be used otherwise than for a qualifying purpose, and
the time when it begins to be so used falls within the first 4 years of the designated period.
If this section applies—
the short-life asset pool ends without a final chargeable period,
the available qualifying expenditure in the pool is allocated to the main pool for the chargeable period in which the asset begins to be used otherwise than for a qualifying purpose, and
the asset ceases to be a short-life asset.
If— the disposal value to be brought into account for the purposes of Chapter 5 is the market value of the asset.
a short-life asset is disposed of at less than market value,
the disposal is not one in respect of which an election is made under section 89(6), and
there is no charge to tax under Schedule E,
This section applies if, at any time before the four-year cut-off, a person (“the transferor”) disposes of a short-life asset to a connected person.
Subject to subsection (6)—
the transferor is to be treated as having sold the short-life asset to the connected person for an amount equal to the available qualifying expenditure in the short-life asset pool for the chargeable period in which the disposal occurs, and
the connected person is to be treated as having incurred qualifying expenditure of the same amount in buying the short-life asset.
Subject to subsection (6)— do not apply to the disposal.
sections 217 and 218 (restrictions on first-year and other allowances in the case of certain transactions between connected persons, to obtain a tax advantage etc.), and
sections 222 to 225 (further restrictions in the case of sale and finance leaseback),
Immediately after the disposal of the short-life asset, the connected person is to be taken to have made an election under section 83 (so that the plant or machinery is a short-life asset in his hands).
In relation to the connected person, “the four-year cut-off” means the date that would have been the four-year cut-off in relation to the transferor.
Subsections (2) and (3) apply in relation to a disposal only if— elect that they should apply.
the transferor, and
the connected person,
An election under subsection (6) must be made by notice given to the Inland Revenue no later than 2 years after the end of the chargeable period in which the disposal occurred.
“Long-life asset expenditure” means qualifying expenditure—
incurred on the provision of a long-life asset for the purposes of a qualifying activity, and
not excluded from being long-life asset expenditure by any of sections 93 to 100.
For the purposes of this Chapter “long-life asset” means plant or machinery which—
if new, can reasonably be expected to have a useful economic life of at least 25 years, and
if not new, could reasonably have been expected when new to have a useful economic life of at least 25 years.
“New” means unused and not second-hand.
The useful economic life of plant or machinery is the period—
beginning when it is first brought into use by any person for any purpose, and
ending when it is no longer used or likely to be used by anyone for any purpose as a fixed asset of a business.
If, under any of the following provisions of this Chapter, this Chapter applies to part only of the capital expenditure on plant and machinery— are to be treated for the purposes of this Act as expenditure on separate items of plant or machinery.
the part to which this Chapter applies, and
the part to which it does not,
For the purposes of subsection (1), all such apportionments are to be made as are just and reasonable.
Expenditure is not long-life asset expenditure if it is incurred on the provision of plant or machinery which is a fixture in, or is provided for use in, any building used wholly or mainly—
as a dwelling-house, hotel, office, retail shop or showroom, or
for purposes ancillary to the use referred to in paragraph (a).
In this section—
“fixture” has the meaning given by section 173(1);
“retail shop” includes any premises of a similar character where a retail trade or business, including repair work, is carried on.
anything included in the definitions of “station” and “track” in section 83 of the 1993 Act, and
any light maintenance depot within the meaning of Part I of the 1993 Act, and
anything else that would be included if in section 83 “railway” had the meaning given in section 81(2) of the 1993 Act;
Expenditure is not long-life asset expenditure if—
it is incurred before 1st January 2011 on the provision of a ship of a sea-going kind, and
each of the conditions in subsection (2) is met.
The conditions are that—
the ship is not an offshore installation,
the ship would not be an offshore installation if the activity for the carrying on of which it is, or is to be, established or maintained were carried on in or under controlled waters, and
the primary use to which ships of the same kind are put by their owners (or, if their use is made available to others, those others) is a use otherwise than for sport or recreation.
“Offshore installation” and “controlled waters” have the same meaning as in the Mineral Workings (Offshore Installations) Act 1971 (c. 61).
Expenditure is not long-life asset expenditure if it is incurred before 1st January 2011 on the provision of a railway asset used by any person wholly and exclusively for the purposes of a railway business.
“Railway asset” means—
a locomotive, tram or other vehicle, or a carriage, wagon or other rolling stock designed or adapted for use on a railway;
anything which is, or is to be, comprised in any railway station, railway track or light maintenance depot or any apparatus which is, or is to be, installed in association with such a station, track or depot.
“Railway business” means a business so far as carried on to provide a service to the public for carrying goods or passengers by means of a railway in the United Kingdom or the Channel Tunnel.
For the purposes of subsection (1), a railway asset of a kind described in subsection (2)(a) is not to be treated as used otherwise than wholly and exclusively for the purposes of a railway business merely because it is used to carry goods or passengers—
from places inside the United Kingdom to places outside the United Kingdom, or
from places outside the United Kingdom to places inside the United Kingdom.
In subsections (2) and (3), “railway” has the same meaning as in section 81(2) of the 1993 Act (“railway” includes tramways and other modes of guided transport).
In this section—
“goods” has the same meaning as in Part I of the 1993 Act;
Expenditure is not long-life asset expenditure if it is incurred on the provision of a car (as defined by section 81).
Expenditure is not long-life asset expenditure if it is—
expenditure to which the monetary limits apply, and
incurred in a chargeable period for which the relevant monetary limit is not exceeded.
The monetary limits apply to expenditure incurred by an individual for a chargeable period if—
the expenditure was incurred by him for the purposes of a qualifying activity carried on by him,
the whole of his time is substantially devoted in that period to the carrying on of that qualifying activity, and
the expenditure is not within subsection (4).
The monetary limits apply to expenditure incurred by a partnership for a chargeable period if—
all of the members of the partnership are individuals,
the expenditure was incurred by the partnership for the purposes of a qualifying activity carried on by it,
at all times throughout that period at least half the partners for the time being devote the whole or a substantial part of their time to the carrying on of that qualifying activity, and
the expenditure is not within subsection (4).
The monetary limits apply for the purposes of corporation tax to any expenditure incurred by a company for a chargeable period other than expenditure within subsection (4).
Expenditure is within this subsection if it is—
incurred on the provision of a share in plant or machinery,
treated as a result of section 538 (contribution allowances: plant and machinery) as incurred on the provision of plant or machinery, or
incurred on the provision of plant or machinery for leasing (whether or not the leasing is in the course of a trade).
The monetary limit in the case of a chargeable period of 12 months is £100,000.
If, in the case of an individual or partnership, the chargeable period is longer or shorter than 12 months, the monetary limit is the amount given by a proportional increase or reduction of £100,000.
If, in the case of a company, the chargeable period is shorter than 12 months, the monetary limit is the amount given by a proportional reduction of £100,000.
If, in a chargeable period, a company has one or more associated companies, the monetary limit for that period is— where— L is the monetary limit applicable under subsection (1) or (3), and N is the number of the associated companies.
Section 13(4) and (5) of ICTA (companies which count as associated companies for the purposes of section 13(3)) applies for the purposes of subsection (4).
The monetary limit for a chargeable period is exceeded if the total expenditure in that period that meets the conditions in subsection (2) exceeds that limit.
The conditions are that the expenditure—
is long-life asset expenditure, or would be long-life asset expenditure in the absence of section 97 (expenditure within monetary limit), and
is expenditure to which the monetary limits apply.
Subsection (4) applies if, in the case of any contract for the provision of plant or machinery, the capital expenditure which is (or is to be) incurred under the contract is (or may fall to be) treated for the purposes of this Act as incurred in different chargeable periods.
All of the expenditure falling to be incurred under the contract on the provision of the plant or machinery is to be treated for the purposes of this section as incurred in the first chargeable period in which any of the expenditure is incurred.
Long-life asset expenditure to which this section applies, if allocated to a pool, must be allocated to a class pool (“the long-life asset pool”).
This section applies to long-life asset expenditure if—
it is incurred on the provision of long-life assets wholly and exclusively for the purposes of a qualifying activity, and
it is not expenditure which is required to be allocated to a single asset pool.
The amount of the writing-down allowance to which a person is entitled for a chargeable period in respect of expenditure which is long-life asset expenditure is 6% of the amount by which AQE exceeds TDR (see Chapter 5).
Subsection (1) applies even if the long-life asset expenditure is in a single asset pool.
In the case of expenditure which is within section 107(2)(a) and (b) (overseas leasing which is not protected leasing), this section is subject to sections 110, 114 and 115 (allowances prohibited in certain cases etc.).
Subsections (3) and (4) of section 56 (proportionate increases or reductions in amount in certain cases) apply for the purposes of subsection (1) of this section as they apply for the purposes of subsection (1) of that section.
Subsection (2) applies if—
a person entitled to do so has made a Part 2 claim in respect of expenditure incurred on the provision of plant or machinery, and
the expenditure fell to be treated as long-life asset expenditure for the purposes of the claim.
If—
at any time after making the Part 2 claim, that claimant or another person makes a Part 2 claim in respect of any qualifying expenditure incurred at any time (including a time before the incurring of the expenditure to which the earlier claim relates) on the provision of the same plant or machinery, and
the expenditure to which the later claim relates— this Part has effect in relation to the later claim as if the expenditure to which it relates were long-life asset expenditure.
would not (but for this subsection) be treated for the purposes of the later claim as long-life asset expenditure, and
is not prevented from being long-life asset expenditure by any of sections 93 to 96,
A person makes a Part 2 claim in respect of any expenditure if he—
makes a tax return in which the expenditure is taken into account in determining his available qualifying expenditure for the purposes of this Part;
gives notice of an amendment of a tax return which provides for the expenditure to be so taken into account;
makes a claim in any other way for the expenditure to be so taken into account.
This section applies if—
section 102 (writing-down allowances at 6%) has had effect in relation to any long-life asset expenditure incurred by a person (“the taxpayer”),
any disposal event occurs in relation to the long-life asset,
the disposal value to be brought into account by the taxpayer would (but for this section) be less than the notional written-down value of the long-life asset, and
the disposal event is part of, or occurs as a result of, a scheme or arrangement the main purpose or one of the main purposes of which is the obtaining by the taxpayer of a tax advantage under this Part.
The disposal value that the taxpayer must bring into account is the notional written-down value of the long-life asset.
The notional written-down value is— where— QE is the taxpayer’s expenditure on the plant or machinery that is qualifying expenditure, and A is the total of all allowances which could have been made to the taxpayer in respect of that expenditure if— that expenditure had been the only expenditure that had ever been taken into account in determining his available qualifying expenditure, that expenditure had not been prevented by the application of a monetary limit from being long-life asset expenditure, and all allowances had been made in full.
In this Chapter—
“leasing” includes letting a ship or aircraft on charter or letting any other asset on hire, and
references to a lease include a sub-lease (and references to a lessor or lessee are to be read accordingly).
Plant or machinery is used for overseas leasing if it is used for the purpose of being leased to a person who—
is not resident in the United Kingdom, and
does not use the plant or machinery exclusively for earning profits chargeable to tax.
In this Chapter “profits chargeable to tax”—
includes profits chargeable under section 830(4) of ICTA (profits from exploration and exploitation of the seabed etc.), but
excludes profits arising to a person who, under double taxation arrangements, is afforded or is entitled to claim any relief from the tax chargeable on those profits.
“Double taxation arrangements” means arrangements specified in an Order in Council making any such provisions as are referred to in section 788 of ICTA.
“Protected leasing” of plant or machinery means—
short-term leasing of the plant or machinery (as defined in section 121), or
if the plant or machinery is a ship, aircraft or transport container, the use of the ship, aircraft or transport container for a qualifying purpose under section 123 or 124 (letting on charter to UK resident etc.).
In this Chapter “qualifying activity” includes (subject to any provision to the contrary) any activity listed in section 15(1) even if any profits or gains from it are not chargeable to tax.
Subject to subsection (2), the designated period, in relation to expenditure incurred by a person on the provision of plant or machinery, is the period of 10 years beginning with the date on which he first brought the plant or machinery into use.
If the person who incurred the expenditure ceases to own the plant or machinery before the end of the 10 year period, the designated period ends on the date when he ceases to own it.
For the purposes of subsection (2), a person is to be treated as continuing to own plant or machinery so long as it is owned by a person who—
is connected with him, or
acquired it from him as a result of one or more disposals on the occasion of which, or each of which, the qualifying activity carried on by the person making the disposal was treated as continuing under one of the relevant provisions of ICTA.
“The relevant provisions of ICTA” means section 113(2) or 114(1) (effect of change in persons carrying on a trade etc.).
Qualifying expenditure to which this section applies, if allocated to a pool, must be allocated to a class pool (“the overseas leasing pool”).
