Capital Allowances Act 1990 (repealed)

Subject to the provisions of this Act, in any case where— there shall be made to the person who incurred the expenditure, for the chargeable period which is that related to the incurring of the expenditure, an allowance (“an initial allowance”) equal to 100 per cent. of the amount of that expenditure.

In this section, and in Chapter III as it applies for the purposes of this section, any reference to an industrial building or structure shall include a reference to a commercial building or structure.

The lessees mentioned in subsection (1) above are lessees occupying the building or structure on the construction of which the expenditure was incurred under a lease to which the relevant interest is reversionary.

The reference in subsection (1) above to the occupation of a building or structure for the purposes of a trade carried on by the person who incurred the capital expenditure on the construction of that building or structure shall include a reference to the use of that building or structure for the purposes of a trade carried on by a licensee of that person or of a lessee of that person. This subsection does not apply in relation to licences granted before 10th March 1982.

A person making a claim by virtue of subsection (1) above as it applies for income tax purposes may require the initial allowance to be reduced to a specified amount; and a company may by notice given to the inspector not later than two years after the end of the chargeable period for which the allowance falls to be made disclaim the initial allowance or require it to be reduced to a specified amount.

Notwithstanding anything in subsection (1) above, no initial allowance shall be made in respect of any expenditure if, when the building or structure comes to be used, it is not an industrial building or structure, and where an initial allowance has been granted in respect of any expenditure otherwise than in accordance with the provisions of this section all such assessments shall be made as are necessary to secure that effect is given to those provisions.

No initial allowance shall be made in respect of so much of any expenditure (or be made by virtue of section 154 in respect of a proportionate part of any contribution towards such expenditure) as is taken into account for the purposes of— made towards that expenditure, being a grant or payment declared by the Treasury by order to be relevant for the purposes of the withholding of initial allowances.

If any such grant or payment is made after the making of an initial allowance, that allowance shall to that extent be withdrawn; and where the amount of the grant or payment is repaid in whole or in part by the grantee to the grantor, then to the extent to which it has been so repaid it shall be deemed never to have been made.

All such assessments or adjustments of assessments to tax shall be made as may be necessary in consequence of subsection (8) above and, notwithstanding any other provision, the time within which such an assessment or adjustment may be made shall not expire before the expiration of three years from the end of the chargeable period in which the grant, payment or repayment in question was made.

Any expenditure incurred for the purposes of a trade by a person about to carry it on shall, for the purpose only of determining the chargeable period for which an allowance may be made in respect of that expenditure under subsection (1) above, be treated as if it had been incurred by that person on the first day on which he does carry it on, and, except for that purpose, expenditure shall not be treated as having been incurred after the date on which it was in fact incurred by virtue of section 10(1).

In relation to expenditure to which this section applies, section 1 shall have effect subject to the following modifications, that is to say—

This section applies to so much of any expenditure as is certified by the Secretary of State for the purposes of this section to be expenditure which, in his opinion, qualifies for a regional development grant or a grant under Part IV of the relevant Order and consists of the payment of sums on a project—

This section also applies to so much of any expenditure as is certified by the Department of Economic Development in Northern Ireland for the purposes of this section to be expenditure which, in the opinion of that Department, qualifies for a grant under Part IV of the relevant Order and consists of the payment of sums on a project—

In this section— and any reference to a particular provision of that Act or Order includes a reference to the corresponding provision of any Act or Order which was in force before and repealed by the Industrial Development Act 1982 or the Industrial Development (Northern Ireland) Order 1982.

Subject to the provisions of this Act, where— an allowance (“a writing-down allowance”) shall be made to him for that chargeable period.

The writing-down allowance shall be equal to one-twentyfifth or, where the expenditure was incurred before 6th November 1962, one-fiftieth of the expenditure mentioned in subsection (1)(c) above, except that for a chargeable period of less than a year that fraction of one-twentyfifth or one-fiftieth shall be proportionately reduced.

Where the interest in a building or structure which is the relevant interest in relation to any expenditure is sold and the sale is an event to which section 4(1) applies, then (subject to any further adjustment under this subsection on a later sale) the writing-down allowance for any chargeable period, if that chargeable period or its basis period ends after the time of the sale, shall be the residue (as defined in section 8(1)) of that expenditure immediately after the sale, reduced in the proportion (if it is less than one) which the length of the chargeable period bears to the part unexpired at the date of the sale of the period of 25 years or, where the expenditure was incurred before 6th November 1962, 50 years beginning with the time when the building or structure was first used.

Notwithstanding anything in subsections (1) to (3) above, in no case shall the amount of a writing-down allowance made to a person for any chargeable period in respect of any expenditure exceed what, apart from the writing off falling to be made by reason of the making of that allowance, would be the residue of that expenditure at the end of that chargeable period or its basis period.

Subject to section 5, where any capital expenditure has been incurred on the construction of a building or structure, and any of the following events occurs while the building is an industrial building or structure or after it has ceased to be one, that is to say— an allowance or charge (“a balancing allowance” or “a balancing charge”) shall, in the circumstances mentioned in this section and subject to subsection (2) below, be made to, or, as the case may be, on, the person entitled to the relevant interest immediately before that event occurs, for the chargeable period related to that event.

No balancing allowance or balancing charge shall be made by reason of any event occurring more than 25 years (or, where the expenditure was incurred before 6th November 1962, 50 years) after the building or structure was first used and where two or more events occur during a period when the building or structure is not an industrial building or structure no balancing allowance or balancing charge shall be made on the occurrence of any of those events except the first.

Where there are no sale, insurance, salvage or compensation moneys, or where the residue of the expenditure immediately before the event exceeds those moneys, a balancing allowance shall be made the amount of which shall be the amount of that residue or, as the case may be, of the excess of the residue over those moneys.

If the sale, insurance, salvage or compensation moneys exceed the residue, if any, of the expenditure immediately before the event, a balancing charge shall be made, and the amount on which it is made shall be an amount equal to the excess or, where the residue is nil, to those moneys.

If for any part of the relevant period the building or structure was neither an industrial building or structure nor used for scientific research, subsections (6) to (9) below shall have effect instead of subsections (3) and (4) above.

Subject to subsection (8) below, where the sale, insurance, salvage or compensation moneys are not less than the capital expenditure, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the allowances given.

Subject to subsection (8) below, where there are no sale, insurance, salvage or compensation moneys or where those moneys are less than the capital expenditure, then—

No balancing charge or allowance shall be made under subsection (6) or (7) above on the occasion of a sale if by virtue of section 158 the building or structure is treated as having been sold for a sum equal to the residue of the expenditure on its construction immediately before the sale.

In subsections (5) to (7) above and this subsection—

Notwithstanding anything in subsections (1) to (9) above, in no case shall the amount on which a balancing charge is made on a person in respect of any expenditure on the construction of a building or structure exceed the amount of the initial allowance, if any, made to him in respect of that expenditure together with the amount of any writing-down allowances or scientific research allowances in respect of that expenditure, and any relevant mills, factories or exceptional depreciation allowances in respect of that building or structure, made to him for chargeable periods which end on or before the date of the event giving rise to the charge or of which the basis periods end on or before that date.

Where— the allowance shall be treated for the purposes of subsection (10) above as having been made to the woman.

In subsection (10) above “relevant mills, factories or exceptional depreciation allowances”, in relation to any building or structure, means —

This section has effect where—

For the purposes of section 4 the net proceeds to the relevant person of the sale— but the net proceeds of sale shall not by virtue of this subsection be taken to be greater than such amount as will secure that no balancing allowance falls to be made.

Where subsection (2) above operates in relation to a sale to deny or reduce a balancing allowance in respect of any expenditure, the residue of that expenditure immediately after the sale shall be calculated for the purposes of this Part as if that balancing allowance had been made or, as the case may be, had not been reduced.

In this section—

Where the terms on which a subordinate interest is granted are varied before the sale of the relevant interest any capital consideration for the variation shall be treated for the purposes of this section as a premium for the grant of the interest, and the question whether any and, if so, what rent is payable in respect of the interest shall be determined by reference to the terms as in force immediately before the sale.

This Chapter and Chapter III— in any case where the expenditure is incurred, or is incurred under a contract entered into, at a time when the site of the industrial building or structure, the qualifying hotel or the commercial building or structure is in an enterprise zone, being a time not more than 10 years after the site was first included in the zone.

Section 3(2) shall have effect with the substitution for the references to one-twentyfifth of references to one-quarter.

Section 7 shall not apply to expenditure to which this Chapter applies by virtue of this section.

For the purposes of sections 3(1)(b), 4(1), 8(3), (4) and (7) and 15(1) and (2) a building or structure of any description (including a qualifying hotel) in relation to which this Chapter has effect in accordance with subsection (1) above shall be regarded as continuing to be, or to be used as, a building or structure of that description notwithstanding that it has become a building or structure of another such description.

For the purposes of subsection (1) above, expenditure shall not by reason only of section 10(1) be treated as having been incurred after the date on which it was in fact incurred.

Subject to the following provisions of this section, this Part, except Chapter I, shall apply in relation to a qualifying hotel as if it were an industrial building or structure, with the following modifications—

Subsection (1)(a) above has effect subject to section 15(1); but a building shall not by virtue of that section be deemed to continue to be a qualifying hotel for more than two years after the end of the chargeable period or its basis period in which it falls temporarily out of use.

Subsection (1)(b) above shall not have effect in relation to any chargeable period or its basis period ending after 26th July 1989.

Any expenditure incurred on the construction of any building or structure shall be treated for the purposes of this Part as written off to the extent and as at the times specified below in this section, and references in this Part to the residue of any such expenditure shall be construed accordingly.

Where an initial allowance is made in respect of the expenditure, the amount of that allowance shall be treated as written off as at the time when the building or structure is first used.

Subject to subsection (4) below, where, by reason of the building or structure being at any time an industrial building or structure, a writing-down allowance is made for any chargeable period in respect of the expenditure, the amount of that allowance shall be treated as written off as at the end of that period or its basis period.

Where, at the time referred to in subsection (3) above, an event occurs which gives rise or may give rise to a balancing allowance or balancing charge, the amount directed to be treated as written off by that subsection as at that time shall be taken into account in computing the residue of that expenditure immediately before that event for the purpose of determining whether any and if so what balancing allowance or balancing charge is to be made.

Subject to subsection (6) below, where a scientific research allowance is made for any chargeable period in respect of the expenditure, the amount of that allowance shall be treated as written off—

Where, at the time as at which an amount falls to be treated as written off under subsection (5) above, an event occurs which gives rise or may give rise to a balancing allowance or balancing charge, the amount directed to be treated as written off by that subsection as at that time shall be taken into account in computing the residue of the expenditure immediately before that event for the purpose of determining whether any and if so what balancing allowance or balancing charge is to be made.

If, for any period or periods between the time when the building or structure was first used for any purpose and the time at which the residue of the expenditure falls to be ascertained, the building or structure has not been in use as an industrial building or structure, then there shall in ascertaining that residue be treated as having been previously written off in respect of that period or those periods amounts equal to writing-down allowances made for chargeable periods of a total length equal thereto at such rate or rates as would have been appropriate having regard to any sale on which section 3(3) operated.

For the purposes of subsection (7) above a building or structure shall not be treated—

Where, on the occasion of a sale, a balancing allowance is made in respect of the expenditure, there shall be treated as written off as at the time of the sale the amount by which the expenditure before the sale exceeds the net proceeds of the sale.

Where, on the occasion of a sale, a balancing charge is made in respect of the expenditure, the residue of the expenditure shall be deemed for the purposes of this Part to be increased as at the time of the sale by the amount on which the charge is made.

Where, on the occasion of a sale, a balancing charge is made under section 4(7)(b) in respect of the expenditure and, apart from this subsection, the residue of the expenditure immediately after the sale would by virtue of subsection (10) above be deemed to be greater than the net proceeds of the sale, the residue immediately after the sale shall be deemed for the purposes of this Part to be equal to the net proceeds.