This section applies to qualifying expenditure if—
it is incurred on the provision of plant or machinery for leasing,
the plant or machinery is at any time in the designated period used for overseas leasing which is not protected leasing, and
the expenditure is not—
long-life asset expenditure, or
expenditure that is required to be allocated to a single asset pool.
This section applies if—
a person who has incurred qualifying expenditure which has been allocated to an overseas leasing pool disposes of the plant or machinery to a connected person,
the disposal is not an occasion on which the qualifying activity is treated as continuing under any of the relevant provisions of ICTA, and
a disposal value is required to be brought into account on that occasion under this Part.
The disposal value to be brought into account is—
the market value of the plant or machinery at the time of the disposal, or
if less, the qualifying expenditure incurred by the person disposing of the plant or machinery.
The person acquiring the plant or machinery is to be treated for the purposes of this Part as having incurred expenditure on its provision of an amount equal to the disposal value given by subsection (2).
“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).
The amount of the writing-down allowance to which a person is entitled for a chargeable period in respect of expenditure to which this section applies is 10% of the amount by which AQE exceeds TDR (see Chapter 5).
This section applies to expenditure incurred on the provision of plant or machinery for leasing if—
the plant or machinery is at any time in the designated period used for overseas leasing which is not protected leasing, and
the expenditure is not long-life asset expenditure.
Subsection (2) applies to expenditure even if the expenditure is in a single asset pool.
Subsections (3) and (4) of section 56 (proportionate increases or reductions in amount in certain cases) apply for the purposes of subsection (1) of this section as they apply for the purposes of subsection (1) of that section.
A person is not entitled to any writing-down or balancing allowances in respect of qualifying expenditure which is within subsection (2).
Expenditure is within this subsection if—
it is incurred on the provision of plant or machinery for leasing,
the plant or machinery is at any time in the designated period used for overseas leasing which is not protected leasing,
the plant or machinery is used otherwise than for a qualifying purpose (see sections 122 to 125), and
the lease is within any of the items in the list below. 1. The lease is expressed to be for a period of more than 13 years. 2. The lease, or a separate agreement, provides for— extending or renewing the lease, or the grant of a new lease,making it possible for the plant or machinery to be leased for a period of more than 13 years. 3. There is a period of more than one year between the dates on which any two consecutive payments become due under the lease. 4. Any payments are due under the lease or a collateral agreement other than periodical payments. 5. If payments due under the lease or a collateral agreement are expressed as monthly amounts due over a period, any payment due for that period is not the same as any of the others. But, for this purpose, ignore variations made under the terms of the lease which are attributable to changes in— the rate of corporation tax or income tax, the rate of capital allowances, any rate of interest where the changes are linked to changes in the rate of interest applicable to inter-bank loans, or the premiums charged for insurance of any description by a person who is not connected with the lessor or the lessee. 6. The lessor or a person connected with the lessor will, or may in certain circumstances, become entitled at any time to receive from the lessee or any other person a payment, other than a payment of insurance money, which is— of an amount determined before the expiry of the lease, and referable to a value of the plant or machinery at or after the expiry of the lease. For this purpose, it does not matter whether the payment relates to a disposal of the plant or machinery.
In items 4 and 5 of the list “collateral agreement” means an agreement which might reasonably be construed as being collateral to the lease.
If— the following provisions of this section have effect in relation to the person who is the owner of the plant or machinery when it is first so used.
expenditure incurred by a person in providing plant or machinery has qualified for a first-year allowance or a normal writing-down allowance, and
at any time in the designated period, the plant or machinery is used for overseas leasing which is not protected leasing,
For the chargeable period in which the plant or machinery is first used as described in subsection (1)(b), the owner is—
liable to a balancing charge of an amount given by subsection (4), and
required to bring into account a disposal value of an amount given by that subsection.
For the chargeable period following that in which the plant or machinery is first used as described in subsection (1)(b), an amount given by subsection (4) is to be allocated to whatever pool is appropriate for plant or machinery which is of that description and is provided for leasing and used for overseas leasing.
The amounts are— The balancing charge The amount, if any, by which F + N exceeds T, where— F is the amount of any first-year allowance made in respect of the qualifying expenditure referred to in subsection (1)(a) (“E”), N is the total of any normal writing-down allowances made in respect of E for the relevant chargeable periods, and T is the total of the allowances that could have been made for the relevant chargeable periods if no first-year allowance or normal writing-down allowances had been or could have been made. The disposal value The amount, if any, by which E exceeds (F + N), where E, F and N have the meaning given in relation to the amount of the balancing charge. The amount to be allocated to the pool The aggregate of the balancing charge and the disposal value.
For the purpose of calculating N, the normal writing-down allowances that were made in respect of expenditure on an item of plant or machinery are to be determined as if that item were the only item of plant or machinery in relation to which Chapter 5 had effect.
“The relevant chargeable periods” means the chargeable period in which the qualifying expenditure was incurred and any subsequent chargeable period up to and including the one in which the plant or machinery was first used as described in subsection (1)(b).
Section 111 applies with the modifications in subsections (2) to (4) in a case in which—
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),
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
any of the connected persons is a person to whom—
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
a balancing allowance has been made in respect of such expenditure without a first-year allowance or normal writing-down allowance having been claimed.
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).
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.
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.
“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).
If the plant or machinery referred to in section 111 is a ship—
no allowance is to be made in respect of the ship under section 131(3) (postponed allowances) for the first chargeable period of overseas use or any subsequent chargeable period,
nothing in section 132(2) (disposal events and single ship pool) restricts the operation of section 111, and
the amount of any first-year or writing-down allowance in respect of the ship which has been postponed under section 130 and not made is to be allocated to a long-life asset pool or an overseas leasing pool for the chargeable period following the first chargeable period of overseas use.
“The first chargeable period of overseas use” means the chargeable period in which the plant or machinery is first used for overseas leasing which is not protected leasing.
If— the following provisions have effect in relation to the person owning the plant or machinery immediately before that event.
a first-year allowance, a writing-down allowance or a balancing allowance has been made in respect of expenditure incurred in providing plant or machinery, and
at any time in the designated period, an event occurs such that the expenditure is brought within section 110(2) (cases where allowances are prohibited),
For the chargeable period in which the event occurs, the owner is—
liable to a balancing charge of an amount equal to A — R, and
required to bring into account a disposal value of an amount equal to E − (A − R).
For the purposes of subsection (2)— A is the amount of any allowances within subsection (1)(a), R is any amount previously recovered under section 111 or 112 (recovery of excess allowances), and E is the amount of the expenditure referred to in subsection (1)(a).
For the purpose of calculating A, the amount of the allowances made in respect of expenditure on an item of plant or machinery is to be determined as if that item were the only item of plant or machinery in relation to which Chapter 5 had effect.
Section 114 applies with the modifications in subsection (2) in a case in which—
an amount falls to be treated as a balancing charge under that section,
the person on whom the balancing charge is to be imposed acquired the plant or machinery in question as a result of a transaction between connected persons (or a series of transactions each of which was between connected persons),
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
a first-year allowance, a writing-down allowance or a balancing allowance in respect of expenditure on the provision of that plant or machinery has been made to any of those persons.
For the purpose of calculating the balancing charge—
A is the amount of any allowances within subsection (1)(d),
any consideration paid or received on a disposal of the plant or machinery between the connected persons is to be disregarded, and
if a balancing allowance or a balancing charge has been made in respect of any of the transactions, A is to be adjusted in a just and reasonable manner.
“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).
This section applies if—
plant or machinery is leased to two or more persons jointly,
at least one of them is a person who—
is not resident in the United Kingdom, and
does not use the plant or machinery exclusively for earning profits chargeable to tax, and
the leasing is not protected leasing.
Subsection (3) applies if, at any time when the plant or machinery is leased as described in subsection (1), the lessees use the plant or machinery for the purposes of a qualifying activity or activities but not for leasing.
The expenditure on the provision of the plant or machinery is to be treated as not subject to sections 107, 109 and 110 if, and to the extent to which, it appears that the profits of the qualifying activity or activities will be chargeable to tax throughout—
the designated period, or
if shorter, the period of the lease.
Subsection (5) applies if, under subsection (3), part of the expenditure is treated as not subject to section 107, 109 or 110.
Whether or not the plant or machinery continues to be leased as described in subsection (1), Chapters 5 (allowances and charges) and 10 (long-life assets) and this Chapter have effect as if—
the part of the expenditure that is not subject to section 107, 109 or 110 were expenditure on the provision of a separate item of plant or machinery, and
the rest were expenditure which has been incurred on the provision of another item of plant or machinery (and which is subject to those sections).
All such apportionments are to be made as are necessary as a result of subsection (5).
If— sections 111 and 112 (recovery of excess allowances) apply as if the plant or machinery or (as the case may be) the separate item of plant or machinery referred to in section 116(5)(a) had at that time begun to be used for overseas leasing which is not protected leasing.
expenditure is incurred on the provision of plant or machinery which is leased as described in section 116(1),
the whole or a part of the expenditure has qualified for a normal writing-down allowance under section 116(3),
at any time in the designated period while the plant or machinery is so leased, no lessee uses the plant or machinery for the purposes of a qualifying activity or activities the profits of which are chargeable to tax, and
section 114 (recovery of prohibited allowances) does not apply at that time and has not applied at any earlier time,
If— sections 111 and 112 (recovery of excess allowances) apply as if the plant or machinery (and not any separate item of plant or machinery referred to in section 116(5)(a)) had at that time begun to be used for overseas leasing which is not protected leasing.
the whole or a part of any expenditure has qualified for—
a normal writing-down allowance otherwise than as a result of section 116(3), or
a first-year allowance,
subsequently, but during the designated period, the plant or machinery is leased as described in section 116(1),
at any time in the designated period while the plant or machinery is so leased, no lessee uses the plant or machinery for the purposes of a qualifying activity or activities the profits of which are chargeable to tax, and
section 114 (recovery of prohibited allowances) does not apply at that time and has not applied at any earlier time,
Subsections (4) and (5) apply if—
expenditure is incurred on the provision of plant or machinery which is leased as described in section 116(1),
the whole or a part of the expenditure has qualified for a normal writing-down allowance under section 116(3),
at the end of the designated period, the plant or machinery is leased as described in section 116(1) but subsection (1) has not had effect, and
it appears that the extent to which the plant or machinery has been used for the purposes of a qualifying activity or activities the profits of which are chargeable to tax is less than the extent of such use taken into account in determining the amount of the expenditure which qualified for a normal writing-down allowance.
Sections 111 and 112 (recovery of excess allowances) apply as if—
a part of the expenditure corresponding to the reduction in the extent of use referred to in subsection (3)(d) were expenditure on the provision of a separate item of plant or machinery, and
the separate item of plant or machinery had been used, on the last day of the designated period, for overseas leasing which is not protected leasing.
Any disposal value subsequently brought into account under this Part in respect of the plant or machinery must be apportioned by reference to the extent of its use (determined at the end of the designated period) for the purposes of a qualifying activity or activities the profits of which are chargeable to tax.
If an apportionment is made under subsection (5), section 116(6) does not apply.
If— a claim for a writing-down allowance which takes account of that expenditure must be accompanied by a certificate.
expenditure is incurred on the provision of plant or machinery, and
before the expenditure has qualified for a normal writing-down allowance, the plant or machinery is used for overseas leasing which is protected leasing,
The certificate must specify—
the description of protected leasing,
the person to whom the plant or machinery has been leased, and
if the certificate is given by reference to a chargeable period, all the items of plant or machinery (if more than one) relevant to that period.
Subsection (1) applies, for the purposes of claims to first-year allowances, as if the references to a normal writing-down allowance and to a writing-down allowance included a first-year allowance.
But nothing in subsection (3) prevents subsection (1) from continuing to apply if the use for protected leasing occurs after the expenditure has qualified for one allowance and before it qualifies for another.
If— the person who then owns the plant or machinery must give notice of the fact to the Inland Revenue.
any expenditure on plant or machinery has qualified for a first-year allowance or a normal writing-down allowance, and
the plant or machinery is subsequently used at any time in the designated period for overseas leasing which is not protected leasing,
The notice must specify—
the person who is not resident in the United Kingdom to whom the plant or machinery has been leased, and
if the notice is given by reference to a chargeable period, all the items of plant or machinery (if more than one) relevant to that period.
The notice must be given—
no later than 3 months after the end of the chargeable period in which the plant or machinery is first used for overseas leasing which is not protected leasing, or
if at the end of the 3 months the person required to give the notice does not know and cannot reasonably be expected to know that the plant or machinery is being so used, within 30 days of coming to know of it.
If expenditure is incurred on the provision of plant or machinery which is leased as described in section 116(1) (joint lessees: mitigation of regime), the lessor must give notice to the Inland Revenue.
A notice under subsection (1) must specify—
the names and addresses of the persons to whom the asset is jointly leased,
the part of the expenditure properly attributable to each of them, and
which of them (so far as the lessor knows) is resident in the United Kingdom.
If circumstances occur such that section 117(1) or (2) (recovery of allowances) applies, the person who is then the lessor must give notice of the fact to the Inland Revenue.
A notice under subsection (3) must specify—
any of the joint lessees who is not resident in the United Kingdom to whom the plant or machinery has been leased, and
if it is given by reference to a chargeable period, all the items of plant or machinery (if more than one) relevant to that period.
A notice under this section must be given—
no later than 3 months after the end of the chargeable period in which the plant or machinery is first leased as described in section 116(1) or (as the case may be) in which the circumstances referred to in subsection (3) occur, or
if at the end of the 3 months the person required to give the notice does not know and cannot reasonably be expected to know that the plant or machinery is being so used, within 30 days of coming to know of it.
Leasing of plant or machinery is short-term leasing if—
the number of consecutive days for which it is leased to the same person will normally be less than 30, and
the total number of days for which it is leased to that person in any period of 12 months will normally be less than 90.
Leasing of plant or machinery is also short-term leasing if—
the number of consecutive days for which the plant or machinery is leased to the same person will not normally exceed 365, and
the total length of the periods for which it is leased in any consecutive period of 4 years within the designated period to lessees in circumstances not falling within section 125(4) (other qualifying purposes: non-leasing use) will not exceed 2 years.
If any plant or machinery is leased as a number of items which— all items in the group may be treated as used for short-term leasing if substantially the whole of the items in the group are so used.
form part of a group of items of the same or a similar description, and
are not separately identifiable,
For the purposes of subsections (1) and (2) persons who are connected with each other are to be treated as the same person.
Plant or machinery is used for a qualifying purpose at any time when any of the persons listed in subsection (2) uses it for short-term leasing (as defined by section 121).
The persons are—
the person (“X”) who incurred expenditure on the provision of the plant or machinery;
a person who is connected with X;
a person who acquired the plant or machinery from X as a result of— the qualifying activity carried on by the person making the disposal was treated as continuing under one of the relevant provisions of ICTA;
a disposal on the occasion of which, or
two or more disposals on the occasion of each of which,
a person to whom the plant or machinery is leased and who is resident in the United Kingdom;
a person to whom the plant or machinery is leased, who is carrying on a qualifying activity in the United Kingdom and who uses the plant or machinery for the short-term leasing in the course of that activity.
“The relevant provisions of ICTA” means section 113(2) or 114(1) (effect of change in persons carrying on a trade etc.).
A ship is used for a qualifying purpose at any time when it is let on charter in the course of a trade which consists of or includes operating ships by a person who is—
resident in the United Kingdom or carries on the trade there, and
responsible for navigating and managing the ship throughout the period of the charter and for defraying—
all expenses in connection with the ship throughout that period, or
substantially all such expenses other than those directly incidental to a particular voyage or to the employment of the ship during that period.
Subsection (1) applies, with the necessary modifications, in relation to aircraft as it applies in relation to ships.
For the purposes of subsection (1)(b) a person is responsible for something if he—
is responsible as principal, or
appoints another person to be responsible in his place.
Subsections (1) and (2) do not apply if the main object, or one of the main objects— was to obtain a writing-down allowance determined without regard to section 109 (writing-down allowances at 10%) in respect of expenditure incurred by any person on the provision of the ship or aircraft.
of the letting of the ship or aircraft on charter,
of a series of transactions of which the letting of the ship or aircraft on charter was one, or
of any of the transactions in such a series,
A transport container is used for a qualifying purpose at any time when it is leased in the course of a trade which is carried on by a person who— and either of the conditions given below is met.
is resident in the United Kingdom, or
carries on the trade there,
The first condition is that—
the person’s trade consists of or includes the operation of ships or aircraft, and
the container is at other times used by that person in connection with the operation of the ships or aircraft.
The second condition is that the container is leased under a succession of leases to different persons who are not, or most of whom are not, connected with each other.
Plant or machinery is used for a qualifying purpose at any time when subsection (2) or (4) applies.
This subsection applies if any of the persons listed in subsection (3) uses the plant or machinery for the purpose of a qualifying activity without leasing it.
The persons are—
the person (“X”) who incurred expenditure on the provision of the plant or machinery;
a person who is connected with X;
a person who acquired the plant or machinery from X as a result of— the qualifying activity carried on by the person making the disposal was treated as continuing under one of the relevant provisions of ICTA.
a disposal on the occasion of which, or
two or more disposals on the occasion of each of which,
This subsection applies if—
a lessee uses the plant or machinery for the purposes of a qualifying activity without leasing it, and
if he had incurred expenditure on the provision of the plant or machinery at that time, the expenditure would have fallen to be included, in whole or in part, in his available qualifying expenditure for a chargeable period.
“The relevant provisions of ICTA” means section 113(2) or 114(1) (effect of change in persons carrying on a trade etc.).
In this Chapter “normal writing-down allowance” means a writing-down allowance of an amount determined without regard to sections 102 and 109 (reduced rates).
In this Chapter any reference, in relation to any person, to expenditure having qualified for a normal writing-down allowance is to—
the expenditure, or part of it, having fallen to be included in that person’s available qualifying expenditure for any chargeable period, and
that available qualifying expenditure being expenditure which is not subject to section 102 or 109.
Any reference in this Chapter to a person’s expenditure having qualified for a first-year allowance is to such an allowance having fallen to be made in respect of the whole or any part of the expenditure.
Qualifying expenditure incurred on the provision of a ship for the purposes of a qualifying activity, if allocated to a pool, must be allocated to a single asset pool (a “single ship pool”).
Subsection (1) is subject to the exceptions given in section 128 and any election under section 129 to use the appropriate non-ship pool.
In this Chapter “the appropriate non-ship pool”, in relation to a ship, means the pool to which the expenditure incurred on the provision of the ship would be allocated, or would have been allocated, apart from this Chapter.
The expenditure is not to be allocated to a single ship pool if the ship is provided for leasing unless—
the ship is not used for overseas leasing at any time in the designated period, or if it is, is used only for protected leasing, and
it appears that the ship will be used for a qualifying purpose in the designated period and will not be used for any other purpose at any time in that period.
The expenditure is not to be allocated to a single ship pool if the qualifying activity for the purposes of which the ship is provided is special leasing of plant or machinery.
In subsection (1) “leasing”, “overseas leasing”, “protected leasing”, “qualifying purpose” and “designated period” have the same meaning as in Chapter 11 (overseas leasing).
A person who has incurred qualifying expenditure on the provision of a ship may, by an election made for a chargeable period, allocate to the appropriate non-ship pool—
all or a part of any qualifying expenditure that would otherwise be allocated to a single ship pool, or
all or a part of the available qualifying expenditure in a single ship pool.
An election under this section must be made by notice given to the Inland Revenue—
for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;
for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.
“The relevant chargeable period” means the chargeable period for which the election is made.
A person who is entitled to a first-year allowance for a chargeable period in respect of qualifying expenditure on the provision of a ship may, by notice, postpone all or part of the allowance.
A person who is entitled to a writing-down allowance for a chargeable period in respect of qualifying expenditure allocated to a single ship pool may, by notice, postpone all or part of the allowance.
A notice under this section must specify the amount postponed.
A notice under this section must be given to the Inland Revenue—
for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;
for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.
“The relevant chargeable period” means the chargeable period for which the person is entitled to the allowance.
If a person entitled to a first-year allowance in respect of qualifying expenditure on the provision of a ship claims the allowance in respect of part of the expenditure, subsection (1) applies to the allowance claimed.
If a person entitled to a writing-down allowance in respect of qualifying expenditure allocated to a single ship pool requires the allowance to be reduced to a specified amount, subsection (2) applies to the allowance as so reduced.
If a person gives notice in respect of a chargeable period under section 130—
the allowance is withheld or withdrawn to the extent that it is postponed, but
sections 57 to 59 (calculation of available qualifying expenditure) apply as if the allowance had been made to the person without any postponement.
On making a claim, the person is entitled to have all or part of a postponed first-year allowance made to him as a first-year allowance for one or more subsequent chargeable periods in which he is carrying on the qualifying activity.
On making a claim, the person is entitled to have all or part of a postponed writing-down allowance made to him as a writing-down allowance for one or more subsequent chargeable periods in which he is carrying on the qualifying activity.
The total amount of any first-year allowances made under subsection (2) or writing-down allowances made under subsection (3) must not exceed the amount of the postponed allowance in question.
A writing-down allowance made under subsection (3) is ignored for the purposes of section 59 (unrelieved qualifying expenditure).
The fact that a postponed writing-down allowance is claimed for a chargeable period does not affect entitlement to, or the amount of, any other writing-down allowance to which the person is otherwise entitled for that chargeable period.
A postponed allowance is not, merely because of the postponement, included in the reference in section 403ZB(2) of ICTA (group relief) to an allowance or amount carried forward from an earlier period.
A person is required to bring a disposal value into account in a single ship pool if the ship—
is provided for leasing, and
begins to be used otherwise than for a qualifying purpose within the first 4 years of the designated period.
If any disposal event (including one under subsection (1)) occurs in relation to a single ship pool—
the available qualifying expenditure in the single ship pool is allocated, for the chargeable period in which the event occurs, to the appropriate non-ship pool,
the disposal value must be brought into account as a disposal value for that chargeable period in the appropriate non-ship pool, and
the single ship pool ends without a final chargeable period and without any liability to a balancing charge arising.
Subsections (1) and (2) apply even if, as a result of an election under section 129, some of the qualifying expenditure on the provision of the ship has been allocated to the appropriate non-ship pool.
In subsection (1) “leasing”, “qualifying purpose” and “designated period” have the same meaning as in Chapter 11 (overseas leasing).
This section applies if—
a person has incurred qualifying expenditure on the provision of a ship for the purposes of a qualifying activity, and
the ship ceases to be owned by the person without having been brought into use for the purposes of the qualifying activity.
Any writing-down allowances that have previously been made in respect of qualifying expenditure in the single ship pool (or which have been postponed) must be withdrawn.
The amount of any writing-down allowances withdrawn under subsection (2) is allocated, for the chargeable period in which the person ceases to own the ship, to the appropriate non-ship pool.
Any adjustments required by this section are in addition to any adjustments required under section 132 (disposal events and single ship pool).
Sections 135 to 156 enable a balancing charge that arises when there is a disposal event in respect of a ship to be deferred and attributed to qualifying expenditure on another ship.
In this Chapter “the deferment rules” means sections 135 to 156.
A person (“the shipowner”) who is liable to a balancing charge for a chargeable period may claim deferment of all or part of the charge if—
in the chargeable period there is a disposal event (“the relevant disposal event”) in respect of a ship (“the old ship”),
the old ship—
was provided for the purposes of a qualifying activity carried on by the shipowner, and
was owned by the shipowner at some time in the chargeable period, and
the conditions in section 136 are met.
The amount which may be deferred is subject to the limit in section 138.
For income tax purposes, a claim for deferment must be made on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends.
“The relevant chargeable period” means the chargeable period for which the shipowner is liable to the balancing charge.
For corporation tax purposes, Part IX of Schedule 18 to FA 1998 applies in relation to the making of a claim for deferment as it applies in relation to the making of a claim for an allowance.
The conditions referred to in section 135(1)(c) are that—
the relevant disposal event is of a kind mentioned in section 61(1)(a) to (d) (cessation of ownership, loss, abandonment, destruction etc. of ship),
the old ship was a qualifying ship immediately before the relevant disposal event,
the shipowner has not incurred a loss in respect of the qualifying activity for the chargeable period for which he is liable to the balancing charge, and
no amount in respect of the old ship has been allocated to—
the overseas leasing pool,
a single asset pool under section 206 (plant or machinery provided or used partly for purposes other than those of the qualifying activity),
a single asset pool under section 211 (payment of partial depreciation subsidy), or
a pool for a qualifying activity consisting of special leasing.
A claim for deferment is given effect by allocating the amount deferred, for the chargeable period in respect of which the claim is made, to the appropriate non-ship pool.
The amount deferred must not exceed the smallest of the following amounts—
the amount of any balancing charge which, if the claim for deferment had not been made, would have been made for the chargeable period for which deferment is claimed in the appropriate non-ship pool;
the amount given by section 139 (amount taken into account in respect of the old ship);
the amount which is, or is expected to be, the amount of expenditure on new shipping incurred—
by the shipowner or, if the shipowner is a company, by another company which is a member of the same group at the time when the expenditure is incurred, and
within the period of 6 years beginning with the relevant disposal event;
the amount of the shipowner’s profits or income from the qualifying activity for the chargeable period for which deferment is claimed.