Where a building or structure is demolished, and the demolition gives rise, or might give rise, to a balancing allowance or charge under this Part to or on the person incurring the cost of demolition, the net cost to him of the demolition (that is to say, the excess, if any, of the cost of the demolition over any moneys received for the remains of the property) shall be added for the purposes of this Part to the residue, immediately before the demolition, of the expenditure incurred on the construction of the property; and if this subsection applies to the net cost to a person of the demolition of any property, the cost or net cost shall not be treated for the purposes of this Act (other than Part III) as expenditure incurred in respect of any other property by which that property is replaced.

Where the Crown is at any time entitled to the relevant interest in a building or structure, subsections (1) to (12) above shall have effect as if all such writing-down allowances, balancing allowances and balancing charges had been made as could have been made if—

In relation to sales occurring after the passing of the Finance Act 1988 (29th July 1988), references in subsection (13) above to the Crown shall include references to any person who is not within the charge to tax in the United Kingdom.

Except in the cases mentioned in subsections (2) to (7) below, any allowance or charge made to or on a person under the preceding provisions of this Part shall be made to or on him in taxing his trade.

An initial allowance shall be made to a person by way of discharge or repayment of tax if his interest in the building or structure is subject to any lease when the expenditure is incurred or becomes subject to any lease before the building or structure is first used for any purpose.

A writing-down allowance shall be made to a person for a chargeable period by way of discharge or repayment of tax if his interest is subject to any lease at the end of that chargeable period or its basis period.

A balancing allowance shall be made to a person by way of discharge or repayment of tax if his interest is subject to any lease immediately before the event giving rise to the allowance.

Any allowance which, under subsections (2) to (4) above, is to be made by way of discharge or repayment of tax shall be available primarily against the following income, that is to say—

Effect shall be given to a balancing charge to be made on a person where his interest is subject to any lease immediately before the event giving rise to the charge—

Where a balancing allowance or balancing charge falls to be made in the case of a building or structure which has ceased to be an industrial building or structure and the circumstances are such as are mentioned in section 15(2)(a) and (b), the allowance or charge shall be made as provided in that subsection.

This section shall also apply where the building or structure in question is used by a licensee of the person entitled to the relevant interest as if that interest were subject to a lease.

Where expenditure is incurred on the construction of a building or structure and, before that building or structure is used, the relevant interest in it is sold—

Where the relevant interest in the building or structure is sold more than once before the building or structure is used, paragraph (b) of subsection (1) above shall have effect only in relation to the last of those sales.

Where the expenditure incurred on the construction of a building or structure was incurred by a person carrying on a trade which consists, in whole or in part, in the construction of buildings or structures with a view to their sale, and, before the building or structure is used, he sells the relevant interest in it in the course of that trade, or, as the case may be, of that part of that trade, paragraph (b) of subsection (1) above shall have effect subject to the following modifications, that is to say—

Subsection (5) below applies where—

Where this subsection applies, this Part shall have effect in relation to the person who buys the interest as if—

Subject to the provisions of this section, where expenditure has been incurred on the construction of a building or structure and a long lease of that building or structure is granted out of an interest therein which is the relevant interest in relation to that expenditure, this Part shall, if the lessor and the lessee so elect, have effect as if—

Any election under this section shall have effect in relation to all the expenditure in relation to which the interest out of which the lease is granted is the relevant interest and which relates to the building or structure or (if more than one) the buildings or structures which are the subject of the lease.

Any election under this section shall be by notice to the inspector given within two years after the date on which the lease takes effect; and all such adjustments shall be made, whether by discharge or repayment of tax or by further assessments, as may be required for giving effect to the election.

In this section “long lease” means a lease the duration of which (ascertained according to subsections (1) to (4) and (6) of section 38 of the principal Act) exceeds 50 years; and any question whether a lease is a long lease shall be determined without regard to section 16(5).

Section 20(3) shall have effect subject to subsection (1)(c) above.

This section does not apply where— but paragraph (a) above shall not prevent the application of this section where the lessor is a body discharging statutory functions and the lessee a company of which it has control.

For the purposes of this Part, a building or structure shall not be deemed to cease altogether to be used by reason only that it falls temporarily out of use, and where, immediately before any period of temporary disuse, a building or structure is an industrial building or structure, it shall be deemed to be an industrial building or structure during the period of temporary disuse.

The reference in this section to the permanent discontinuance of a trade does not include a reference to the happening of any event which, by virtue of section 113 or 337(1) of the principal Act (changes in persons carrying on a trade, and special rules for corporation tax), is to be treated as equivalent to the discontinuance of the trade.

Subject to subsection (2) below, the provisions of this Part shall have effect in relation to any period of requisition of any land by the Crown as if the Crown had been in possession of that land for that period by virtue of a lease, and—

Where a person carrying on a trade is authorised by the Crown to occupy the land or any part thereof for the whole or any part of the period of requisition (“the occupier”)—

In subsections (1) and (2) above “period of requisition” means a period in respect of which compensation is, or, but for any agreement to the contrary, would be, payable under section 2(1)(a) of the Compensation (Defence) Act 1939 by reference to the rent which might reasonably be expected to be payable under a lease granted immediately before the beginning of that period.

Where, with the consent of the lessor, a lessee of any building or structure remains in possession thereof after the termination of the lease without a new lease being granted to him, that lease shall be deemed for the purposes of this Part to continue so long as he remains in possession as aforesaid.

Where, on the termination of a lease, a new lease is granted to the lessee in pursuance of an option available to him under the terms of the first lease, the provisions of this Part shall have effect as if the second lease were a continuation of the first lease.

Where, on the termination of a lease, the lessor pays any sum to the lessee in respect of a building or structure comprised in the lease, the provisions of this Part shall have effect as if the lease had come to an end by reason of the surrender thereof in consideration of the payment.

Where, on the termination of a lease, another lease is granted to a different lessee and, in connection with the transaction, that lessee pays a sum to the person who was the lessee under the first lease, the provisions of this Part shall have effect as if both leases were the same lease and there had been an assignment thereof by the lessee under the first lease to the lessee under the second lease in consideration of the payment.

If, in the case of a trade which consists of or includes the working of a mine, oil well or other source of mineral deposits— the person entitled to the allowance may claim that the balance of the allowance shall be given for the last preceding chargeable period, and so on for other preceding chargeable periods, so however that allowances shall not be given by virtue of this subsection for periods together amounting to more than five years (inclusive of any period for which an allowance might be made but cannot be given effect for want of profits or gains) otherwise than by giving a proportionately reduced allowance for a chargeable period of which part is required to make up the five years.

In the case of a company no allowance shall be given by virtue of this section so as to create or augment a loss in any accounting period; and, where on a company ceasing to carry on a trade a claim is made both under this section and under section 394 of the principal Act (relief for terminal loss) the allowance for which the claim is made shall be disregarded for the purposes of the claim under that section, but effect shall be given to the claim under that section in priority to the claim under this section.

Section 42 of the Taxes Management Act 1970 shall apply to any claim under this section.

Subject to the provisions of this section, in this Part “industrial building or structure” means a building or structure in use— and, in particular, the expression “industrial building or structure” includes any building or structure provided by the person carrying on such a trade or undertaking for the welfare of workers employed in that trade or undertaking and in use for that purpose.

The provisions of subsection (1) above shall apply in relation to a part of a trade or undertaking as they apply in relation to a trade or undertaking except that where part only of a trade or undertaking complies with the conditions set out in subsection (1), a building or structure shall not by virtue of this subsection be an industrial building or structure unless it is in use for the purposes of that part of that trade or undertaking.

The reference in paragraph (e) of subsection (1) above to the subjection of goods or materials to any process shall include a reference to the maintaining or repairing of any goods or materials but, notwithstanding subsection (2) above, paragraph (e) shall not apply to the maintenance or repair by any person of any goods or materials employed by that person in any trade or undertaking unless that trade or undertaking itself falls within any of the paragraphs of subsection (1) (including paragraph (e)).

Notwithstanding anything in subsections (1) to (3) above, but subject to subsections (5) and (7) below, “industrial building or structure” does not include any building or structure in use as, or as part of, a dwelling-house, retail shop, showroom, hotel or office or for any purpose ancillary to the purposes of a dwelling-house, retail shop, showroom, hotel or office.

Subsection (4) above shall not apply to, or to part of, a building or structure which was constructed— if the building or structure is likely to have little or no value to the person carrying on the trade when the mine, oil well or other source, or the plantation, is no longer worked, or will cease to belong to such person on the coming to an end of a foreign concession under which the mine, oil well or other source, or the plantation, is worked.

Where a building or structure is used by more than one licensee of the same person, that building or structure shall not be an industrial building or structure unless each of the licensees uses the building or structure or that part of it to which his licence relates for the purposes of a trade which falls within subsection (1) above. This subsection does not apply in any case where the licence in question was granted before 10th March 1982.

Where part of the whole of a building or structure is, and part of it is not, an industrial building or structure, and the capital expenditure which has been incurred on the construction of the second mentioned part is not more than one-quarter of the total capital expenditure which has been incurred on the whole building or structure, the whole building or structure and every part of it shall be treated as an industrial building or structure. In relation to capital expenditure which, disregarding section 1(10), was incurred before 16th March 1983, other than expenditure which by virtue of section 10(1) was deemed to have been incurred after that date, this subsection shall have effect with the substitution of “one-tenth” for “one-quarter”.

A road on an industrial estate shall be treated as used for the purposes of a trade which falls within subsection (1) above if the buildings and structures on the estate are used wholly or mainly for such purposes. This subsection shall have effect in relation to any chargeable period or its basis period ending on or after 27th July 1989.

In this section—

In this section the expression “foreign plantation” shall (without prejudice to the generality of the definition in subsection (9) above) be extended so as to include any land outside the United Kingdom used for husbandry or forestry, and the reference in subsection (5) above to the growing and harvesting of crops shall be correspondingly extended.

Paragraph (c) of subsection (1) above shall not affect any allowance or charge which would have been made under this Act, disregarding Parts III, IV and VII, if this Act had been enacted without that paragraph and if section 7(1)(c) of the 1968 Act and section 25 of the Finance Act 1952 (which were the corresponding provisions prior to the passing of this Act) had not been passed, and where by virtue of paragraph (c) a balancing charge is made on a person in respect of any expenditure, the amount on which it is made shall not exceed the amount of the allowances made to him in respect of that expenditure by virtue of that paragraph (and those prior provisions).

Subsection (1)(d) above shall have effect only in relation to expenditure which is to be treated for the purposes of this Part as incurred after the end of the year 1956-57.

For the purposes of this Part references to use as an industrial building or structure do not apply, in the case of a building or structure outside the United Kingdom, to use for the purposes of a trade at a time when the profits or gains of the trade are not assessable in accordance with the rules applicable to Case I of Schedule D.

Subsection (13) shall apply in relation to qualifying hotels to which this Part applies by virtue of section 7, and subsection (7) shall apply in relation to any qualifying hotel and also in relation to commercial buildings and structures but, subject to that, none of the provisions of this section shall apply in relation to any qualifying hotel or commercial building or structure.

For the purposes of this Part, a qualifying hotel is an hotel the accommodation in which is in a building or buildings of a permanent nature and which complies with the following requirements—

In subsection (1) above “the season” means April, May, June, July, August, September and October; and for the purposes of that subsection a letting bedroom is a private bedroom available for letting to the public generally and not normally in the same occupation for more than one month.

Subject to subsection (4) below, any question whether an hotel complies with the requirements in subsection (1)(a) and (b) above at any time in a person’s chargeable period or its basis period shall be determined— but an hotel shall not by virtue of this subsection be treated as complying with those requirements at any time in a chargeable period or its basis period after it has ceased altogether to be used.

Where, during the 12 months mentioned in subsection (3)(a) above, an hotel had fewer than 10 letting bedrooms until a date too late for it to qualify by reference to those 12 months, it may instead qualify under subsection (3)(b) by reference to the 12 months beginning with that date as if it had then first been used.