In determining profits or income for the purposes of subsection (1)(d)—
any other amounts deferred under section 135 are to be taken into account, and
any amounts brought forward under section 385 or 393 of ICTA (losses) are to be disregarded.
The amount taken into account in respect of the old ship for the purposes of section 138(1)(b) is—
amount A, if no election has been made under section 129 (election to use appropriate non-ship pool) in respect of any of the qualifying expenditure incurred on the provision of the ship, or
amount B, in any other case.
Amount A is the amount which falls to be brought into account as a disposal value in the appropriate non-ship pool under section 132(2)(b) as a result of the relevant disposal event, less the available qualifying expenditure allocated to the appropriate non-ship pool under section 132(2)(a).
Amount B is— where— DV is the amount of the disposal value required to be brought into account in respect of the old ship, QE is all the qualifying expenditure incurred in respect of the old ship, WDA is the maximum amount of any writing-down allowances which (on the assumptions in subsection (4)) could have been made in respect of that qualifying expenditure for chargeable periods up to (but not including) the one in respect of which the claim for deferment is made, and FYA is the total of any first-year allowances actually made or postponed in respect of the old ship.
The assumptions are that—
all the qualifying expenditure in respect of the old ship is (and has always been) allocated to the appropriate non-ship pool, and
no other qualifying expenditure has been allocated to that pool.
If an election is made under section 129 (election to use appropriate non-ship pool) after the determination under this section of the amount taken into account in respect of the old ship, the amount is, and is treated as always having been, amount B and not amount A.
The shipowner may, by notice to the Inland Revenue, attribute all or part of an amount deferred under section 135 to expenditure on new shipping.
An amount attributed under this section is attributed to an equal amount of the expenditure on new shipping.
Subsection (1) is subject to subsections (4) and (5) and section 141 (deferred amounts attributed to earlier expenditure first).
Subsection (1) applies only if the expenditure on new shipping is incurred—
by the shipowner or, if the shipowner is a company, by another company which is a member of the same group at the time when the expenditure is incurred, and
within the period of 6 years beginning with the relevant disposal event.
An amount may be attributed to expenditure on new shipping only to the extent that amounts have not already been attributed to it under this section.
A notice given in respect of expenditure incurred by another company does not have effect unless the other company joins the shipowner in giving it.
No part of an amount deferred under section 135 is to be attributed to the whole or a part of any expenditure on new shipping (“the current expenditure”) if there is other expenditure (“the earlier expenditure”) which— unless the condition in subsection (2) is met in relation to the earlier expenditure.
was incurred before the current expenditure but at the same time as or after the relevant disposal event,
was incurred by the shipowner or, if the shipowner is a company, by another company which was a member of the same group at the time the earlier expenditure was incurred, and
is expenditure on new shipping, or would be treated as such but for an election under section 129 (election to use appropriate non-ship pool),
The condition is that—
amounts have been attributed to all the earlier expenditure under section 140, and
the attributions have been made in the case of the amount deferred and any other amounts deferred under section 135 as a result of disposal events occurring at the same time as or before the relevant disposal event.
The shipowner may, by notice, vary an attribution under section 140 (notice attributing deferred amounts to new expenditure).
The notice must be given to the Inland Revenue on or before the time limit for the shipowner to make a claim for deferment in respect of the relevant chargeable period.
For the time limit for making a claim for deferment, see section 135(3) to (5).
For the purposes of subsection (2), it is to be assumed that—
the shipowner is liable to a balancing charge for the relevant chargeable period, and
a claim for deferment of that balancing charge can be made for the relevant chargeable period.
“The relevant chargeable period” means the earliest chargeable period in which expenditure to which the variation relates is incurred.
If the person to whose expenditure the notice relates is not the shipowner, a notice under subsection (1) does not have effect unless the person joins the shipowner in giving it.
This section applies if a notice is given under section 140 attributing an amount to expenditure on new shipping.
The amount must be brought into account as a disposal value—
for the chargeable period in which the expenditure is incurred, and
in the single ship pool to which the expenditure is allocated.
This section applies if—
an amount has been deferred under section 135, and
circumstances arise in which any part of the amount ceases (otherwise than by being attributed) to be attributable.
The shipowner is assumed not to have been entitled to defer so much of the amount as ceases to be attributable.
For the purposes of this section an amount is attributable if it may be attributed to expenditure on new shipping in accordance with section 140.
This section applies if—
an amount has been deferred under section 135, and
circumstances arise that require the shipowner to be treated as if he was not entitled to defer all or part of the amount.
The shipowner must give notice of the fact to the Inland Revenue, specifying the circumstances.
The notice must be given no later than 3 months after the end of the chargeable period in which the circumstances first arise.
An assessment to tax chargeable as a result of the circumstances may be made at any time in the period which—
begins when those circumstances arise, and
ends 12 months after the shipowner gives notice of them to the Inland Revenue.
Subsection (4) applies in spite of any limitation on the time for making assessments.
For the purposes of the deferment rules, expenditure on the provision of a ship is expenditure on new shipping if the conditions in subsection (3) are met.
Subsection (1) is subject to sections 147 to 150.
The conditions are that—
the expenditure is qualifying expenditure incurred by a person wholly and exclusively for the purposes of a qualifying activity carried on by him,
when the expenditure is incurred, it appears that the ship will—
be brought into use for the purposes of the qualifying activity as a qualifying ship, and
continue to be a qualifying ship for at least 3 years after that, and
the expenditure is allocated to a single ship pool.
Expenditure on the provision of a ship is not expenditure on new shipping if the person who incurred the expenditure—
has already owned the ship in the period of 6 years ending with the time when he first owns it as a result of incurring the expenditure, or
was connected at a material time with a person who owned the ship at any time during that period.
For this purpose a material time is—
the time when the expenditure was incurred, or
any earlier time in the 6 year period beginning with the relevant disposal event.
Expenditure on the provision of a ship is not expenditure on new shipping if the object, or one of the main objects, of— was to secure the deferment of a balancing charge under section 135.
the transaction by which the ship was provided for the purposes of a qualifying activity carried on by the person who incurred the expenditure,
any series of transactions of which that transaction was one, or
any transaction in such a series,
Expenditure on the provision of a ship is not, and is treated as never having been, expenditure on new shipping if—
at a time during the period mentioned in subsection (2), the ship is not a qualifying ship,
the expenditure is allocated to a pool as a result of an election under section 129 (election to use appropriate non-ship pool), or
section 107 applies in relation to the expenditure (overseas leasing).
The period referred to in subsection (1)(a) is—
the period of 3 years beginning with the time when the ship is first brought into use for the purposes of a qualifying activity carried on—
by the person (“A”) who incurred the expenditure, or
if earlier, by a person connected with A, or
if shorter, the period beginning with that time and ending when neither A nor a person connected with A owns the ship.
Expenditure on the provision of a ship is not, and is treated as never having been, expenditure on new shipping if—
it is incurred by a company which is a member of the same group as the shipowner at the time when the expenditure is incurred, and
subsection (2) or (4) applies.
This subsection applies (subject to subsection (3)) if—
the ship ceases to be owned by the company before it has been brought into use for the purposes of a qualifying activity carried on by the company, or
a disposal event occurs in respect of the ship within 3 years of its first being brought into use for the purposes of a qualifying activity carried on by the company.
But subsection (2) does not apply if the event which would otherwise result in that subsection applying is, or is the result of, the total loss of the ship or irreparable damage to it.
This subsection applies if—
after the expenditure is incurred, there is a time when the company and the shipowner are not members of the same group, and
if the ship is brought into use for the purposes of a qualifying activity carried on by the company, that time is within 3 years of the ship first being so brought into use.
A time falling after the total loss of the ship or irreparable damage to it is to be disregarded for the purposes of subsection (4).
In this section “irreparable damage”, in relation to a ship, means damage that puts it in a condition in which it is impossible, or not commercially worthwhile, to undertake the repairs required for restoring it to its previous use.
For the purposes of the deferment rules, a ship is a qualifying ship if it is—
of a sea-going kind, and
registered as a ship with a gross tonnage of 100 tons or more in a register of shipping established and maintained under the law of any country or territory.
This is subject to sections 152 to 154.
This section applies if the relevant disposal event is, or results from—
the total loss of the old ship, or
damage to the old ship that puts it in a condition in which it is impossible, or not commercially worthwhile, to undertake the repairs required for restoring it to its previous use.
A registered ship may be a qualifying ship for the purposes of— even if it is not registered as a ship with a gross tonnage of 100 tons or more.
section 136(b) (further conditions for deferment), or
sections 146(3)(b) and 149(1)(a) (expenditure on new shipping),
In subsection (2) “registered ship” means a ship registered in a register of shipping established and maintained under the law of any country or territory.
A ship is not a qualifying ship if the primary use to which ships of the same kind as that ship are put— is use for sport or recreation.
by the persons who own them, or
by others to whom they are made available,
A ship is not a qualifying ship at any time when—
it is an offshore installation, or
it would be such an installation if the activity for which it is to be established or maintained were carried on in or under controlled waters.
“Offshore installation” and “controlled waters” have the same meaning as in the Mineral Workings (Offshore Installations) Act 1971 (c. 61).
If— the ship is not a qualifying ship after that time.
a person (“A”) has incurred expenditure on the provision of a ship, and
there is a time in the qualifying period, but more than 3 months after the beginning of that period, when the ship is not registered in a relevant register,
The qualifying period is—
the period of 3 years beginning with the time when the ship is first brought into use for the purposes of a qualifying activity carried on—
by A, or
if earlier, by a person connected with A, or
if shorter, the period beginning with that time and ending when neither A nor a person connected with A owns the ship.
In determining the qualifying period for the old ship, a qualifying activity carried on at any time by a person (“B”) is taken to be carried on at that time by a person connected with A if—
it is subsequently carried on by A or a person connected with A, and
the only changes in the persons carrying it on between the time that B does so and the time that A or a person connected with A does so are changes in respect of which, under section 113(2) or 343(2) of ICTA, the qualifying activity is not treated as having been discontinued.
In this section “relevant register” means a register of shipping established and maintained—
under the laws of any part of the British Islands, or
under the laws of any country or territory which, at a time in the qualifying period for the ship, is an EEA State or a colony.
“EEA State” means a State which is a contracting party to the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 as adjusted by the Protocol signed at Brussels on 17th March 1993 (except that for the period before the Agreement came into force in relation to Liechtenstein it does not include the State of Liechtenstein).
This section applies if—
a person is carrying on the qualifying activity previously carried on by the shipowner, and
the only changes in the persons carrying on the qualifying activity since the shipowner carried it on are changes in respect of which, under section 113(2) or 343(2) of ICTA, it is not treated as having been discontinued.
For the purposes of the deferment rules—
expenditure incurred by a person mentioned in subsection (1)(a) for the purposes of the qualifying activity is to be treated as incurred by the shipowner, and
in relation to the giving of any notice, a reference to the shipowner is to be read as a reference to the person carrying on the qualifying activity when the notice is given or is required to be given.
For the purposes of the deferment rules a person (“B”) is connected with another person (“A”) at any time if, at that time—
B is connected (in the sense given in section 839 of ICTA) with A,
B is carrying on a qualifying activity previously carried on by A and the condition in subsection (2) is met, or
B is connected (in the sense given in section 839 of ICTA) with a person who is carrying on a qualifying activity previously carried on by A and the condition in subsection (2) is met.
The condition is that the only changes in the persons carrying on the qualifying activity since A carried it on are changes in respect of which, under section 113(2) or 343(2) of ICTA, the qualifying activity is not treated as having been discontinued.
If expenditure is incurred by a person who is not the shipowner, the persons connected with him at any time include any person connected with the shipowner at that time as a result of subsection (1).
All such assessments and adjustments of assessments are to be made as are necessary to give effect to this Chapter.
Subsection (1) does not apply for the purposes of section 145 (see instead section 145(4) and (5)).
For the purposes of this Chapter two companies are members of the same group at any time if they would be treated as members of the same group of companies at that time for the purposes of Chapter IV of Part X of ICTA (group relief).
In this Chapter— “mineral extraction trade”, and “mineral exploration and access” have the same meaning as in Part 5 (mineral extraction allowances).
For the purposes of this Part, expenditure incurred by a person— is to be treated as incurred for the purposes of that trade.
on the provision of plant or machinery for mineral exploration and access, and
in connection with a mineral extraction trade carried on by him,
This section applies if a person—
incurs pre-trading expenditure on the provision of plant or machinery for the purposes of mineral exploration and access, and
owns the plant or machinery on the first day of trading. But this is subject to subsection (5).