For the purposes of this section—

Subsections (1) to (5) above do not apply in any case where the expenditure in question was incurred before 12th April 1978, and expenditure shall not be treated for the purposes of this subsection as having been incurred after the date on which it was in fact incurred by reason only of section 10(1).

Subject to the provisions of this section, in this Part, “the relevant interest” means, in relation to any expenditure incurred on the construction of a building or structure, the interest in that building or structure to which the person who incurred the expenditure was entitled when he incurred it.

Where, when he incurs expenditure on the construction of a building or structure, a person is entitled to two or more interests in the building or structure, and one of those interests is an interest which is reversionary on all the others, that interest shall be the relevant interest for the purposes of this Part.

An interest shall not cease to be the relevant interest for the purposes of this Part by reason of the creation of any lease or other interest to which that interest is subject, and where the relevant interest is a leasehold interest and is extinguished by reason of the surrender thereof or on the person entitled thereto acquiring the interest which is reversionary thereon, the interest into which that leasehold interest merges shall thereupon become the relevant interest.

An interest which by virtue of section 11(4) of the 1968 Act was immediately before the commencement of this section treated as the relevant interest shall continue to be so treated for the purposes of the provisions of this Part in so far as they relate to writing-down allowances, balancing allowances and balancing charges.

References in this Part to expenditure incurred on the construction of a building or structure do not include any expenditure incurred on the acquisition of, or of rights in or over, any land.

A person who has incurred expenditure on the construction of a building or structure shall be deemed, for the purposes of any provision of this Part referring to his interest therein at the time when the expenditure was incurred, to have had the same interest therein as he would have had if the construction thereof had been completed at that time.

Without prejudice to any of the other provisions of this Part or Part VIII relating to the apportionment of sale, insurance, salvage or compensation moneys, the sum paid on the sale of the relevant interest in a building or structure, or any other sale, insurance, salvage or compensation moneys payable in respect of any building or structure, shall, for the purposes of this Part, be deemed to be reduced by an amount equal to so much thereof as, on a just apportionment, is attributable to assets representing expenditure other than expenditure in respect of which an allowance can be made under this Part.

In this Part “enterprise zone” means an area designated as such by an order made by the Secretary of State under powers in that behalf conferred by Schedule 32 to the Local Government, Planning and Land Act 1980 or, in Northern Ireland, by an order made by the Department of the Environment for Northern Ireland under Article 7 of the Enterprise Zones (Northern Ireland) Order 1981.

In this Part “commercial building or structure” means a building or structure, other than an industrial building or structure or a qualifying hotel, which is used for the purposes of a trade, profession or vocation or, whether or not for such a purpose, as an office or offices but does not include any building or structure in use as, or as part of, a dwelling-house.

For the purposes of this Part, and the other provisions of this Act which are relevant to this Part, any transfer of the relevant interest in a building or structure otherwise than by way of sale shall be treated as a sale of the interest for a price other than that which it would have fetched if sold on the open market.

If sections 157 and 158 would not apart from this subsection have effect in relation to a transfer treated as a sale by virtue of subsection (6) above, those sections shall have effect in relation to it as if it were a sale falling within section 157(1)(a).

Without prejudice to section 148(1), any reference in this Part to the incurring of expenditure on the construction of a building or structure does not include expenditure on the provision of machinery or plant or on any asset which has been treated for any chargeable period as machinery or plant. This subsection shall not have effect in relation to any chargeable period or its basis period ending after 26th July 1989.

Where section 16(4) of the 1968 Act (expenditure on preparatory work before the appointed day) applied immediately before the commencement of this Part in relation to any expenditure so that Chapter I of Part I of that Act (apart from section 1) applied to part of the expenditure separately from the remainder of the expenditure, then the provisions of this Part (apart from section 1) shall similarly apply to that part of the expenditure separately from the remainder.

Any reference in this Part to any allowance or charge is, except where the context otherwise requires, a reference to such an allowance or charge under this Part, and a reference to an allowance made or postponed under this Part includes, where the context permits, a reference to an allowance relating to expenditure in respect of an industrial building or structure (or any building or structure treated as an industrial building or structure) made or postponed under any enactment repealed by this Act or by any Act repealed by this Act, notwithstanding that the repealed enactment is not re-enacted in this Act.

Subject to the provisions of this Part, where— there shall be made to him for that period an allowance (“a first-year allowance”) which shall be of an amount equal to the whole of that expenditure.

This section applies to so much of any expenditure as is certified by the Secretary of State for the purposes of this section to be expenditure which, in his opinion, qualifies for a regional development grant or a grant under Part IV of the relevant Order and consists of the payment of sums on a project—

This section applies to so much of any expenditure as is certified by the Department of Economic Development in Northern Ireland for the purposes of this section to be expenditure which, in the opinion of that Department, qualifies for a grant under Part IV of the relevant Order and consists of the payment of sums on a project—

Subject to the following provisions of this section, no first-year allowance shall be made in respect of any expenditure— and section 50 shall apply for the interpretation of paragraph (c) above as it applies for the interpretation of Chapter V of this Part.

Paragraph (c) of subsection (4) above does not apply to expenditure incurred at any time on the provision of machinery or plant which is to be an integral part of a building or structure if section 1 would apply to expenditure incurred at that time on the construction of that building or structure.

Nothing in paragraph (c) of subsection (4) above affects expenditure on the provision of vehicles if they are provided wholly or mainly for the use of persons in receipt of—

Where one or more first-year allowances fall to be made for any chargeable period in connection with a trade carried on by a company, the company may, by notice given to the inspector not later than two years after the end of that period, either disclaim the allowance or allowances or require that the amount, or aggregate amount, thereof be reduced to an amount specified in that behalf in the notice; and a claim for one or more first-year allowances to be made for any chargeable period in connection with a trade carried on by a person other than a company may contain a similar requirement as to the amount or aggregate amount thereof.

No disclaimer or claim under subsection (7) above may be made in respect of any ship.

All such assessments or adjustments of assessments shall be made as may be necessary to give effect to subsection (7) above.

In this section— and any reference to a particular provision of that Act or Order includes a reference to the corresponding provision of any Act or Order which was in force before and repealed by the Industrial Development Act 1982 or the Industrial Development (Northern Ireland) Order 1982.

Where expenditure is incurred on the provision of machinery or plant which is fixed to a building or land of which the person who incurs the expenditure is the lessor and the circumstances are such that a transfer of his interest in the building or land would operate to transfer his interest in the machinery or plant, then subsection (4)(c) above shall not preclude the making of a first-year allowance in respect of such expenditure.

A claim by a person other than a company for a first-year allowance in respect of expenditure to which section 22(4)(c) applies, and a return by a company of profits in the computation of which a deduction is made on account of such an allowance, shall be accompanied by a certificate—

Where a person other than a company has claimed a first-year allowance in respect of any expenditure, or a deduction on account of such an allowance has been made in computing profits in respect of which a return has been made by a company, and the machinery or plant in question is at any time in the requisite period used otherwise than for a qualifying purpose, the person to whom it then belongs shall give notice of that fact to the inspector, specifying the use to which the machinery or plant has been put; and, subject to subsection (3) below, any such notice shall—

If, at the end of the three months mentioned in subsection (2)(a) above, the person concerned does not know and cannot reasonably be expected to know that any item of machinery or plant in respect of which he is required to give a notice under that subsection has been used otherwise than for a qualifying purpose, he shall in respect of that item give the notice within 30 days of his coming to know that it has been so used.

Where a first-year allowance has been made in respect of any expenditure, the inspector may by notice require— to furnish him, within such period (not being less than 30 days) as may be specified in the notice, with such information as he may require and the person to whom the notice is addressed has or can reasonably obtain about the leasing of the machinery or plant or the use to which it is being or has been put.

The obligation to give notice by virtue of subsection (2) or (3) above where the machinery or plant becomes used otherwise than for a qualifying purpose shall arise a second time when the machinery or plant becomes used— (if it were not so used before).

Section 50 shall apply for the interpretation of this section as it applies for the interpretation of Chapter V of this Part.

Subject to the provisions of this Part, where— allowances and charges shall be made to and on him in accordance with the following provisions of this section.

Subject to subsection (3) below, for any chargeable period for which a person within subsection (1) above has qualifying expenditure which exceeds any disposal value to be brought into account in accordance with subsection (6) below, there shall be made to him —

A claim for a writing-down allowance to be made for any chargeable period in connection with a trade carried on by a person other than a company may require that the amount of the allowance be reduced to an amount specified in that behalf in the claim.

For any chargeable period for which a company has qualifying expenditure, the company may, by notice given to the inspector not later than two years after the end of that period, either disclaim a writing-down allowance or require that the allowance be reduced to an amount specified in that behalf in the notice; and all such assessments and adjustments of assessments shall be made as may be necessary to give effect to this subsection.

For any chargeable period for which a person’s qualifying expenditure is less than the disposal value which he is to bring into account, there shall be made on him a charge (“a balancing charge”), and the amount on which the charge is made shall be an amount equal to the difference.

The disposal value to be brought into account by a person for any chargeable period is the disposal value of all machinery or plant— but this subsection shall not require a person to bring into account the disposal value of any machinery or plant which he disposes of by way of gift in such circumstances that there is a charge to tax under Schedule E.

Subject to subsections (2) to (9) below, for the purposes of section 24, a person’s qualifying expenditure for a chargeable period is the aggregate of the following amounts—

In any case where— then, for the purposes of section 24, that expenditure shall not, by virtue of subsection (1)(a)(ii) above, be excluded from the capital expenditure referred to in subsection (1)(a) above.

In any case where— then, for the purposes of section 24, that expenditure shall not, by virtue of subsection (1)(a)(ii) above, be excluded from the capital expenditure referred to in subsection (1)(a) above.

In any case where— then, for the purposes of section 24, an amount equal to the relevant portion of the expenditure giving rise to the first-year allowance or allowances referred to in paragraph (c) above shall be treated as expenditure in respect of which no first-year allowance is or could be made for the chargeable period in question.

Subject to subsection (6) below, where— that expenditure shall not be virtue of subsection (1)(a)(ii) above be excluded from the capital expenditure referred to in subsection (1)(a) above.

Where the event by reason of which disposal value falls to be brought into account as mentioned in subsection (5) above is the assignment of the benefit of a contract, subsection (1) above, as modified by subsection (5) above, shall have effect as if any reference in paragraph (a) to capital expenditure incurred were a reference to the total capital expenditure which the person in question would have incurred in respect of the machinery or plant if he had wholly performed the contract.

Where an allowance is or has been made under any provision of Part V except section 122 in respect of any capital expenditure, none of that expenditure shall be taken into account in determining qualifying expenditure for the purpose of any allowance or charge under section 24. This subsection shall not have effect in relation to any chargeable period or its basis period ending after 26th July 1989.

All such assessments and adjustments of assessments shall be made as may be necessary to give effect to subsections (5) and (6) above.

In subsection (4) above “the relevant portion” of expenditure giving rise to a first-year allowance or allowances is that which bears to the whole of that expenditure the same proportion as the amount of the reduction mentioned in subsection (4)(c) above bears to what the amount of the allowance or allowances would have been apart from that reduction.

Subject to subsection (2) below, for the purposes of section 24 the disposal value of any machinery or plant depends upon the event by reason of which it falls to be taken into account and—

The disposal value of any machinery or plant shall in no case exceed the capital expenditure incurred by the person in question on the provision of the machinery or plant for the purposes of the trade.

Where the person mentioned in subsection (2) above has acquired the machinery or plant as a result of a transaction which was, or a series of transactions each of which was, between connected persons within the terms of section 839 of the principal Act, that subsection shall have effect as if it referred to the capital expenditure on the provision of the machinery or plant incurred by whichever party to that transaction, or to any of those transactions, incurred the greatest such expenditure.

Except as otherwise provided and subject in particular to subsections (2) and (3) below, the provisions of this Part shall, with any necessary adaptations, apply in relation to— as they apply in relation to trades.

The provisions of this Part in their application in accordance with this section to an office or employment—

This section shall have effect from 6th April 1993 with the omission of subsection (1)(b).

Subject to subsections (2) to (6) below, this Part and such other provisions of the Corporation Tax Acts as relate to allowances or charges under this Part shall apply with any necessary adaptations in relation to machinery and plant provided for use or used for the purposes of the management of the business— as they apply in relation to machinery or plant provided for use or used for the purposes of a trade; and, except as provided by subsection (2) below, in relation to any allowances and balancing charges which fall to be made by virtue of this section, the Corporation Tax Acts shall apply as if they were to be made in taxing a trade.

As respects allowances or charges falling to be made by virtue of this section in relation to any business— and sections 73, 144 and 145 shall not apply.

No allowance and no balancing charge shall be made by virtue of this section for any accounting period in respect of expenditure incurred by any person on machinery or plant, except in pursuance of an election made by him for that accounting period; but an election for any chargeable period shall have effect as an election for that and all subsequent chargeable periods.

An election under subsection (3) above shall be made by notice to the inspector either for all machinery or plant provided for use or used for the purposes of the management of the relevant business, or for any class of machinery or plant so provided or used; but an election for machinery or plant of any class shall not be made for any accounting period after an assessment in respect of the business for that or a subsequent accounting period has been finally determined without such an election.

Corresponding allowances or charges in the case of the same machinery or plant shall not be made under this Part both under subsection (2) above and in some other way; and, on any assessment to tax, expenditure to which an election under this section applies shall not be taken into account otherwise than under this Part and except as provided by section 75(4) of the principal Act.

In this section references to the purposes of the management of a business are to be taken as referring to those purposes expenditure on which would, apart from this section, be treated as expenses of management within the meaning of section 75 of the principal Act.

For the purposes of this Part—

Subsection (1) above shall be construed as one with section 503 of the principal Act and, accordingly, section 504 of that Act shall also apply for the purposes of this section.

Where there is a letting of accommodation only part of which is holiday accommodation, such apportionments shall be made for the purposes of this section as appear to the inspector, or on appeal the Commissioners, to be just and reasonable.

Where for any chargeable period a first-year allowance falls to be made to a person carrying on a trade in respect of expenditure incurred by him on the provision of a ship, that person may, by notice given to the inspector not later than two years after the end of the period— and a notice which contains a requirement under paragraph (b) above may also contain a requirement under paragraph (c) above with respect to the reduced amount of the allowance.

Where a notice has been given under subsection (1) above requiring the postponement of the whole or part of any first-year allowance—

All such assessments and adjustments of assessments shall be made as may be necessary to give effect to the provisions of this section.

An allowance which is postponed by virtue of this section shall not by reason only of the postponement fall within the references to allowances or amounts carried forward from an earlier year or period in sections 383(5)(d), 388(7) and 403(3) of the principal Act (loss relief and group relief).

In any case where a notice under subsection (1) above contains requirements under both paragraphs (b) and (c) of that subsection, any reference in subsections (2) to (4) above to the first-year allowance is a reference to the reduced amount of that allowance as specified in the notice.

This section and sections 32 and 33 apply in any case where—

Subject to sections 32 and 33, it shall be assumed for the purposes of sections 24, 25 and 26 and subsections (3) to (10) below— and subject to subsections (3) to (10) below, any allowance or charge which, on those assumptions, would fall to be made for any chargeable period in the case of the single ship trade shall be made for that period in the case of the actual trade.

The shipowner may, by notice given to the inspector not later than two years after the end of a chargeable period for which he has qualifying expenditure in respect of his single ship trade, require the postponement of the whole of the writing-down allowance to be made to him for that period or of so much of it as is specified in the notice.

Where notice has been given under subsection (3) above in respect of a chargeable period— and, where a claim under paragraph (c) above relates to only part of the amount postponed, a further claim or claims may be made under that paragraph in relation to the balance or any part thereof until the aggregate of the amounts claimed equals the amount postponed.

A claim under subsection (4)(c) above shall not affect any right of the shipowner to (or the determination of the amount of) any writing-down allowance to which, apart from the claim, he is entitled for the chargeable period to which the claim relates.

For any chargeable period of the single ship trade for which the amount of a writing-down allowance is reduced by virtue of a requirement— any reference in subsections (3) to (5) above to the writing-down allowance is a reference to the reduced amount of the allowance, as specified in the claim or notice concerned.

For any chargeable period of the single ship trade for which the disposal value of the ship falls to be brought into account in accordance with sections 24, 25 and 26, no balancing allowance or balancing charge shall be made to or on the shipowner in respect of that trade but, in such a case—

In relation to old expenditure, in any case where subsection (7) above applies by reason of the ship beginning to be used otherwise than for a qualifying purpose—

All such assessments and adjustments of assessments shall be made as may be necessary to give effect to the provisions of this section and sections 32 and 33.

An allowance which is postponed by virtue of this section shall not by reason of the postponement fall within the references to allowances or amounts carried forward from an earlier year or period in sections 383(5)(d), 388(7) and 403(3) of the principal Act (loss relief and group relief).

In this section “requisite period”, “qualifying purpose” and “old expenditure” have the same meanings as they have for the purposes of Chapter V of this Part.

In relation to expenditure incurred before 27th July 1989, subsection (1) shall have effect with the substitution for paragraph (b) of the following paragraph—.

If the ship ceases to belong to the shipowner without having in fact been brought into use for the purposes of his actual trade, then—

In this section “the shipowner”, “actual trade” and “single ship trade” have the same meanings as in section 31.

The shipowner may by notice given to the inspector not later than two years after the end of a chargeable period of a single ship trade, not being the chargeable period relating to the permanent discontinuance of that trade, require that, with effect from the beginning of that chargeable period, section 31 shall not, or as the case may be, shall no longer apply.

Where a notice under subsection (1) above is given before any writing-down allowance has been made to the shipowner in respect of the expenditure referred to in section 31(1), the provisions of that section shall be deemed never to have applied with respect to that expenditure.

If a notice under subsection (1) above is given after any writing-down allowance has been so made, then, for the purposes of sections 24, 25, 26 and 31—

The shipowner may by notice given to the inspector not later than two years after the end of a chargeable period of a single ship trade, require that an amount of expenditure specified in the notice, being less than the amount which, apart from this subsection, would be his qualifying expenditure for that period in respect of the single ship trade, shall be attributed to his actual trade.

If a notice is given under subsection (4) above, then, for the purposes of sections 24, 25, 26 and 31—

In this section “the shipowner”, “actual trade” and “single ship trade” have the same meanings as in section 31.

The following provisions of this section shall have effect where capital expenditure exceeding £8,000 is incurred, or is treated under subsection (4)(b) below or section 81 as incurred, on the provision of a motor car for the purposes of a trade.

It shall be assumed for the purposes of sections 24, 25 and 26— and, subject to subsections (3) to (5) below, the allowance or charge under section 24 which, on these assumptions, would fall to be made for any chargeable period in the case of the separate trade shall be made for that period in the case of the actual trade.

If, on the assumptions in subsection (2) above, a writing-down allowance would fall to be made for any chargeable period in the case of the separate trade, the amount thereof shall be treated as not exceeding—

Where the disposal value of the motor car falls to be taken into account by reason of an event falling within section 24(6)(c)(i) and that event is such a sale or the performance of such a contract as is referred to in section 75—

If either of the following events occurs in relation to the motor car— neither section 79 nor section 80 shall apply, but for the chargeable period related to the event and any subsequent period, instead of there being made in the case of the actual trade the allowance or charge which under subsections (1) to (4) above would fall to be made for that period in the case of the separate trade, there shall be made so much of that allowance or charge as, in accordance with section 79 or 80, would be just and reasonable if it were one falling to be made for that period in the case of the notional trade referred to in that section.

Where capital expenditure exceeding £8,000 is incurred on the provision of a motor car and, by virtue of section 154, writing-down allowances may be made to a person as if a contribution made by him to the expenditure had been expenditure on the provision of a motor car for the purposes of a trade, the amount of the allowance to be made for any chargeable period—

Where, apart from this subsection, the amount of any expenditure on the hiring of a motor car the retail price of which when new exceeds £8,000 would be allowed to be deducted in computing for the purposes of tax the profits or gains of any trade, that amount shall be reduced in the proportion which £8,000, together with one half of the excess, bears to that retail price.

In this Part “motor car” means any mechanically propelled road vehicle other than—

Subsection (1)(c) applies to a vehicle only if—

For the purposes of subsection (2) above persons who are connected with each other within the meaning of section 839 of the principal Act shall be treated as the same person.

Subsection (2) above does not affect vehicles provided wholly or mainly for the use of persons in receipt of—

The Treasury may by order increase or further increase the sums of money specified in sections 34 and 35.

This section applies where— and any machinery or plant to which an election under this section applies is in the following provisions of this section referred to as a short-life asset.

An election under this section— and if different parts of the capital expenditure are incurred at different times, only that part of the expenditure which is first incurred shall be taken into account for the purposes of paragraph (c) above.

Where an election is made under this section, it shall be assumed for the purposes of sections 24, 25 and 26—

Any allowance or charge which, on the assumptions in subsection (3) above, would fall to be made for any chargeable period in the case of the notional trade shall be made for that period in the case of the actual trade; and all such assessments and adjustments of assessments shall be made as may be necessary to give effect to an election under this section.

If the disposal value of a short-life asset does not fall to be brought into account in accordance with sections 24, 25 and 26 for any of the chargeable periods ending on or before the fourth anniversary of the end of the chargeable period related to the incurring of the capital expenditure concerned or, as the case may be, the first part of that expenditure, then—

If, at a time before the notional trade would otherwise be permanently discontinued for the purposes of sections 24, 25 and 26, a short-life asset provided for leasing begins to be used otherwise than for a qualifying purpose, within the meaning of section 39 and the occasion of its being so used falls within the requisite period, within the meaning of section 40, then at that time—

Subsection (6)(b) above shall have effect—

Subject to subsection (9) below, if, at a time before the notional trade is permanently discontinued for the purposes of sections 24, 25 and 26, the trader disposes of a short-life asset to a person with whom he is connected within the terms of section 839 of the principal Act—

Paragraphs (a) and (b) of subsection (8) above do not apply in relation to a disposal unless, by notice given to the inspector not more than two years after the end of the chargeable period or its basis period in which the disposal occurred, the trader and the connected person so elect.

In the application of subsection (1) of section 26 where a short-life asset is disposed of at a price lower than that which it would have fetched if sold in the open market, paragraph (b)(i) of that subsection shall not apply unless an election is made under subsection (9) above.

Machinery or plant on the provision of which a person (“the buyer”) has incurred expenditure is used for a qualifying purpose at any time if at that time any of the conditions specified in subsections (2) to (5) below are satisfied.

The machinery or plant is leased to a lessee who uses it for the purposes of a trade, otherwise than for leasing, and either—

The buyer uses the machinery or plant for short-term leasing.

The machinery or plant is leased to a lessee who uses it for short-term leasing and either is resident in the United Kingdom or so uses it in the course of a trade carried on by him there.

The buyer uses the machinery or plant for the purposes of a trade otherwise than for leasing.

Without prejudice to subsections (1) to (5) above but subject to subsection (8) below, a ship is also 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 if—

Subsection (6) above shall with the necessary modifications apply also in relation to aircraft.

Subsection (6) above does not apply if the main object, or one of the main objects, of the letting of the ship or aircraft on charter, or of a series of transactions of which the letting on charter was one, or of any of the transactions in such a series was to obtain— in respect of expenditure incurred on the provision of the ship or aircraft whether that expenditure was incurred by the person referred to in subsection (6)(a) above or some other person.

Without prejudice to subsections (1) to (5) above, a transport container is also 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 is resident in the United Kingdom or who carries on the trade there if—

For any part of the requisite period for which the machinery or plant belongs to a person falling within section 40(5)(a) or (b), that person shall be treated for the purposes of subsections (3) and (5) above as the buyer.