The person is to be treated for the purposes of this Part as if he had—
sold the plant or machinery immediately before the first day of trading, and
on that first day incurred capital expenditure on the provision of the plant or machinery for the purposes of the trade.
The amount of the capital expenditure that the person is to be treated as having incurred is an amount equal to—
the pre-trading expenditure, or
if there has been an actual sale and re-acquisition before the first day of trading, the amount last incurred on the provision of the plant or machinery.
In this section—
“pre-trading expenditure” means capital expenditure incurred before the day on which a person begins to carry on a mineral extraction trade, and
“the first day of trading”, in relation to a person’s pre-trading expenditure, means the day on which that person begins to carry on the mineral extraction trade.
This section does not apply if the plant or machinery on which the pre-trading expenditure was incurred is sold, demolished, destroyed or abandoned before the first day of trading (but see section 402 (mineral extraction allowances: pre-trading expenditure on plant or machinery)).
If a person carries on a ring fence trade, it is a separate qualifying activity for the purposes of this Part.
In this Chapter “ring fence trade” means activities which—
fall within any of paragraphs (a) to (c) of section 492(1) of ICTA (oil extraction activities, the acquisition, enjoyment or exploitation of oil rights, etc.), and
constitute a separate trade (whether as a result of section 492(1) of ICTA or otherwise).
In sections 164 and 165 “abandonment expenditure” means expenditure which meets the requirements in subsections (2) to (4).
The expenditure must have been incurred—
for the purposes of, or in connection with, the closing down of an oil field or of any part of an oil field, and
on the demolition of plant or machinery—
which has been brought into use for the purposes of a ring fence trade, and
which is, or forms part of, an offshore installation or a submarine pipeline.
The demolition of the plant or machinery must be carried out, wholly or substantially, to comply with—
an abandonment programme, or
any condition to which the approval of an abandonment programme is subject.
The plant or machinery must not be replaced.
In this section—
“oil field” has the same meaning as in Part I of OTA 1975, and
“abandonment programme”, “offshore installation” and “submarine pipeline” have the same meaning as in Part IV of the Petroleum Act 1998 (c. 17).
If a person carrying on a ring fence trade incurs abandonment expenditure, he may elect to have a special allowance made to him.
The election—
must be made by notice to the Inland Revenue no later than 2 years after the end of the chargeable period in which the abandonment expenditure is incurred, and
is irrevocable.
The election must specify—
the abandonment expenditure to which it relates, and
any amounts received for the remains of the plant or machinery in question.
If a person makes an election under this section—
he is entitled to a special allowance, of an amount equal to the net abandonment cost, for the chargeable period in which the abandonment expenditure is incurred, and
section 26(3) (net cost of demolition added to existing pool where plant or machinery not replaced) does not apply.
“The net abandonment cost” means the amount by which the abandonment expenditure to which the election relates exceeds any amounts received for the remains of the plant or machinery.
This section applies if—
a person (“the former trader”) has ceased to carry on a ring fence trade,
the former trader incurs abandonment expenditure on the demolition of plant or machinery within the post-cessation period, and
the abandonment expenditure is not otherwise deductible in calculating the income of the former trader for any tax purpose.
“The post-cessation period” means the period of 3 years immediately following the last day on which the former trader carried on the ring fence trade.
If this section applies—
an amount equal to the relevant abandonment cost is allocated to the appropriate pool for the chargeable period in which the former trader ceased to carry on the ring fence trade, and
any amount received within the post-cessation period for the remains of the plant or machinery does not constitute income of the former trader for any tax purpose.
In subsection (3)—
“the relevant abandonment cost” means the amount by which the abandonment expenditure exceeds any amounts received within the post-cessation period for the remains of the plant or machinery.
All such adjustments, by discharge or repayment of tax or otherwise, are to be made as are necessary to give effect to this section.
This section applies if—
there is, for the purposes of Schedule 17 to FA 1980, a transfer by a participator in an oil field of the whole or part of his interest in the field, and
as part of the transfer, the old participator disposes of, and the new participator acquires—
plant or machinery used, or expected to be used, in connection with the field, or
a share in such plant or machinery.
The amount, if any, by which the new participator’s expenditure exceeds the old participator’s disposal value is to be left out of account in determining the new participator’s available qualifying expenditure.
In subsection (2)—
“the new participator’s expenditure” means the expenditure incurred by the new participator on the acquisition of the plant or machinery, and
“the old participator’s disposal value” means the disposal value to be brought into account by the old participator as a result of the disposal of the plant or machinery to the new participator.
In this section—
“oil field” and “participator” have the same meaning as in Part I of OTA 1975,
“the old participator” means the participator whose interest in the oil field is wholly or partly transferred, and
“the new participator” means the person to whom the interest in the oil field is transferred.
Nothing in this section affects the operation of Chapter 17 (anti-avoidance).
Sections 168 to 170 apply if—
a person (“the contractor”) is entitled to an interest in a contract made with, or with the authorised representative of, the government of a country or territory in which oil is or may be produced, and
the contract provides (among other things) for any plant or machinery of a description specified in the contract which— to be transferred (immediately or later) to the government or representative.
is provided by the contractor, and
has an oil-related use under the contract,
For the purposes of this section and sections 168 to 170, plant or machinery has an oil-related use if it is used—
to explore for, win access to or extract oil,
for the initial storage or treatment of oil, or
for other purposes ancillary to the extraction of oil.
In this section and sections 168 to 170 “oil” has the meaning given by section 556(3).
This section applies if—
the contractor incurs capital expenditure on the provision of plant or machinery of a description specified in the contract,
the plant or machinery is to have an oil-related use under the contract, for the purposes of a trade of oil extraction carried on by the contractor,
the amount of the expenditure is commensurate with the value of the contractor’s interest under the contract, and
the plant or machinery is transferred to the government or representative in accordance with the contract.
Despite the transfer, the plant or machinery is to be treated for the purposes of this Part as owned by the contractor (and not by any other person) until—
it ceases to be owned by the government or representative, or
it ceases to be used, or held for use, by any person under the contract. This is subject to section 170(2).
This section applies if—
a person (“the participator”) acquires an interest in the contract from—
the contractor, or
another person who has acquired it (directly or indirectly) from the contractor,
the participator incurs capital expenditure on the provision of plant or machinery,
the plant or machinery is to have an oil-related use under the contract, for the purposes of a trade of oil extraction carried on by the participator,
the amount of the expenditure is commensurate with the value of the participator’s interest under the contract, and
the plant or machinery is transferred to the government or representative in accordance with the contract.
Despite the transfer, the plant or machinery is to be treated for the purposes of this Part as owned by the participator (and not by any other person) until—
it ceases to be owned by the government or representative, or
it ceases to be used, or held for use, by any person under the contract. This is subject to section 170(2).
This section applies if—
a person (“the relevant participator”) acquires an interest in the contract from—
the contractor, or
another person who has acquired it (directly or indirectly) from the contractor, and
some of the expenditure incurred by the relevant participator to acquire the interest in the contract is attributable to plant or machinery which—
is treated by section 168 as owned by the contractor, or
is treated by section 169 or subsection (2) as owned by another person (“the other participator”).
The plant or machinery is to be treated for the purposes of this Part as owned by the relevant participator (and not by any other person) until—
it ceases to be owned by the government or representative, or
it ceases to be used, or held for use, by any person under the contract. This is subject to a later application of this subsection.
The person who, until subsection (2) applies, is treated as owning the plant or machinery is to be treated for the purposes of this Part as if he had disposed of it for a consideration equal to the relevant participator’s expenditure attributable to it.
The relevant participator is to be treated for the purposes of this Part as if—
he had incurred capital expenditure of an amount given by subsection (5), and
he owned the plant or machinery (in accordance with subsection (2)) as a result of having incurred that expenditure.
The amount of that expenditure is—
the amount of the relevant participator’s expenditure attributable to the plant or machinery, or
if less, the disposal value to be brought into account by the contractor or the other participator as a result of subsection (3).
The expenditure attributable to plant or machinery for the purposes of this section is to be determined having regard to what is just and reasonable in the circumstances.
This section applies if a person treated as owning plant or machinery under section 168(2), 169(2) or 170(2) ceases to be treated as owning it solely as a result of one of those provisions.
If the person receives capital compensation, the disposal value to be brought into account is the amount of the compensation.
If the person does not receive capital compensation, the disposal value to be brought into account is nil.
This Chapter applies to determine entitlement to allowances under this Part in respect of expenditure on plant or machinery that is, or becomes, a fixture.
For the purposes of this Part, ownership of plant or machinery that is, or becomes, a fixture is determined under this Chapter.
The provisions of this Chapter that treat a person as being the owner of a fixture (see sections 176 to 184 and 193 to 195) are subject to the provisions of this Chapter which treat a person as ceasing to be the owner of a fixture (see sections 188 to 192).
References in this Chapter to a person being treated— are to be read as references to the person being so treated for the purposes of this Part.
as the owner of plant or machinery, or
as ceasing to be the owner of plant or machinery,
This Chapter does not affect any entitlement a person has to an allowance as a result of section 538 (contribution allowances for plant and machinery).
In this Chapter “fixture”—
means plant or machinery that is so installed or otherwise fixed in or to a building or other description of land as to become, in law, part of that building or other land, and
includes any boiler or water-filled radiator installed in a building as part of a space or water heating system.
In this Chapter “relevant land”, in relation to a fixture means—
the building or other description of land of which the fixture becomes part, or
in the case of a boiler or water-filled radiator which is a fixture as a result of subsection (1)(b), the building in which it is installed as part of a space or water heating system.
In this Chapter “equipment lease” means—
an agreement entered into in the circumstances given in subsection (2), or
a lease entered into under or as a result of such an agreement.
The circumstances are that—
a person incurs capital expenditure on the provision of plant or machinery for leasing,
an agreement is entered into for the lease, directly or indirectly from that person, of the plant or machinery to another person,
the plant or machinery becomes a fixture, and
the agreement is not an agreement for the plant or machinery to be leased as part of the relevant land.
In this Chapter—
“equipment lessor” means the person from whom (directly or indirectly) the equipment lease provides for the plant or machinery to be leased, and
Except in the context of leasing plant or machinery, any reference in this Chapter to a lease is to— and, in relation to such an agreement, “grant” is to be read accordingly.
any leasehold estate in or, in Scotland, lease of, the land (whether in the nature of a head-lease, sub-lease or under-lease), or
any agreement to acquire such an estate or, in Scotland, lease;
In this Chapter “interest in land” means—
the fee simple estate in the land or an agreement to acquire such an estate,
in relation to Scotland, the interest of the owner or an agreement to acquire such an interest,
a lease,
an easement or servitude or an agreement to acquire an easement or servitude, and
a licence to occupy land.
If an interest in land is— the person with the right of redemption is treated for the purposes of this Chapter as having that interest, and not the creditor.
conveyed or assigned by way of security, and
subject to a right of redemption,
If— that person is to be treated, on and after that time, as the owner of the fixture as a result of incurring the expenditure.
a person incurs capital expenditure on the provision of plant or machinery for the purposes of a qualifying activity carried on by him,
the plant or machinery becomes a fixture, and
that person has an interest in the relevant land at the time the plant or machinery becomes a fixture,
If there are two or more persons with different interests in the relevant land who would be treated as the owner of the same fixture as a result of subsection (1), one interest only is taken into account under that subsection.
The interest to be taken into account is given by the following rules— Rule 1 If one of the interests is an easement or servitude or any agreement to acquire an easement or servitude, that interest is the interest to be taken into account. Rule 2 If Rule 1 does not apply, but one of the interests is a licence to occupy land, that interest is the interest to be taken into account. Rule 3 In any other case— except in Scotland, the interest to be taken into account is the interest which is not in reversion (at law or in equity and whether directly or indirectly) on any other interest in the relevant land which is held by any of the persons referred to in subsection (2), and in Scotland, the interest to be taken into account is the interest of whichever of the persons referred to in subsection (2) has, or last had, the right of use of the relevant land.
Subsection (1) is subject to section 177(4).
If— the equipment lessor is to be treated, on and after the relevant time, as the owner of the fixture as a result of incurring the capital expenditure on the provision of the plant or machinery that is the subject of the equipment lease.
the conditions in— are met in relation to an equipment lease,
section 178 (equipment lessee has qualifying activity etc.),
section 179 (equipment lessor has right to sever fixture that is not part of building), or
section 180 (equipment lease is part of affordable warmth programme),
the equipment lessor and the equipment lessee are not connected persons, and
they elect that this section should apply,
The relevant time for the purposes of subsection (1) is (unless subsection (3) applies) the time when the equipment lessor incurs the expenditure.