In this Chapter “short-term leasing”, in relation to any machinery or plant, means leasing the machinery or plant in such a manner—

In a case where the requisite period exceeds four years the reference in subsection (1)(b)(ii) above to that period shall be construed as a reference to any period of four consecutive years which falls within the requisite period.

For the purposes of subsection (1) above, persons who are connected with each other shall be treated as the same person and where any machinery or plant is leased as one of a number of items which form part of a pool of items of the same or a similar description and are not separately identifiable, all the items in the pool may be treated as used for short-term leasing within the meaning of that subsection if substantially the whole of the items in the pool are so used.

For the purposes of this Chapter the requisite period is— except that where the machinery or plant ceases to belong to that person at any time before the end of those four years or ten years (as the case may be), the requisite period shall end at that time. If the circumstances are such that machinery or plant is used for a qualifying purpose, this subsection shall have effect with the substitution for each reference to ten years of a reference to four years.

For the purposes of subsection (4) above, machinery or plant shall be treated as continuing to belong to the person who incurred the expenditure so long as it belongs to—

Where— then, subject to the following provisions of this Chapter, subsections (2) to (6) below shall have effect with respect to the allowances and charges to be made in the case of the trade (“the actual trade”) under section 24.

It shall be assumed for the purposes of sections 24, 25 and 26— and the allowance or charge under section 24 which, on those assumptions and having regard to subsections (3) and (4) below, would fall to be made for any chargeable period in the case of the separate trade shall be made for that period in the case of the actual trade.

If an allowance under section 24 falling by virtue of this section to be made for any chargeable period in the case of the actual trade is not claimed or is disclaimed under subsection (4) of that section, or is reduced in amount in accordance with a requirement under subsection (3) or under subsection (4) of that section, then in determining the allowance or charge under that section which would fall to be made for any subsequent chargeable period in the case of the separate trade, any allowance falling to be made in the case of that trade for the first-mentioned chargeable period shall be treated as not claimed or as disclaimed or, as the case may require, as proportionately reduced.

Where in the case of any person sections 24, 25 and 26 apply in accordance with this section to different items of machinery or plant—

Where sections 24, 25 and 26 have effect in accordance with this section in respect of expenditure incurred by a person providing machinery or plant for the purposes of a trade, then, if the machinery or plant is disposed of by him to a person who is connected with him and the disposal is not on an occasion on which the trade is treated as continuing by virtue of section 113(2), 114(1) or 343(2) of the principal Act or section 77(1) of this Act—

This section does not apply to machinery or plant in relation to which sections 24, 25 and 26 apply in accordance with section 34, 79 or 80.

This section has effect with respect to expenditure on the provision of machinery or plant for leasing where the machinery or plant is at any time in the requisite period used for the purpose of being leased to a person who— and where the leasing is neither short-term leasing nor the leasing of a ship, aircraft or transport container which is used for a qualifying purpose by virtue of section 39(6) to (9).

In their application to expenditure falling within subsection (1) above, sections 24, 25 and 26 as they have effect— shall have effect, subject to subsection (3) below, as if the reference in section 24(2) to 25 per cent. were a reference to 10 per cent.

No balancing allowances or writing-down allowances shall be available in respect of expenditure falling within subsection (1) above if the circumstances are such that the machinery or plant in question is used otherwise than for a qualifying purpose and—

Where a balancing allowance or a writing-down allowance has been made in respect of expenditure incurred in providing machinery or plant and, at any time in the requisite period, an event occurs such that, by virtue of subsection (3) above, there is no right to that allowance, an amount equal to any such allowance which has previously been given (less any excess reliefs previously recovered by the operation of section 46) shall, in relation to the person to whom the machinery or plant belongs immediately before the occurrence of that event, be treated as if it were a balancing charge to be made on him for the chargeable period in which, or in the basis period for which, the machinery or plant is used at the time that event occurs.

For the purposes of subsection (4) above, the allowances that have been made in respect of expenditure on any item of machinery or plant shall be determined as if that item were the only item of machinery or plant in respect of which sections 24, 25 and 26 had effect.

Subsection (7) below applies where— except that it does not apply where section 113(2), 114(1) or 343(2) of the principal Act or section 77(1)(a) or (b) of this Act applied on the occasion of the transaction or transactions referred to in paragraph (b) above.

Where this subsection applies—

For the purposes of the application of this section to old expenditure, this section shall have effect subject to the following modifications—

This section shall have effect in any case where machinery or plant is leased to two or more persons jointly and—

If at any time when the machinery or plant is leased as mentioned in subsection (1) above the lessees use the machinery or plant for the purposes of a trade or trades, otherwise than for leasing, the expenditure on the provision of the machinery or plant shall be treated as not falling within section 42(1) if and to the extent to which it appears that the profits or gains of the trade or trades arising throughout the requisite period (or the period of the lease, if shorter) will be chargeable to income tax or corporation tax.

Where, by virtue of subsection (2) above, part only of the expenditure on the provision of any machinery or plant is treated as not falling within section 42(1), then, whether or not the machinery or plant continues to be leased as mentioned in subsection (1) above, sections 24, 25, 26, 41 and 42 shall have effect as if— and there shall be made all such apportionments as are necessary in consequence of this subsection.

Without prejudice to the operation of section 46, this section shall have effect where new expenditure is incurred on the provision of machinery or plant which is leased as mentioned in section 43(1).

Where, by virtue of section 43(2), the whole or part of the new expenditure has qualified for a normal writing-down allowance and, at any time in the requisite period while it is leased as mentioned in that subsection— sections 46 and 48(2) shall have effect as if the separate item of machinery or plant referred to in section 43(3)(a) had at that time begun to be used for the purpose of being leased to a non-resident, otherwise than by permitted leasing.

Where the whole or part of any new expenditure has qualified for a normal writing-down allowance and the machinery or plant is subsequently leased in the requisite period as mentioned in section 43(1), subsection (2) above shall apply as if the whole of the expenditure had qualified for a normal writing-down allowance by virtue only of section 43(2).

Where, by virtue of section 43(2), the whole or part of the new expenditure has qualified for a normal writing-down allowance and, at the end of the requisite period, the machinery or plant in question is leased as mentioned in section 43(1) but subsection (2) above has not had effect, then, if it appears that the extent to which the machinery or plant has been used for the purposes of such a trade or trades as are referred to in subsection (2) above is less than that which was taken into account in determining the amount of the new expenditure which qualified for a normal writing-down allowance—

Sections 22(4)(c), 23, 39, 40, 41 and 47 shall have effect in accordance with this section where the expenditure in question is not new expenditure and the machinery or plant is leased to two or more persons jointly.

Section 39(2)(a) shall not apply at any time when the machinery or plant is leased to two or more persons jointly but if the lessees use the machinery or plant for the purposes of a trade or trades, otherwise than for leasing, it shall be regarded as used for a qualifying purpose if and to the extent to which it appears that the profits or gains of the trade or trades arising throughout the requisite period (or the period of the lease, if shorter) will be chargeable to income tax or corporation tax.

Where, by virtue of subsection (2) above, a first-year allowance may be made in respect of part only of the expenditure on the provision of any machinery or plant, then, whether or not the machinery or plant continues to be leased to two or more persons jointly, sections 24, 25, 26, 41 and 47 shall have effect as if— and there shall be made all such apportionments as are necessary in consequence of this subsection.

Where by virtue of subsection (2) above a first-year allowance has been made in respect of the whole or part of the expenditure on the provision of any machinery or plant and at any time in the requisite period while it is leased as mentioned in subsection (1) above no lessee uses it for the purpose of a trade or trades the profits or gains of which are chargeable to income tax or corporation tax, section 47 shall have effect as if the machinery or plant or, as the case may be, the separate item referred to in subsection (3)(a) above had at that time been used otherwise than for a qualifying purpose.

Where by virtue of subsection (2) above a first-year allowance has been made in respect of the whole or part of the expenditure on the provision of any machinery or plant and at the end of the requisite period the machinery or plant is leased as mentioned in subsection (1) above but subsection (4) has not had effect, then, if it appears that the extent to which the machinery or plant has been used for the purposes of a trade or trades the profits or gains of which are chargeable to income tax or corporation tax is less than that by reference to which the amount of the first-year allowance was determined—

Where a first-year allowance has been made in respect of expenditure on the provision of machinery or plant otherwise than by virtue of subsection (2) above and the machinery or plant is subsequently leased in the requisite period to two or more persons jointly, subsections (4) and (5) above shall apply as if the first-year allowance had been made by virtue of subsection (2) above and had been so made in respect of the whole expenditure.

Where the machinery or plant is leased to two or more persons jointly and at least one of the joint lessees is a person falling within section 42(1)(a) and (b) (“a non-resident lessee”)—

Where new expenditure incurred by any person in providing machinery or plant has qualified for a normal writing-down allowance and the machinery or plant is at any time in the requisite period used for the purpose of being leased to a non-resident, otherwise than by permitted leasing—

The excess relief is the excess, if any, of—

The unused expenditure is the amount by which the new expenditure incurred in providing the machinery or plant exceeds the allowances referred to in subsection (2)(a) above.

For the purposes of subsection (2) above, the normal writing-down allowances that were made in respect of new expenditure on any item of machinery or plant shall be determined as if that item were the only item of machinery or plant in relation to which sections 24, 25 and 26 had effect.

Where the person to whom any machinery or plant belongs at a time when it is first used for the purpose of being leased to a non-resident, otherwise than by permitted leasing, has acquired it as a result of a transaction which was, or a series of transactions each of which was, between connected persons and a normal writing-down allowance in respect of expenditure on the provision of the machinery or plant has been made to any of those persons— but this subsection does not apply where section 113(2), 114(1) or 343(2) of the principal Act or section 77 of this Act applied on the occasion of the transaction or transactions in question.

Where the person to whom any machinery or plant belongs at such a time as is mentioned in subsection (5) above acquired it as there mentioned and— this section shall with the necessary modifications apply as it applies where a normal writing-down allowance has been made.

If at any time in the requisite period a ship is used for the purpose of being leased to a non-resident otherwise than by permitted leasing, then, without prejudice to subsections (1) to (6) above—

Where a first-year allowance has been made in respect of expenditure incurred in providing machinery or plant and the machinery or plant is at any time in the requisite period used otherwise than for a qualifying purpose—

The excess relief is the excess, if any, of—

Where as a result of a requirement under section 22(7) an aggregate amount of first-year allowances in respect of different items of machinery or plant is reduced, there shall be treated for the purposes of subsection (2) above as having been made in respect of each item a reduction proportionate to the capital expenditure on the provision of that item.

For the purposes of subsection (2) above, the writing-down allowance or allowances that were made or would have been made in respect of any item of machinery or plant shall be determined as if that item were the only item of machinery or plant in relation to which sections 24, 25 and 26 had effect.

Where the person to whom any machinery or plant belongs at a time when it is first used otherwise than for a qualifying purpose has acquired it as a result of a transaction which was, or a series of transactions each of which was, between connected persons and a first-year allowance in respect of expenditure on the provision of the machinery or plant has been made to any of those persons— but this subsection does not apply where section 113(2), 114(1) or 343(2) of the principal Act or section 77 of this Act applied on the occasion of the transaction or transactions in question.

Where the person to whom any machinery or plant belongs at such a time as is mentioned in subsection (5) above acquired it as there mentioned and— this section shall with the necessary modifications apply as it applies where a first-year allowance has been made.

If at any time in the requisite period a ship is used otherwise than for a qualifying purpose, then, without prejudice to subsections (1) to (6) above—

In relation to old expenditure in relation to which section 42 has effect in accordance with subsection (8) of that section, this section shall have effect subject to the following modifications, that is to say— and subsections (3) and (4) above shall apply in relation to the allowances mentioned in section 42(4) as they apply in relation to the allowances mentioned in subsection (2) above.

If section 66(7) of the Finance Act 1980 or subsection (7) above had already applied in relation to expenditure on a ship before section 70(1) of the Finance Act 1982 or section 42(1) of this Act applied to that expenditure, then, on the subsequent application of subsection (7) above by virtue of subsection (8)(a) above, subsection (7)(b) shall not again apply.

Subsections (7) to (9) above shall have effect in any case where the requisite period began before 27th July 1989 with the substitution for each reference to a ship of a reference to a new ship.

Where new expenditure is incurred on the provision of machinery or plant and, before the expenditure has qualified for a normal writing-down allowance, it is used for leasing to a non-resident and that leasing is permitted leasing, a claim by a person other than a company for a writing-down allowance which takes account of that expenditure and a return by a company of profits in the computation of which a deduction is made on account of such an allowance shall be accompanied by a certificate to that effect, setting out the description of permitted leasing.

If, after any new expenditure has qualified for a normal writing-down allowance, the machinery or plant in question is at any time in the requisite period used for the purpose of being leased to a non-resident, otherwise than by permitted leasing, the person to whom it belongs at that time shall give notice of that fact to the inspector.

Subject to subsection (6) below, notice under subsection (2) above shall be given within three months after the end of the chargeable period or its basis period in which the machinery or plant is first used for leasing to a non-resident otherwise than by permitted leasing.

A certificate or notice given by any person under subsection (1) or (2) above by reference to a chargeable period or its basis period shall specify the non-resident to whom the machinery or plant has been leased and shall specify all the items of machinery or plant (if more than one) in respect of which the person in question is required to give a certificate or notice under this section by reference to that period.

Subject to subsection (6) below, where new expenditure is incurred on the provision of machinery or plant which is leased as mentioned in section 43(1), the lessor shall, within three months after the end of the chargeable period or its basis period in which the machinery or plant is first so leased, give notice to the inspector specifying—

If, at the end of the three months referred to in subsection (3) or (5) above, the person required to give a notice under that subsection does not know and cannot reasonably be expected to know that any item of machinery or plant in respect of which he is required to give such a notice has been used or leased as mentioned in the subsection in question, he shall in respect of that item give the notice within 30 days of his coming to know that it has been so used or leased.

This section applies where a writing-down allowance (but no first-year allowance) has been made in respect of expenditure which is not new expenditure, and the amount of that allowance was determined without regard to section 42(2); and references below to an allowance are references to an allowance so determined.

Where a person other than a company has claimed an allowance in respect of any expenditure, or a deduction on account of an allowance has been made in computing profits in respect of which a return has been made by a company, and the machinery or plant in question is at any time in the requisite period used for the purpose of being leased to such a person as is referred to in section 42(1)(a) and (b) otherwise than for a qualifying purpose, the person to whom it then belongs shall give notice of that fact to the inspector, specifying the use to which the machinery or plant has been put; and, subject to subsection (3) below, any such notice shall—

If at the end of the three months mentioned in subsection (2)(a) above the person concerned does not know and cannot reasonably be expected to know that any item of machinery or plant in respect of which he is required to give such a notice has been used as mentioned in that subsection, he shall in respect of that item give the notice within 30 days of his coming to know that it has been so used.

Where an allowance has been made in respect of any expenditure, the inspector may by notice require— to furnish him, within such period (not being less than 30 days) as may be specified in the notice, with such information as he may require and the person to whom the notice is addressed has or can reasonably obtain about the leasing of the machinery or plant or the use to which it is being or has been put.

In this Chapter references to a lease include references to a sub-lease and references to a lessor or lessee shall be construed accordingly.

For the purposes of this Chapter, letting a ship on charter or any other asset on hire shall be regarded as leasing if, apart from this subsection, it would not be so regarded.

In this Chapter—

Where new expenditure has been incurred by any person, any reference in this Chapter to the new expenditure having qualified for a normal writing-down allowance is a reference to the expenditure having fallen to be included, in whole or in part, in that person’s qualifying expenditure for any chargeable period for the purposes of subsections (2) to (5) of section 24, as that section has effect with respect to expenditure which does not fall within section 42(1).

Without prejudice to section 27, references in this Chapter to the use of machinery or plant for the purposes of a trade include references to its use for any purpose in connection with which a writing-down allowance can be given by virtue of that section.

Section 839 of the principal Act shall apply for the purposes of this Chapter.

Subject to subsection (8) below, this Chapter shall apply to determine entitlement to an allowance under this Part in respect of expenditure on the provision of machinery or plant which is 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 at any time when, by virtue of this Chapter, any machinery or plant is treated as belonging to any person, no other person shall be entitled to such an allowance in respect of it.

In this Chapter—

In this Chapter “interest in land” means— and, except in the context of leasing machinery or plant, any reference in the following provisions of this Chapter to a lease is a reference to such a leasehold estate or, in Scotland, lease as is mentioned in paragraph (c) above or to such an agreement as is mentioned in that paragraph (and, in relation to such an agreement, the expression “grant” shall be construed accordingly).

If an interest in land is conveyed or assigned by way of security and subject to a right of redemption, then, so long as such a right subsists, the interest held by the creditor shall be treated for the purpose of this Chapter as held by the person having that right.

All such assessments and adjustments of assessments shall be made as may be necessary to give effect to the provisions of this Chapter.

Where any question arises as to whether any machinery or plant has become, in law, part of a building or other land and that question is material with respect to the liability to tax (for whatever period) of two or more persons, that question shall be determined, for the purposes of the tax of all those persons, by the Special Commissioners who shall determine the question in like manner as if it were an appeal, except that, for the purposes of the determination, all those persons shall be entitled to appear and be heard by, or to make representations in writing to, the Special Commissioners.

Subsection (1) above—

Subject to subsection (2) below, in any case where— then, subject to sections 53 and 57, on and after that time the fixture shall be treated for the purposes of this Part as belonging to the person concerned in consequence of his incurring the expenditure.

If, in respect of the same fixture, there are two or more persons with different interests in the relevant land to whom, by virtue of subsection (1) above, the fixture would (apart from this subsection) be treated as belonging for the purposes of this Part, the only interest which shall be taken into account under that subsection is—

In any case where— then, subject to section 57, on and after the time at which the expenditure is incurred the fixture shall be treated for the purposes of this Part as belonging to the equipment lessor in consequence of his incurring the expenditure.

An election under this section shall be made by notice to the inspector given before the expiry of the period of two years beginning at the end of the chargeable period related to the incurring of the expenditure referred to in subsection (1)(a) above; but no election may be made under this section if the equipment lessor and the equipment lessee are connected with each other within the terms of section 839 of the principal Act.

Where an election has been made under this section with respect to a fixture, nothing in section 52 shall have the effect of treating the fixture for the purposes of this Part as belonging to the equipment lessee.

In this Chapter “equipment lease” means such an agreement as is mentioned in subsection (1)(b) above or a lease entered into pursuant to such an agreement.

In any case where— then, subject to section 57, on and after the purchaser’s acquisition of his interest in the relevant land, the fixture shall be treated for the purposes of this Part as belonging to him in consequence of his incurring expenditure as mentioned in paragraph (b) above.

If, in a case where subsection (1)(a) above applies— subsection (1) above shall apply as if that capital sum were such a capital sum as is referred to in paragraph (b) of that subsection.

In any case where— then, subject to section 57, on and after the grant of the lease, the fixture shall be treated for the purposes of this Part as belonging to the lessee in consequence of his incurring expenditure as mentioned in paragraph (c) above.

In any case where the lessor is not within the charge to tax, it shall be assumed that he is within that charge for the purpose of determining whether the condition in subsection (1)(b) above is fulfilled.

An election under this section shall be made by notice to the inspector given within two years after the date on which the lease takes effect.

No election may be made under this section if—

The provisions of this section and section 58 are without prejudice to any other circumstances in which the disposal value of a fixture falls to be brought into account in accordance with section 24.

Subject to subsection (4) below, if at any time the person to whom a fixture is treated for the purposes of this Part as belonging by virtue of any of sections 52, 54, 55 and 56 ceases (whether by reason of the transfer, surrender or expiry of the interest or otherwise) to have the qualifying interest, the fixture shall be treated for those purposes as ceasing to belong to him at that time.

In this section and section 59 “the qualifying interest” means— but if the qualifying interest is an agreement to acquire an interest in land and that interest in land is subsequently transferred or granted to the person referred to in subsection (2) above, the interest so transferred or granted shall be treated as the same interest as the qualifying interest.

For the purposes of subsection (2) above—

At the time at which, by virtue of section 55, the fixture concerned begins to be treated for the purposes of this Part as belonging to the lessee, it shall be treated for those purposes as ceasing to belong to the lessor (as defined in that section).

Where, by virtue of subsection (2) above, on the termination of a lease or licence, a fixture is treated for the purposes of this Part as ceasing to belong to the outgoing lessee or licensee, it shall, on that termination, be treated for those purposes as beginning to belong to the person who, immediately before the termination, was the lessor under the lease or, as the case may be, the licensor under the licence.

If at any time a fixture is permanently severed from the relevant land (so that it ceases to be a fixture) and, immediately before that time, it was treated for the purposes of this Part as belonging to any person by virtue of any provision of sections 51 to 56, subsections (1) to (6) above or section 58(2) or (4), then, unless on its severance the fixture does in fact belong to that person, it shall be treated for those purposes as ceasing to belong to him at that time.

If, by virtue of an election under section 53, a fixture is treated for the purposes of this Part as belonging to the equipment lessor and either— then, at that time (or, as the case may be, the earliest of those times) the fixture shall be treated for the purposes of this Part as ceasing to belong to the equipment lessor by reason of a sale by him of the fixture.

If subsection (1)(a) above applies, then, on and after the time of the assignment referred to in that paragraph, the fixture to which the agreement in question relates shall be treated for the purposes of this Part as belonging to the assignee and the consideration given by him for the assignment shall be treated for those purposes—

On and after an assignment falling within paragraph (a) of subsection (1) above, that subsection shall have effect as if the machinery or plant (as a fixture) were treated for the purposes of this Part as belonging to the assignee by virtue of an election under section 53 and, accordingly, as if the assignee were the equipment lessor, as defined in that section.

Where a capital sum is paid as mentioned in subsection (1)(b) above, that capital sum shall be treated for the purposes of this Part— and where paragraph (b) above applies, on and after the time of that payment, the fixture shall be treated for the purposes of this Part as belonging to the equipment lessee.

Where the financial obligations of the equipment lessee under an equipment lease have become vested in any other person (by assignment, operation of law or otherwise) any reference in subsection (1)(b) or (4) above to the equipment lessee shall be construed as a reference to the person in whom those obligations are for the time being vested when the capital sum is paid.

In any case where— the fixture shall be treated for the purposes of this Part as sold at that time by the former owner for a price determined in accordance with subsections (2) to (6) below.

Subject to subsection (6) below, if the occasion of the fixture ceasing to belong to the former owner is the sale of the qualifying interest, the price referred to in subsection (1) above is that portion of the sale price of the qualifying interest which falls (or, if the purchaser were entitled to an allowance, 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 fixture ceases to belong to the former owner by virtue of section 57(5), the price referred to in subsection (1) above is so much of the capital sum referred to in section 55(1)(c) as falls to be treated for the purposes of this Part as expenditure by the lessee on the provision of the fixture.

If neither subsection (2) nor subsection (3) above applies, the price referred to in subsection (1) above is that portion of the price which, on a sale of the qualifying interest in the open market, would fall to be treated for the purposes of this Part as expenditure by the purchaser on the provision of the fixture.

The sale referred to in subsection (4) above shall be assumed to take place immediately before the event which causes the fixture to be treated for the purposes of this Part as ceasing to belong to the former owner; but that event shall be disregarded in determining the open market price on that sale.

If the sale referred to in subsection (2) above is at a price lower than that which the qualifying interest would have fetched if sold in the open market, that subsection shall not apply unless the purchaser’s expenditure on the acquisition of the fixture can be taken into account as mentioned in section 26(1)(b)(i).

If the occasion of the fixture ceasing to belong to the former owner is the expiry of the qualifying interest, then, except in so far as the former owner receives any capital sum, by way of compensation or otherwise, by reference to the fixture, the disposal value of the fixture which falls to be brought into account under section 24 shall be nil.