If— the relevant time is the time when the equipment lessee begins to carry on the qualifying activity.
the conditions in section 178 are met in relation to an equipment lease (but the conditions in sections 179 and 180 are not), and
the equipment lessor incurs the capital expenditure before the equipment lessee begins to carry on the qualifying activity,
If an election is made under this section, the equipment lessee is not to be treated under section 176 as the owner of the fixture.
An election under this section must be made by notice to the Inland Revenue—
for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;
for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.
“The relevant chargeable period” means the chargeable period in which the capital expenditure was incurred.
The conditions referred to in section 177(1)(a)(i) are that—
the equipment lease is for the lease of the plant or machinery for the purposes of a qualifying activity which is, or is to be, carried on by the equipment lessee,
if the equipment lessee had incurred the capital expenditure incurred by the equipment lessor on the provision of the plant or machinery that is the subject of the equipment lease, he would, as a result of section 176, have been entitled to an allowance in respect of it, and
the equipment lease is not for the lease of the plant or machinery for use in a dwelling-house.
The conditions referred to in section 177(1)(a)(ii) are that—
the plant or machinery becomes a fixture by being fixed to land that is neither a building nor part of a building,
the equipment lessee has an interest in the land when taking possession of the plant or machinery under the equipment lease,
under the terms of the equipment lease, the equipment lessor is entitled to sever the plant or machinery, at the end of the period for which it is leased, from the land to which it is fixed at that time,
under the terms of the equipment lease, the equipment lessor will own the plant or machinery on its severance in accordance with the equipment lease,
the nature of the plant or machinery and the way in which it is fixed to land are such that its use on one set of premises does not, to any material extent, prevent it from being used, once severed, for the same purposes on a different set of premises,
the equipment lease is one which under normal accountancy practice falls (or would fall) to be treated in the accounts of the equipment lessor as an operating lease, and
the equipment lease is not for the lease of the plant or machinery for use in a dwelling-house.
For the purposes of applying subsection (1)(f), the equipment lessor is to be treated as being a company incorporated in a part of the United Kingdom.
The conditions referred to in section 177(1)(a)(iii) are that—
the plant or machinery which is the subject of the equipment lease consists of a boiler, heat exchanger, radiator or heating control that is installed in a building as part of a space or water heating system,
the expenditure of the equipment lessor is incurred before 1st January 2008, and
the equipment lease is approved for the purposes of this section as entered into as part of the affordable warmth programme.
The approval mentioned in subsection (1)(c) may be given, with the consent of the Treasury—
by the Secretary of State;
in the case of buildings in Scotland, by the Scottish Ministers;
in the case of buildings in Wales, by the National Assembly for Wales;
in the case of buildings in Northern Ireland, by the Department for Social Development in Northern Ireland.
If an approval is withdrawn, it is to be treated for the purposes of subsection (1)(c) as never having had effect.
If— the purchaser is to be treated, on and after the time of the acquisition, as the owner of the fixture as a result of incurring that expenditure.
after any plant or machinery has become a fixture, a person (“the purchaser”) acquires an interest in the relevant land,
that interest was in existence before the purchaser’s acquisition of it, and
the consideration which the purchaser gives for the interest is or includes a capital sum that, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture,
Subsection (1) does not apply, and is to be treated as never having applied, if—
immediately after the time of the acquisition, any person holds another interest in any land in which the whole or any part of the relevant land is comprised, and
the person holding that other interest has a prior right in relation to the fixture.
For the purposes of subsection (2)(b), the person holding the other interest has a prior right in relation to the fixture if he—
is treated as the owner of the fixture immediately before the time referred to in subsection (2)(a) as a result of incurring expenditure on the provision of the fixture,
is not so treated as a result of section 538 (contribution allowances for plant and machinery),
is entitled to an allowance in respect of that expenditure, and
makes or has made a claim in respect of that expenditure.
Subsection (1) is subject to section 182.
If— the purchaser is to be treated, on and after the time of the acquisition, as the owner of the fixture as a result of incurring expenditure, consisting of that capital sum, on the provision of the fixture.
after any plant or machinery has become a fixture, a person (“the purchaser”) acquires an interest in the relevant land,
that interest was in existence before the purchaser’s acquisition of it,
before that acquisition, the plant or machinery was let under an equipment lease, and
in connection with that acquisition, the purchaser pays a capital sum to discharge the obligations of the equipment lessee under the equipment lease,
Subsection (1) does not apply, and is to be treated as never having applied, if—
immediately after the time of the acquisition, any person holds another interest in any land in which the whole or any part of the relevant land is comprised, and
the person holding that other interest has a prior right in relation to the fixture.
Section 181(3) (test for whether the person holding the other interest has a prior right) applies for the purposes of subsection (2)(b).
If— the lessee is to be treated, on and after the time when the lease is granted, as the owner of the fixture as a result of incurring that expenditure.
after any plant or machinery has become a fixture, a person (“the lessor”) who has an interest in the relevant land grants a lease,
the lessor is entitled to an allowance in respect of the fixture for the chargeable period in which the lease is granted or would be if he were within the charge to tax,
the consideration which the lessee gives for the lease is or includes a capital sum that, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture,
the lessor and the lessee are not connected persons, and
the lessor and the lessee make an election under this section,
An election under this section must be made by notice to the Inland Revenue within 2 years after the date on which the lease takes effect.
If— the lessee is to be treated, on and after the time when the lease is granted, as the owner of the fixture as a result of incurring that expenditure.
after any plant or machinery has become a fixture, a person (“the lessor”) who has an interest in the relevant land grants a lease,
the lessor is not within section 183(1)(b),
before the lease is granted, the fixture has not been used for the purposes of a qualifying activity carried on by the lessor or any person connected with the lessor, and
the consideration which the lessee gives for the lease is or includes a capital sum that, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture,
Subsection (1) does not apply, and is to be treated as never having applied, if—
immediately after the time when the lease is granted, any person holds another interest in any land in which the whole or any part of the relevant land is comprised, and
the person holding that other interest has a prior right in relation to the fixture.
Section 181(3) (test for whether the person holding the other interest has a prior right) applies for the purposes of subsection (2)(b).
This section applies if—
a person (“the current owner”) is treated as the owner of a fixture as a result of incurring capital expenditure (“new expenditure”) on its provision,
the plant or machinery is treated as having been owned at a relevant earlier time by any person (“the past owner”) as a result of incurring other expenditure,
the plant or machinery is within paragraph (b) otherwise than as a result of section 538 (contribution allowances for plant and machinery), and
the past owner is or has been required to bring the disposal value of the plant or machinery into account (as a result of having made a claim in respect of that other expenditure).
If the new expenditure exceeds the maximum allowable amount, the excess—
is to be left out of account in determining the current owner’s qualifying expenditure, or
if the new expenditure has already been taken into account for this purpose, is to be treated as expenditure that should never have been taken into account.
The maximum allowable amount is— where— D is the disposal value of the plant or machinery which the past owner has been or is required to bring into account, and I is any of the new expenditure that is treated under section 25 (building alterations in connection with installation) as expenditure on the provision of the plant or machinery.
If more than one disposal event has occurred requiring the past owner to bring the disposal value of the plant or machinery into account, the maximum allowable amount is calculated by reference only to the most recent of those events.
For the purposes of this section, the current owner and the past owner may be the same person.
In subsection (1)(b) “relevant earlier time” means (subject to subsection (7)) any time before the earliest time when the current owner is treated as owning the plant or machinery as a result of incurring the new expenditure.
If, before the earliest time when the current owner is treated as owning the plant or machinery as a result of incurring the new expenditure— the relevant earlier time does not include any time before the seller ceased to own the plant or machinery.
any person has ceased to own the plant or machinery as a result of a sale,
the sale was not a sale of the plant or machinery as a fixture, and
the buyer and seller were not connected persons at the time of the sale,
This section applies if—
a person (“the past owner”) has at any time claimed an allowance to which he is entitled under Part 3 (industrial buildings allowances) in respect of expenditure which was or included expenditure on the provision of plant or machinery,
the past owner has transferred the interest which is the relevant interest for the purposes of Part 3, and
the current owner of the plant or machinery makes a claim in respect of expenditure (“new expenditure”) incurred—
on the provision of the plant or machinery, and
at a time when it is a fixture in the building.
If the new expenditure exceeds the maximum allowable amount, the excess is to be left out of account in determining the current owner’s qualifying expenditure.
The maximum allowable amount is— where— F is the part of the consideration for the transfer by the past owner that is attributable to the fixture, T is the total consideration for that transfer, and R is the residue of qualifying expenditure attributable to the relevant interest immediately after that transfer, calculated on the assumption that the transfer was a sale of the relevant interest.
For the purposes of this section the current owner of the plant or machinery is—
the person to whom the past owner transferred the relevant interest, or
any person who is subsequently treated as the owner of the plant or machinery.
In this section “building” and “residue of qualifying expenditure” have the same meaning as in Part 3.
This section applies if—
a person has at any time claimed an allowance to which he is entitled under Part 6 (research and development allowances) in respect of qualifying expenditure under that Part (“Part 6 expenditure”),
an asset representing the whole or part of the Part 6 expenditure (“the Part 6 asset”) has ceased to be owned by that person (“the past owner”),
the Part 6 asset was or included plant or machinery, and
the current owner makes a claim under this Part in respect of expenditure (“new expenditure”) incurred—
on the provision of the plant or machinery, and
at a time when it is a fixture.
If the new expenditure exceeds the maximum allowable amount, the excess is to be left out of account in determining the current owner’s qualifying expenditure.
The maximum allowable amount is— where— F is the part of the consideration for the disposal of the Part 6 asset by the past owner that is attributable to the fixture, T is the total consideration for that disposal, and A is an amount equal to whichever is the smaller of— the disposal value of the Part 6 asset when the past owner ceased to own it, and so much of the Part 6 expenditure as related to the provision of the Part 6 asset.
For the purposes of this section the current owner of the plant or machinery is—
the person who acquired the Part 6 asset from the past owner, or
any person who is subsequently treated as the owner of the plant or machinery.
This section applies if a person is treated as the owner of a fixture under—
section 176 (person with interest in land having fixture for purposes of qualifying activity),
section 181 (purchaser of land giving consideration for fixture),
section 182 (purchaser of land discharging obligations of equipment lessee),
section 183 (incoming lessee where lessor entitled to allowances), or
section 184 (incoming lessee where lessor not entitled to allowances).
If the person ceases at any time to have the qualifying interest, he is to be treated as ceasing to be the owner of the fixture at that time.
In this Chapter “the qualifying interest” means—
if section 176, 181 or 182 applies, the interest in the relevant land referred to in that section, and
if section 183 or 184 applies, the lease referred to in that section.
This section is subject to section 189.
If— the interest transferred or granted is to be treated as the qualifying interest.
a person’s qualifying interest is an agreement to acquire an interest in land, and
that interest is subsequently transferred or granted to that person,
If a person’s qualifying interest ceases to exist as a result of its being merged in another interest acquired by that person, that other interest is to be treated as the qualifying interest.
If— the new lease is to be treated as the qualifying interest.
the qualifying interest is a lease, and
on its termination, a new lease of the relevant land (with or without other land) is granted to the lessee,
If— the new licence is to be treated as the qualifying interest.
the qualifying interest is a licence, and
on its termination, a new licence to occupy the relevant land (with or without other land) is granted to the licensee,
If— the qualifying interest is to be treated as continuing so long as the lessee remains in possession of the relevant land.
the qualifying interest is a lease, and
with the consent of the lessor, the lessee remains in possession of the relevant land after the termination of the lease without a new lease being granted to him,
This section applies if a lessee is treated under section 183 (incoming lessee where lessor entitled to allowances) as the owner of a fixture.
The lessor is to be treated as ceasing to be the owner of the fixture when the lessee begins to be treated as the owner.
If— that person is to be treated as ceasing to be the owner of the fixture when it is severed.
a person is treated as the owner of the fixture as a result of any provision of this Chapter,
the fixture is permanently severed from the relevant land (so that it ceases to be a fixture), and
once it is severed, it is not in fact owned by that person,
This section applies if an equipment lessor is treated under section 177 as the owner of a fixture.
If— the equipment lessor is to be treated as ceasing to be the owner of the fixture at that time (or, as the case may be, at the earliest of those times).
the equipment lessor at any time assigns his rights under the equipment lease, or
the financial obligations of the equipment lessee under an equipment lease are at any time discharged (on the payment of a capital sum or otherwise),
The reference in subsection (2)(b) to the equipment lessee is, in a case where the financial obligations of the equipment lessee have become vested in another person (by assignment, operation of law or otherwise), a reference to the person in whom the obligations are vested when the capital sum is paid.
If, on the termination of a lease or licence, the outgoing lessee or licensee is treated under section 188 as ceasing to be the owner of a fixture, the lessor or licensor is to be treated, on and after the termination of the lease or licence, as the owner of the fixture.