In any case where— that paragraph shall apply as if the reference therein to paragraphs (a) and (b) of that subsection were omitted; but if the event which follows the discontinuance of the trade is the sale of the qualifying interest, the disposal value of the fixture to be brought into account under those sections shall be that portion of the sale price referred to in subsection (2) above.

If the disposal value of the fixture falls to be brought into account in accordance with section 24 on its beginning to be used wholly or partly for purposes which are other than those of the trade, section 26(1)(f) shall apply as if the reference to the price which the machinery or plant would have fetched if sold on the open market were a reference to that portion of the price referred to in subsection (4) above.

If, on the occasion of the fixture being treated by virtue of section 57 as ceasing to belong to the former owner— there shall be disregarded for the purposes of this Part so much (if any) of that expenditure as exceeds that disposal value.

In relation to expenditure incurred before 27th July 1989, subsection (10) above shall have effect with the substitution for the words following “to the former owner” of the words “another person incurs expenditure on the provision of the fixture, there shall be disregarded so much (if any) of that expenditure as exceeds the disposal value which the former owner is required to bring into account in accordance with section 24”.

Where a person carrying on a trade incurs capital expenditure on the provision of machinery or plant for the purposes thereof under a contract providing that he shall or may become the owner of the machinery or plant on the performance of the contract—

Where a person to whom any machinery or plant is treated as belonging by virtue of subsection (1)(a) above ceases to be entitled to the benefit of the contract in question so far as it relates to that machinery or plant without in fact becoming the owner of the machinery or plant—

In relation to capital expenditure incurred under contracts entered into before 27th July 1989, subsection (1)(a) shall have effect with the omission of the words “(and not to any other person)”.

Subject to subsection (2) below, where machinery or plant is first let by any person otherwise than in the course of a trade, then, whether or not it is used for the purposes of a trade carried on by the lessee—

Subsection (1) above shall not apply to machinery or plant let for use in a dwelling-house.

Where subsection (1) above applies, the question whether the provision of the machinery or plant is to be treated as being wholly and exclusively or only partly for the purposes of the trade referred to in paragraph (a) of that subsection shall be determined according to whether the machinery or plant was in fact provided wholly and exclusively for the purpose of letting otherwise than in the course of a trade or only partly for that purpose.

Where— then, if the machinery or plant would not otherwise belong to him, the machinery or plant shall be treated for the purposes of this Part as belonging to him for so long as it continues to be used for the purposes of the trade; but, as from the determination of the lease, section 24(6) shall have effect as if the capital expenditure on providing the machinery or plant had been incurred by the lessor and not by the lessee. In relation to any lease entered into before 12th July 1984, and any lease entered into after 11th July 1984 pursuant to an agreement made before 12th July 1984, this subsection shall have effect with the omission of the words from “and” (where it first occurs) to “belong to him”.

Where an allowance falling to be made for any chargeable period by virtue of subsection (1) above is in respect of expenditure on the provision of machinery or plant which for the whole or any part of that period or its basis period is not used for the purposes of a trade carried on by the lessee, section 145(3) shall not apply to that allowance or, as the case may require, to a proportionate part thereof.

Subsection (5) above shall not apply to any allowance in respect of expenditure incurred on the provision of machinery or plant which is fixed to a building or land of which the person who incurs the expenditure is the lessor and the circumstances are such that a transfer of his interest in the building or land would operate to transfer his interest in the machinery or plant.

Section 403(3) of the principal Act (group relief) shall not apply to an allowance if or to the extent that, by virtue of subsection (5) above, section 145(3) does not apply to it. This subsection has effect in any case where the accounting period of the surrendering company (within the meaning of Chapter IV of Part X of the principal Act) ends after 26th July 1989.

In this section “lease” includes an agreement for a lease where the term to be covered by the lease has begun, and any tenancy, but does not include a mortgage, and “lessee” and other cognate expressions shall be construed accordingly.

Where any machinery or plant which is in use for the purposes of a trade is demolished, then—

In this section any reference to the net cost of the demolition of any machinery or plant is a reference to the excess, if any, of the cost of the demolition over any moneys received for the remains of the machinery or plant.

In any case where— that person shall be treated for the purposes of this Part as if he had sold the machinery or plant immediately before that first day and had on that first day incurred capital expenditure on the provision of the machinery or plant wholly and exclusively for the purposes of the trade, being expenditure equal to the expenditure incurred (or, where there has been an actual previous sale and re-acquisition, last incurred) as mentioned in paragraph (a) above.

Subsection (1) above shall not apply where the expenditure was incurred by any person before 1st April 1986 on mineral exploration and access and the mineral exploration and access at the source in question had ceased before that person begins to carry on a trade of mineral extraction.

This section applies where—

In the application of this Part to expenditure incurred by the new participator in the acquisition referred to in subsection (1)(b) above, there shall be disregarded so much, if any, of that expenditure as exceeds the disposal value to be brought into account by the old participator under sections 24, 25 and 26 by reason of the disposal.

In this section “the old participator” and “the new participator” have the same meaning as in Schedule 17 to the Finance Act 1980; and, subject to that and to section 83(4), expressions used in subsection (1) above and in Part I of the Oil Taxation Act 1975 have the same meanings in this section as they have in that Part.

Nothing in this section affects the operation of section 75.

In taxing a trade carried on in partnership the same allowances, deductions and charges shall be allowed or made under this Part in respect of machinery or plant used for the purposes of that trade and belonging to one or more of the partners but not being partnership property as would fall to be allowed or made if the machinery or plant had at all material times belonged to all the partners and been partnership property and everything done by or to any of the partners in relation thereto had been done by or to all the partners.

Notwithstanding anything in section 24(6), a sale or gift of machinery or plant used for the purposes of a trade carried on in partnership, being a sale or gift by one or more of the partners to one or more of the partners, shall not be treated as an event requiring any disposal value to be brought into account if the machinery or plant continues to be used after the sale or gift for the purposes of that trade.

References in this section to use for the purposes of a trade do not include references to use in pursuance of a letting by the partner or partners in question to the partnership or to use in consideration of the making to the partner or partners in question of any payment which may be deducted in computing the profits or gains of the trade.

If a person carrying on a trade has incurred expenditure in adding any insulation against loss of heat to any industrial building or structure occupied by him for the purposes of that trade, this Part shall apply as if the expenditure were capital expenditure incurred on the provision of machinery or plant for the purposes of the trade, and as if the machinery or plant had, in consequence of his incurring the expenditure, belonged to him, and as if the disposal value of the machinery or plant were nil.

If a person has incurred expenditure in adding any insulation against any loss of heat to any industrial building or structure let by him otherwise than in the course of a trade, this Part shall apply as if the expenditure were capital expenditure incurred in providing machinery or plant first let by that person, otherwise than in the course of a trade, at the time when the expenditure was incurred, and as if the property comprised in the lease of the building or structure had as from that time included the machinery or plant, and as if the disposal value of the machinery or plant were nil.

Any allowance made by virtue of section 61(1) in a case where it applies by virtue of subsection (2) above shall (notwithstanding section 73(2)), be available primarily against the following income, that is to say—

In this section “industrial building or structure” has the meaning given by section 18.

This section applies to expenditure to which section 1 applies in accordance with section 2 but does not apply to any other expenditure to which section 1 applies or to any expenditure to which section 6 applies.

Subsection (5) above shall not have effect in relation to any chargeable period or its basis period ending after 26th July 1989.

Expenditure which— shall be regarded for the purposes of the Tax Acts as expenditure of a revenue nature unless it is expenditure falling within subsection (9) below.

In this section— and any reference to the acquisition of a film, tape or disc includes a reference to the acquisition of any description of rights in a film, tape or disc.

Subject to the following provisions of this section, in computing the profits or gains accruing to any person from a trade or business which consists of or includes the exploitation of a film, tape or disc, expenditure which— shall be allocated to relevant periods in accordance with subsections (4) to (6) below; and in this section “relevant period” means a period for which the accounts of the trade or business concerned are made up or, if those accounts are not made up for any period, a period the profits or gains of which are taken into account in assessing the income of the trade or business for any chargeable period.

Subject to the following provisions of this section, the amount of expenditure falling within subsection (3) above which falls to be allocated to any relevant period shall be such as is just and reasonable, having regard to—

In addition to any expenditure which is allocated to a relevant period in accordance with subsection (4) above, if a claim is made in that behalf not later than two years after the end of that period, there shall also be allocated to that period so much of the unallocated expenditure as is specified in the claim and does not exceed the difference between—

As respects any relevant period, “the unallocated expenditure” referred to in subsection (5) above is that expenditure falling within subsection (3) above—

Subsections (3) to (6) above do not apply to the profits or gains of a trade in which the film, tape or disc concerned constitutes trading stock, as defined in section 100(2) of the principal Act.

In a case where any expenditure on the production or acquisition of a film, tape or disc is expenditure to which subsection (1) above applies, the sums received from the disposal of that film, tape or disc shall be regarded for the purposes of the Tax Acts as receipts of a revenue nature (if they would not be so regarded apart from this subsection); and the reference in this subsection to sums received from the disposal of any film, tape or disc shall be construed as including—

Subsections (1) to (8) above do not apply to expenditure which is incurred—

In this section “expenditure of a revenue nature” means expenditure which, if it were incurred in the course of a trade the profits or gains of which are chargeable to tax under Case I of Schedule D, would be taken into account for the purpose of computing the profits, gains or losses of the trade; and “receipts of a revenue nature” means receipts which, if they were receipts of such a trade, would be taken into account for that purpose.

If a person carrying on a trade incurs expenditure in taking steps specified in a notice served on him by the fire authority under section 5(4) of the Fire Precautions Act 1971, and— this Part shall apply as if the expenditure were capital expenditure incurred on the provision of machinery or plant for the purposes of the trade, and as if the machinery or plant had, in consequence of his incurring the expenditure, belonged to him, and as if the disposal value of the machinery or plant were nil.

If a person carrying on a trade incurs expenditure in taking, in respect of any premises used by him for the purposes of the trade— then, if an allowance or deduction in respect of the expenditure could not, apart from this subsection, be made in taxing the trade or computing the profits or gains arising from it, this Part shall apply as regards the expenditure as it would apply by virtue of subsection (1) above if the expenditure fell within that subsection.

If a person carrying on a trade incurs expenditure in taking, in respect of any sports ground used by him for the purposes of the trade or in respect of any regulated stand at a sports ground so used— then, if an allowance or deduction in respect of the expenditure could not, apart from this section, be made in taxing the trade or computing the profits or gains arising from it, this Part shall apply as if the expenditure were capital expenditure incurred on the provision of machinery or plant for the purposes of the trade, and as if the machinery or plant had, in consequence of his incurring the expenditure, belonged to him and as if the disposal value of the machinery or plant were nil.

If a person carrying on a trade incurs expenditure in respect of a sports ground used for the purposes of the trade (not being expenditure in respect of a regulated stand), then, if— subsection (1) above shall have effect in relation to the expenditure as it has effect in relation to the expenditure mentioned in that subsection.

Except in relation to expenditure incurred in respect of a regulated stand or as provided by subsection (2) above, subsection (1) above shall not apply in relation to expenditure incurred in respect of a sports ground at any time when it is not a designated sports ground within the meaning of the Safety of Sports Grounds Act 1975.

Any provision of regulations made under section 6(1)(b) of the Safety of Sports Grounds Act 1975 (power of local authorities to charge fees) shall, with the necessary modifications, apply to the issue of a certificate for the purposes of subsection (2) above as it applies to the issue of a safety certificate.

In this section—

This section applies where—

In a case where this section applies, this Part shall apply as if—

Subsection (2) above shall not apply unless the asset is provided or used to meet a threat which—

Subsection (2) above shall not apply unless the person incurring the expenditure—

In a case where— subsection (2) above shall nevertheless apply, but only so as to treat the appropriate proportion of the expenditure there mentioned as capital expenditure incurred as there mentioned.