If section 192(2)(a) applies (cessation of ownership of equipment lessor as a result of assignment), the assignee is to be treated, on and after the assignment—
as having incurred expenditure, consisting of the consideration given by him for the assignment, on the provision of the fixture, and
as being the owner of the fixture.
For the purposes of section 192 (and subsection (1) and section 195) the assignee is to be treated as being an equipment lessor who owns the fixture under section 177.
If section 192(2)(b) applies (discharge of obligations of equipment lessee) because the equipment lessee has paid a capital sum, the equipment lessee is to be treated—
as having incurred expenditure, consisting of the capital sum, on the provision of the fixture, and
as being, on and after the time of payment, the owner of the fixture.
Section 192(3) (assignee of equipment lessee) applies in relation to subsection (1).
The disposal value to be brought into account in relation to a fixture depends on the nature of the disposal event, as shown in the Table— 1. Disposal event 2. Disposal value 1. Cessation of ownership of the fixture under section 188 because of a sale of the qualifying interest except where item 2 applies. The part of the sale price that— falls to be treated for the purposes of this Part as expenditure incurred by the purchaser on the provision of the fixture, or would fall to be so treated if the purchaser were entitled to an allowance. 2. Cessation of ownership of the fixture under section 188 because of a sale of the qualifying interest where— the sale is at less than market value, and the condition in subsection (2) is met by the purchaser. The part of the price that would be treated for the purposes of this Part as expenditure by the purchaser on the provision of the fixture if— the qualifying interest were sold at market value, that sale took place immediately before the event which causes the former owner to be treated as ceasing to be the owner of the fixture, and that event were disregarded in determining that market value. 3. Cessation of ownership of the fixture under section 188 where— neither item 1 nor 2 applies, but the qualifying interest continues in existence after that time or would so continue but for its becoming merged in another interest. The disposal value given for item 2. 4. Cessation of ownership of the fixture under section 188 because of the expiry of the qualifying interest. If the person receives a capital sum, by way of compensation or otherwise, by reference to the fixture, the amount of the capital sum. In any other case, nil. 5. Cessation of ownership of the fixture under section 190 because the lessee has become the owner under section 183. The part of the capital sum given by the lessee for the lease referred to in section 183 that falls to be treated for the purposes of this Part as the lessee’s expenditure on the provision of the fixture. 6. Cessation of ownership of the fixture under section 191 (severance). The market value of the fixture at the time of the severance. 7. Cessation of ownership of the fixture because section 192(2)(a) (assignment of rights) applies. The consideration given by the assignee for the assignment. 8. Cessation of ownership of the fixture because section 192(2)(b) (discharge of equipment lessee’s obligations) applies on the payment of a capital sum. The capital sum paid to discharge the financial obligations of the equipment lessee. 9. Permanent discontinuance of the qualifying activity followed by the sale of the qualifying interest. The part of the sale price that— falls to be treated as expenditure incurred by the purchaser on the provision of the fixture, or would fall to be so treated if the purchaser were entitled to an allowance. 10. Permanent discontinuance of the qualifying activity followed by the demolition or destruction of the fixture. The net amount received for the remains of the fixture, together with— any insurance money received in respect of the demolition or destruction, and any other compensation of any description so received, so far as it consists of capital sums. 11. Permanent discontinuance of the qualifying activity followed by the permanent loss of the fixture otherwise than as a result of its demolition or destruction. Any insurance money received in respect of the loss and, so far as it consists of capital sums, any other compensation of any description so received. 12. The fixture begins to be used wholly or partly for purposes other than those of the qualifying activity. The part of the price that would fall to be treated for the purposes of this Part as expenditure incurred by the purchaser on the provision of the fixture if the qualifying interest were sold at market value.
The condition referred to in item 2 of the Table is met by the purchaser if—
the purchaser’s expenditure on the provision of the fixture cannot be qualifying expenditure under this Part or Part 6 (research and development allowances), or
the purchaser is a dual resident investing company which is connected with the former owner.
Items 1 and 5 of the Table are subject to sections 198 and 199 (election to fix apportionment on sale of qualifying interest or grant of lease).
Section 192(3) (assignee of equipment lessee) applies in relation to item 8 of the Table.
Nothing in sections 188 to 192 or this section prevents a disposal value having to be brought into account under Chapter 5 because of a disposal event not dealt with in these sections.
This section is subject to section 197.
This section applies if—
a person (“the taxpayer”) is treated under this Chapter as the owner of any plant or machinery as a result of incurring any expenditure,
any disposal event occurs in relation to the plant or machinery,
the disposal value to be brought into account by the taxpayer would (but for this section) be less than the notional written-down value of the plant or machinery, and
the disposal event is part of, or occurs as a result of, a scheme or arrangement the main purpose or one of the main purposes of which is the obtaining by the taxpayer of a tax advantage under this Part.
The disposal value that the taxpayer must bring into account is the notional written-down value of the plant or machinery.
The notional written-down value is— where— QE is the taxpayer’s expenditure on the plant or machinery that is qualifying expenditure, A is the total of all allowances which could have been made to the taxpayer in respect of that expenditure if— that expenditure had been the only expenditure that had ever been taken into account in determining his available qualifying expenditure, and all allowances had been made in full.
This section applies if the disposal value of a fixture is required to be brought into account in accordance with item 1 of the Table in section 196 (sale of qualifying interest at not less than market value, etc.).
The seller and the purchaser may jointly, by an election, fix the amount that is to be treated— as the part of the sale price that is expenditure incurred by the purchaser on the provision of the fixture.
for the purposes of item 1 of the Table, and
for the other purposes of this Part,
The amount fixed by the election must not exceed—
the amount of the capital expenditure which was treated as incurred by the seller on the provision of the fixture or of the plant or machinery which became the fixture, or
the actual sale price.
If an election fixes the amount to be treated as the part of the sale price—
the remaining amount (if any) of the sale price is to be treated for the purposes of this Act as expenditure attributable to the acquisition of the property which is not the fixture but is acquired for that amount, and
if there is no remaining amount, the expenditure so attributable is to be treated for the purposes of this Act as nil.
This section is subject to—
sections 186 and 187 (fixtures on which industrial buildings allowance or research and development allowance has been made),
section 197 (disposal values in avoidance cases), and
sections 200 and 201 (further provisions about elections).
This section applies if the disposal value of a fixture is required to be brought into account in accordance with item 5 of the Table in section 196 (on acquisition of ownership by incoming lessee under section 183).
The persons who are the lessor and the lessee for the purposes of section 183 may jointly, by an election, fix the amount that is to be treated— as the part of the capital sum that is expenditure incurred by the lessee on the provision of the fixture.
for the purposes of item 5 of the Table, and
for the other purposes of this Part,
The amount fixed by the election must not exceed—
the amount of the capital expenditure which was treated as incurred by the lessor on the provision of the fixture or of the plant or machinery which became the fixture, or
the actual capital sum.
If an election fixes the amount to be treated as the part of the capital sum—
the remaining amount (if any) of the capital sum is to be treated for the purposes of this Act as expenditure attributable to the acquisition of the property which is not the fixture but is acquired for that amount, and
if there is no remaining amount, the expenditure so attributable is to be treated for the purposes of this Act as nil.
This section is subject to—
sections 186 and 187 (fixtures on which industrial buildings allowance or research and development allowance has been made),
section 197 (disposal values in avoidance cases), and
sections 200 and 201 (further provisions about elections).
In this section and section 201, references to an election are to an election under section 198 or 199.
An apportionment made by an election has effect in place of any apportionment that would otherwise be made under sections 562, 563 and 564(1) (apportionment and procedure for determining apportionment).
An election is irrevocable.
If, as a result of circumstances arising after the making of an election, the maximum amount which could be fixed by the election is reduced to an amount which is less than the amount specified in the election, the election is to be treated, for the purposes of this Act, as having specified the amount to which the maximum is reduced.
An election must be made by notice to the Inland Revenue no later than 2 years after the date when—
the purchaser acquires the qualifying interest, in the case of an election under section 198, or
the lessee is granted the lease, in the case of an election under section 199.
The amount fixed by an election must be quantified at the time when the election is made.
The notice must state—
the amount fixed by the election,
the name of each of the persons making the election,
information sufficient to identify the plant or machinery,
information sufficient to identify the relevant land,
particulars of—
the interest acquired by the purchaser, in the case of an election under section 198, or
the lease granted to the lessee, in the case of an election under section 199, and
the tax district references of each of the persons making the election.
If a person— a copy of the notice containing the election must accompany the return.
has joined in making an election, and
subsequently makes a tax return for a period which is the first period for which he is making a tax return in which the election has an effect for tax purposes in his case,
The following provisions do not apply to the election—
section 42 of, and Schedule 1A to, TMA 1970 (claims and elections for income tax purposes);
paragraphs 54 to 60 of Schedule 18 to FA 1998 (claims and elections for corporation tax purposes).
References in this section to a tax return, in the case of an election for the purposes of a trade, profession or business carried on by persons in partnership, are to be read, in relation to those persons, as references to a return under section 12AA of TMA 1970 (partnership returns).
Any reference in this Chapter to a person being entitled to an allowance in respect of expenditure on the provision of a fixture includes the person having a pool to which expenditure on the provision of the fixture has been allocated. But this is subject to subsection (2).
If— the person is not entitled to an allowance in respect of the expenditure allocated to that pool for any chargeable period after that in which the disposal event occurs.
expenditure on the provision of the fixture has been allocated to a pool, and
the person is required under section 61(1) to bring the disposal value of the fixture into account in the pool,
For the purposes of this Chapter, a person makes a claim in respect of expenditure if he—
makes a claim for an allowance in respect of that expenditure,
makes a tax return in which that expenditure is taken into account in determining his available qualifying expenditure for the purposes of this Part, or
gives notice of an amendment of a tax return which provides for that expenditure to be so taken into account.
If a person who has made a tax return (“the taxpayer”) becomes aware that, after making it, anything in it has become incorrect for any of the reasons given in subsection (2), the taxpayer must give notice to the Inland Revenue specifying how the return needs to be amended.
The reasons are that—
an approval given for the purposes of section 180 (affordable warmth programme) has been withdrawn;
section 181(2), 182(2) or 184(2) (another person has a prior right) applies in the taxpayer’s case;
section 185 (restriction on qualifying expenditure where another person has claimed an allowance) applies in the taxpayer’s case;
an election is made under section 198 or 199 (election to fix apportionment);
section 200(4) (reduction in amount which can be fixed by an election) applies in the taxpayer’s case.
The notice must be given within 3 months beginning with the day on which the taxpayer first became aware that anything contained in the tax return had become incorrect for any of the reasons given in subsection (2).
All such assessments and adjustments of assessments are to be made as are necessary to give effect to this Chapter.
Subsections (2) and (3) apply if—
any question arises as to whether any plant or machinery has become, in law, part of a building or other land, and
that question is material to the tax liability (for whatever period) of two or more persons.
The question is to be determined, for the purposes of the tax of all the persons concerned, by the Special Commissioners.
The Special Commissioners must determine the question in the same way as an appeal, but all the persons concerned are entitled—
to appear before and be heard by the Special Commissioners, or
to make representations to them in writing.
Subsections (5) and (6) apply if any question relating to an election under section 198 or 199 (apportionments) arises for determination by any body of Commissioners for the purposes of any proceedings before them.
The Commissioners must determine the question separately from any other questions in those proceedings.
Each of the persons who has joined in making the election is entitled— and the Commissioners' determination has effect as if made in an appeal to which each of those persons was a party.
to appear before and be heard by the Commissioners, or
to make representations to them in writing;
If it appears that a person carrying on a qualifying activity has incurred expenditure on the provision of plant or machinery— any first-year allowance to which he is entitled in respect of the expenditure must be reduced to an amount which is just and reasonable having regard to the relevant circumstances.
partly for the purposes of the qualifying activity, and
partly for other purposes,
The relevant circumstances include, in particular, the extent to which it appears that the plant or machinery is likely to be used for purposes other than those of the qualifying activity in question.
In calculating for the purposes of section 58 the balance left after deducting a first-year allowance, a reduction under subsection (1) is to be disregarded.
Qualifying expenditure to which this subsection applies, if allocated to a pool, must be allocated to a single asset pool.
Subsection (1) applies to qualifying expenditure incurred by a person carrying on a qualifying activity—
partly for the purposes of the qualifying activity, and
partly for other purposes.
If a person is required to bring a disposal value into account in a pool for a chargeable period because the plant or machinery begins to be used partly for purposes other than those of the qualifying activity, an amount equal to that disposal value is allocated (as expenditure on the plant or machinery) to a single asset pool for that chargeable period.
In the case of a single asset pool under subsection (1), there is no final chargeable period or disposal event merely because the plant or machinery begins to be used partly for purposes other than those of the qualifying activity.
This section applies if a person’s expenditure is in a single asset pool under section 206(1) or (3).
The amount of— must be reduced to an amount which is just and reasonable having regard to the relevant circumstances.
any writing-down allowance or balancing allowance to which the person is entitled, or
any balancing charge to which the person is liable,
The relevant circumstances include, in particular, the extent to which it appears that the plant or machinery was used in the chargeable period in question for purposes other than those of the person’s qualifying activity.
In calculating under section 59 the amount of unrelieved qualifying expenditure carried forward, a reduction of a writing-down allowance under subsection (2) is to be disregarded.
If a person entitled to a writing-down allowance for a chargeable period— the unrelieved qualifying expenditure carried forward from the period is to be treated as not reduced or (as the case may be) only proportionately reduced.
does not claim the allowance, or
claims less than the full amount of the allowance,
This section applies if—
expenditure is allocated to a single asset pool under this Chapter,
there is such a change of circumstances as would make it appropriate for any reduction falling to be made under section 207— to represent a larger proportion of the amount reduced than would have been appropriate apart from the change,
for the chargeable period in which the change takes place (“the relevant chargeable period”), or
for any subsequent chargeable period,
no disposal value in respect of the plant or machinery would, apart from this section, fall to be brought into account for the relevant chargeable period, and
the market value of the plant or machinery at the end of the relevant chargeable period exceeds the available qualifying expenditure in that pool for that period by more than £1 million.
If this section applies—
a disposal value is required to be brought into account in the single asset pool for the relevant chargeable period, and
section 206 applies as if, at the beginning of the following chargeable period, expenditure had been incurred on the provision of the plant or machinery of an amount equal to the disposal value brought into account as a result of paragraph (a).
In this Chapter “partial depreciation subsidy” means a sum which—
is payable directly or indirectly to a person who has incurred qualifying expenditure for the purposes of a qualifying activity,
is in respect of, or takes account of, part of the depreciation of the plant or machinery resulting from its use for the purposes of that activity, and
does not fall to be taken into account as income of that person or in calculating the profits of any qualifying activity carried on by him.
If— the amount of any first-year allowance in respect of that expenditure must be reduced to an amount which is just and reasonable having regard to the relevant circumstances.
a person has incurred qualifying expenditure for the purposes of a qualifying activity carried on by him, and
it appears that a partial depreciation subsidy is, or will be, payable to him in the period during which the plant or machinery will be used for the purposes of that qualifying activity,
In calculating for the purposes of section 58 the balance left after deducting a first-year allowance, a reduction under subsection (1) is to be disregarded.
Qualifying expenditure to which this subsection applies, if allocated to a pool, must be allocated to a single asset pool.
Subsection (1) applies to qualifying expenditure if a partial depreciation subsidy relating to the plant or machinery has been paid to the person who incurred the expenditure.
Subsection (4) applies if—
qualifying expenditure has been allocated to a pool, and
a partial depreciation subsidy relating to the plant or machinery is paid to that person.
For the chargeable period in which the partial depreciation subsidy is paid—
the person is required to bring a disposal value into account in the pool referred to in subsection (3), and
an amount equal to the disposal value is allocated (as expenditure on the plant or machinery) to a single asset pool.
If qualifying expenditure in respect of any plant or machinery is in a single asset pool under this section, there is no further allocation of that qualifying expenditure because a further partial depreciation subsidy is paid in respect of that plant or machinery.
This section applies if expenditure is in a single asset pool under section 211(1) or (4).
The amount of— must be reduced to an amount which is just and reasonable having regard to the relevant circumstances.
any writing-down allowance or balancing allowance to which the person is entitled, or
any balancing charge to which the person is liable,
In calculating under section 59 the amount of unrelieved qualifying expenditure carried forward, a reduction of a writing-down allowance under subsection (2) is to be disregarded.
If a person entitled to a writing-down allowance for a chargeable period— the unrelieved qualifying expenditure carried forward from the period is to be treated as not reduced or (as the case may be) only proportionately reduced.
does not claim the allowance, or
claims less than the full amount of the allowance,
For the purposes of this Chapter, a person (“B”) enters into a relevant transaction with another (“S”) if—
S sells plant or machinery to B,
B enters into a contract with S providing that B shall or may become the owner of plant or machinery on the performance of the contract, or
S assigns to B the benefit of a contract providing that S shall or may become the owner of plant or machinery on the performance of the contract.
For the purposes of this Chapter, references to B’s expenditure under a relevant transaction are references—
in the case of a sale within subsection (1)(a), to B’s capital expenditure on the provision of the plant or machinery by purchase,
in the case of a contract within subsection (1)(b), to B’s capital expenditure under the contract so far as it relates to the plant or machinery, or
in the case of an assignment within subsection (1)(c), to B’s capital expenditure under the contract so far as it relates to the plant or machinery or is by way of consideration for the assignment.
If— B is to be treated for the purposes of this Chapter as having incurred capital expenditure on the provision of the plant or machinery by purchasing it from S.
B is treated under section 14 (use for qualifying activity of plant or machinery which is a gift) as having incurred capital expenditure on the provision of plant or machinery, and
the donor of the plant or machinery was S,
Allowances under this Part are restricted under sections 217 and 218 if—
B enters into a relevant transaction with S, and
B and S are connected with each other.
Allowances under this Part are restricted under sections 217 and 218 if—
B enters into a relevant transaction with S, and
it appears that the sole or main benefit which (but for this section) might have been expected to accrue to B or S, or to any other party, from— was obtaining an allowance under this Part.
the relevant transaction, or
transactions of which the relevant transaction is one,
Allowances under this Part are restricted under sections 217 and 218 if—
B enters into a relevant transaction with S, and
the plant or machinery—
continues to be used for the purposes of a qualifying activity carried on by S, or
is used after the date of the transaction for the purposes of a qualifying activity carried on by S or by a person (other than B) who is connected with S, without having been used since that date for the purposes of any other qualifying activity except that of leasing the plant or machinery.
In this section—
If this section applies as a result of section 214, 215 or 216, a first-year allowance is not to be made in respect of B’s expenditure under the relevant transaction.
Any first-year allowance which is prohibited by subsection (1), but which has already been made, is to be withdrawn.
If plant or machinery is the subject of a sale and finance leaseback (as defined in section 221) section 223 applies instead of this section.
If this section applies as a result of section 214, 215 or 216, the amount, if any, by which B’s expenditure under the relevant transaction exceeds D is to be left out of account in determining B’s available qualifying expenditure. D is defined in subsections (2) and (3).
If S is required to bring a disposal value into account under this Part because of the relevant transaction, D is that disposal value.
If S is not required to bring a disposal value into account under this Part because of the relevant transaction, D is whichever of the following is the smallest—
the market value of the plant or machinery;
if S incurred capital expenditure on the provision of the plant or machinery, the amount of that expenditure;
if a person connected with S incurred capital expenditure on the provision of the plant or machinery, the amount of that expenditure.
If plant or machinery is the subject of a sale and finance leaseback (as defined in section 221), section 224 or 225 applies instead of this section.
In this Chapter “finance lease” means any arrangements—
which provide for plant or machinery to be leased or otherwise made available by a person (“the lessor”) to another person (“the lessee”), and
which, under normal accountancy practice—
fall (or would fall) to be treated, in the accounts of the lessor or a person connected with the lessor, as a finance lease or a loan, or
are comprised in arrangements which fall (or would fall) to be so treated.
For the purpose of applying subsection (1)(b), the lessor and any person connected with the lessor are to be treated as being companies which are incorporated in a part of the United Kingdom.
In this section “accounts”, in relation to a company, includes any accounts which—
relate to two or more companies of which that company is one, and
are drawn up in accordance with—
section 227 of the Companies Act 1985 (c. 6), or
Article 235 of the Companies (Northern Ireland) Order 1986 (S.I.1986/1032 (N.I.6)).
Subject to subsection (2), if a person incurs at any time in a chargeable period capital expenditure on the provision of plant or machinery for leasing under a finance lease—
the part of the expenditure which is proportional to the part of that chargeable period falling before that time is not to be taken into account in determining that person’s available qualifying expenditure for that period, but
this does not prevent that part of the expenditure being taken into account in determining that person’s available qualifying expenditure for any subsequent chargeable period.
Subsection (1)(a) does not apply to a chargeable period if a disposal event occurs in that period in respect of the plant or machinery.
For the purposes of this section and sections 222 to 228, plant or machinery is the subject of a sale and finance leaseback if—
B enters into a relevant transaction with S,
after the date of the transaction, the plant or machinery—
continues to be used for the purposes of a qualifying activity carried on by S,
is used for the purposes of a qualifying activity carried on by S or by a person (other than B) who is connected with S, without having been used since that date for the purposes of any other qualifying activity except that of leasing the plant or machinery, or
is used for the purposes of a non-qualifying activity carried on by any person, without having been used since that date for the purposes of a qualifying activity except that of leasing the plant or machinery, and
it is directly or indirectly as a consequence of having been leased under a finance lease that the plant or machinery is available to be so used after that date.
In this section—
If— the disposal value is whichever of the amounts in subsection (2) is the smallest.
plant or machinery is the subject of a sale and finance leaseback, and
S is required to bring a disposal value into account under this Part because of the relevant transaction,
The amounts are—
the disposal value that S would be required to bring into account apart from subsection (1);
the market value of the plant or machinery;
if S incurred capital expenditure on the provision of the plant or machinery, the notional written-down value of that capital expenditure;
if a person connected with S incurred capital expenditure on the provision of the plant or machinery, the notional written-down value of that capital expenditure.
The notional written-down value is— where— QE is the expenditure incurred by S, or the person connected with S, on the plant or machinery, A is the total of all allowances which could have been made to S, or the person connected with S, in respect of that expenditure if— that expenditure had been qualifying expenditure, that expenditure had been the only expenditure that had ever been taken into account in determining his available qualifying expenditure, that expenditure had been treated as long-life asset expenditure only if it is in fact such expenditure, and all allowances had been made in full.
This section does not apply if the finance lease or any transaction or series of transactions of which it forms a part makes provision such as is described in section 225(1) (sale and finance leasebacks: B’s qualifying expenditure if lessor not bearing non-compliance risk).
If plant or machinery is the subject of a sale and finance leaseback, a first-year allowance is not to be made in respect of B’s expenditure under the relevant transaction.
Any first-year allowance which is prohibited by subsection (1), but which has already been made, is to be withdrawn.
If plant or machinery is the subject of a sale and finance leaseback the amount, if any, by which B’s expenditure under the relevant transaction exceeds D is to be left out of account in determining B’s available qualifying expenditure. D is defined in subsections (2) and (3).
If S is required to bring a disposal value into account under this Part because of the relevant transaction, D is that disposal value (determined in accordance with section 222).
If S is not required to bring a disposal value into account under this Part because of the relevant transaction, D is whichever of the following is the smallest—
the market value of the plant or machinery;
if S incurred capital expenditure on the provision of the plant or machinery, the notional written-down value of that capital expenditure;
if a person connected with S incurred capital expenditure on the provision of the plant or machinery, the notional written-down value of that capital expenditure.
In this section “the notional written-down value”, in relation to expenditure incurred by a person on the provision of plant or machinery, has the meaning given by section 222(3).
This section does not apply if the finance lease or any transaction or series of transactions of which it forms a part makes provision such as is described in section 225(1).
This section applies if plant or machinery is the subject of a sale and finance leaseback, and the finance lease, or any transaction or series of transactions of which it forms a part, makes provision which—
removes from the lessor the whole, or the greater part, of any risk, which would otherwise fall directly or indirectly on the lessor, of any person sustaining a loss if payments under the lease are not made in accordance with its terms, and
does so otherwise than by means of guarantees from persons connected with the lessee.
In such a case the following are not qualifying expenditure for the purposes of this Part —
B’s expenditure under the relevant transaction;
if the lessor is a different person from B, the expenditure incurred by the lessor on the provision of the plant or machinery.
For the purposes of determining whether this section applies, the lessor and the persons connected with the lessor are treated as the same person.
Subsection (2) applies if—
plant or machinery has been the subject of a sale and finance leaseback,
S was required to bring a disposal value into account under this Part because of the relevant transaction,
at any time after that event, a person (“P”) becomes the owner of the plant or machinery as a result of incurring capital expenditure, and
P’s allowances are not restricted by any other provision of this Chapter.
The amount of P’s qualifying expenditure is limited to the sum of—
the amount given by section 222 as the amount of S’s disposal value, and
so much of the actual amount of the expenditure as is treated as expenditure on the provision of plant or machinery under section 25 (building alterations connected with installation of plant or machinery).