For the purposes of subsection (5) above, the appropriate proportion of the expenditure mentioned in subsection (2) above is such proportion of that expenditure as is attributable to the intention of the person incurring it that the asset be used to improve personal physical security.

For the purposes of section 71—

If 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, that other use shall be ignored in construing section 71(4)(b).

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, shall not prevent section 71(2) from applying.

For the purposes of section 71, it is immaterial whether or not the asset becomes affixed to land (whether constituting a dwelling or otherwise).

Section 71 applies where expenditure is incurred on or after 6th April 1989.

Subject to subsection (2) below, any allowance or charge made to or on any person under this Part shall be made to or on that person in taxing his trade.

Any allowance made by virtue of section 61(1) shall be made by way of discharge or repayment of tax, and, subject to subsection (3) below and section 67(3), shall be available primarily against income from the letting of machinery or plant; and effect shall be given to any charge made by virtue of section 61(1)—

Where an allowance falling to be made for any chargeable period by virtue of section 61(1) is in respect of expenditure on the provision of machinery or plant which for the whole or any part of that period or its basis period is not used for the purposes of a trade carried on by the lessee, that allowance or, as the case may require, a proportionate part thereof shall be available primarily against income from the letting of that machinery or plant only.

Subject to sections 76 and 77, where a person incurs capital expenditure on the provision by purchase of machinery or plant, and— a first-year allowance shall not be made in respect of the expenditure or, if made, shall be withdrawn, and there shall be disregarded for the purposes of sections 24, 25 and 26 so much (if any) of the expenditure as exceeds the disposal value to be brought into account under those sections by reason of the sale.

Subject to sections 76 and 77, where a person enters into a contract under which, on the performance thereof, he will or may become the owner of machinery or plant belonging to another person, and— a first-year allowance shall not be made in respect of any expenditure incurred by him under the contract so far as relating to that machinery or plant or, if made, shall be withdrawn, and there shall be disregarded for the purposes of sections 24, 25 and 26 so much (if any) of the expenditure as exceeds the disposal value to be brought into account under those sections by reason of the contract so far as relating thereto.

Subject to sections 76 and 77, where a person, being entitled to the benefit of a contract under which, on the performance thereof, he will or may become the owner of any machinery or plant, assigns the benefit of the contract so far as it relates to that machinery or plant to another person, and— a first-year allowance shall not be made in respect of any expenditure incurred by him under the contract so far as so relating, or by way of consideration for the assignment or, if so made, shall be withdrawn, and there shall be disregarded for the purposes of sections 24, 25 and 26 so much (if any) of the assignee’s expenditure as exceeds the disposal value to be brought into account under section 60 by reason of the assignment.

In this section references to persons connected with each other shall be construed in accordance with section 839 of the principal Act.

All such assessments and adjustments of assessments shall be made as are necessary to give effect to this section.

Paragraph (b) of each of subsections (1) to (3) of section 75 shall have effect as if the reference to the machinery or plant continuing to be used for the purposes of a trade carried on by the person there mentioned included a reference to its being used after the date of the sale, the making of the contract or the assignment of the benefit of the contract (as the case may be) for the purposes of a trade carried on by that person or another person who is connected with him (other than the buyer, the person entering into the contract or the assignee) without having been used since that date for the purposes of any other trade except that of leasing machinery or plant.

In a case in which no disposal value falls to be brought into account as mentioned in subsection (1) of section 75, that subsection shall have effect as if for the reference to the disposal value to be so brought into account there were substituted a reference to an amount equal to whichever of the following is the smallest—

Section 75(1) shall not by virtue of paragraph (a) or (b) thereof deny a first-year allowance if the machinery or plant has not before the sale been used for the purposes of a trade by the seller or any person connected with him but for the purposes of that allowance there shall be disregarded so much (if any) of the expenditure as exceeds whichever is the smallest of the amounts mentioned in subsection (2)(a), (b) and (c) above.

Subsections (2) and (3) above shall apply in relation to section 75(2) and (3) as they apply in relation to section 75(1) but taking references—

Neither subsection (1) nor subsection (2) of section 75 shall apply in relation to a sale or contract if the machinery or plant has never been used before the sale or the making of the contract and the business or part of the business of the seller or owner was the manufacture or supply of machinery or plant of that class and the sale was effected or the contract was made in the ordinary course of that business.

In this section—

Where a person (in this subsection referred to as “the successor”) has succeeded to a trade which was until that time carried on by another person (in this subsection referred to as “the predecessor”) and the two persons are connected with each other within the terms of section 839 of the principal Act and the successor is not a dual resident investing company, those persons may by notice to the inspector elect that the provisions of this subsection shall have effect; and in that event—

Subsection (1) above shall not apply in relation to successions occurring after the passing of the Finance Act 1988 (29th July 1988); and the requirement in that subsection that the successor must not be a dual resident investing company shall not apply if the successor began to carry on the trade before 1st April 1987.

Where at any time after the passing of the Finance Act 1988 a person (referred to below as “the successor”) succeeds to a trade which was until that time carried on by another person (referred to below as “the predecessor”) and— those persons may by notice given to the inspector not later than two years after that time, elect that the provisions of subsection (4) below shall have effect.

In the event of an election under subsection (3) above—

For the purposes of subsection (3) above the predecessor and the successor are connected with each other if—

In subsection (5) above “control” shall be construed in accordance with section 840 of the principal Act; and any reference to the right to a share in a partnership is a reference to the right to a share of the assets or income of that partnership.

All such assessments and adjustments of assessments shall be made as are necessary to give effect to subsections (3) and (4) above.

Sections 41(5) and 78(1) shall not apply in any case where an election is made under subsection (3) above. This subsection shall not apply in relation to successions occurring before 27th July 1989.

Where a person succeeds to any trade which until that time was carried on by another person and, by virtue of section 113 or 337(1) of the principal Act (changes in persons carrying on a trade, and special rules for corporation tax), the trade is to be treated as discontinued, any property which, immediately before the succession takes place, was either in use or provided and available for use for the purposes of the discontinued trade and, without being sold, is, immediately after the succession takes place, either in use or provided and available for use for the purposes of the new trade shall, for the purposes of this Part be treated as if— but no first-year allowance shall be made by virtue of this subsection.

Where a person succeeds to a trade as a beneficiary under the will or on the intestacy of a deceased person who carried on that trade and the beneficiary by notice to the inspector so elects, then, in relation to any machinery or plant which passes to him together with the trade, being machinery or plant— the reference in subsection (1) above to the price which the machinery or plant would have fetched if sold in the open market shall, in relation to the succession and any previous succession occurring on or after the death of the deceased, be deemed to be a reference to that price or, if it is less than that price, any excess of qualifying expenditure over disposal value which would have been taken into account under sections 24, 25 and 26 for making an allowance for the chargeable period related to the permanent discontinuance of the deceased person’s trade if the machinery or plant had had no disposal value.

This subsection has effect as respects any allowance under this Part, other than a balancing allowance. Where, after the setting up and before the permanent discontinuance of a trade which at any time is carried on in partnership, anything is done for the purposes thereof, any such allowance which, if the trade had at all times been carried on by one and the same person, would have fallen to be made to him shall be made to the person or persons from time to time carrying on that trade, and the amount of any such allowance shall be computed as if that person or those persons had at all times been carrying on the trade, and as if everything done to or by his or their predecessors in the carrying on thereof had been done to or by him or them.

Where, after the setting up and on or before the permanent discontinuance of a trade which at any time is carried on in partnership, any event occurs which gives rise or may give rise to a balancing allowance or balancing charge under this Part in respect of machinery or plant, any balancing allowance or balancing charge which, if the trade had at all times been carried on by one and the same person, would have fallen to be made to or on him in respect of that machinery or plant by reason of that event shall be made to or on the person or persons carrying on the trade at the time of that event, and the amount of any such allowance or charge shall be computed as if that person or those persons had at all times been carrying on the trade and as if everything done to or by his or their predecessors in the carrying on thereof had been done to or by him or them.

Notwithstanding section 27(1), this section shall not apply to any employment or office.

A first-year allowance may be made to a person in respect of any machinery or plant notwithstanding that it appears that the provision of the machinery or plant is partly for purposes other than those of a trade carried on by him; but the allowance in any such case shall be so much only of the allowance that would fall to be made if the provision of the machinery or plant were wholly and exclusively for the purposes of the trade as may be just and reasonable having regard to all the relevant circumstances of the case and, in particular, to the extent to which it appears that the machinery or plant is likely to be used for those other purposes.

Where a person carrying on a trade incurs capital expenditure on the provision of machinery or plant partly for the purposes of a trade (in subsections (4) to (6) below referred to as “the actual trade”) and partly for other purposes, it shall be assumed for the purposes of sections 24, 25 and 26 that he incurred the expenditure on the provision of the machinery or plant wholly and exclusively for the purposes of a trade (in subsections (4) to (6) below referred to as “the notional trade”) carried on by him separately from the actual trade and any other trade carried on him.

If, for any chargeable period, a person who has incurred expenditure on the provision of machinery or plant for the purposes of a trade (in subsections (4) to (6) below referred to as “the actual trade”) is required to bring the disposal value of the machinery or plant into account by reason of it beginning in that chargeable period or its basis period to be used partly, but not wholly, for purposes other than those of the actual trade, it shall be assumed for the purposes of sections 24, 25 and 26 that, immediately after the beginning of that chargeable period or its basis period, he incurs capital expenditure equal to that disposal value on the provision of the machinery or plant wholly and exclusively for the purposes of a trade (in subsections (4) to (6) below referred to as “the notional trade”) carried on by him separately from the actual trade and any other trade carried on by him.

Without prejudice to section 24(6)(c)(i) to (iii), it shall be assumed for the purposes of that section that the notional trade is permanently discontinued on the machinery or plant beginning to be used wholly for purposes other than those of the actual trade.

The allowance or charge under section 24 which, on the above assumptions, and having regard to subsection (6) below, would fall to be made for any chargeable period in the case of the notional trade—

If an allowance under section 24 falling to be made by virtue of this section for any chargeable period in the case of the actual trade is not claimed or is disclaimed under subsection (4) of that section, or is reduced in amount in accordance with a requirement under subsection (3) or (4) of that section then, in determining the allowance or charge under that section which would fall to be made for any subsequent chargeable period in the case of the notional trade, any allowance falling to be made in the case of that trade for the first-mentioned chargeable period shall be treated as not claimed or as disclaimed or, as the case may require, as proportionately reduced.

If it appears that, during the period during which any machinery or plant will be used by a person for the purposes of his trade, sums which— are, or are to be, payable to that person directly or indirectly by the Crown, or by any government or public or local authority (whether in the United Kingdom or elsewhere), or by any other person, then, unless those sums are in respect of, or take account of, part only of that wear and tear, any expenditure incurred by the first-mentioned person in providing the machinery or plant shall be wholly disregarded for the purposes of this Part.

Where subsection (1) above would apply to a person’s expenditure on the provision of machinery or plant but for the fact that the sums there referred to are in respect of, or take account of, part only of the wear and tear to the machinery or plant, a first-year allowance may be made in respect of the expenditure, but the amount thereof shall be reduced to such extent as may be just and reasonable having regard to all the relevant circumstances of the case.

Where sums within subsection (1) above are paid as mentioned in that subsection to a person carrying on a trade, but are in respect of, or take account of, part only of the wear and tear to the machinery or plant in respect of which they are paid, subsections (4) to (6) below shall have effect with respect to the allowances and charges to be made in the case of the trade (“the actual trade”) under section 24.

If an allowance has been made under section 24 for a chargeable period prior to the relevant period, the machinery or plant shall be treated for the purposes of that section as having begun to be used wholly for purposes other than those of the actual trade immediately after the beginning of the relevant period.

Whether or not subsection (4) above applies—

If an allowance under section 24 falling by virtue of this section to be made for any chargeable period in the case of the actual trade is not claimed or is disclaimed under subsection (4) of that section, or is reduced in amount in accordance with a requirement under subsection (3) or (4) of that section then, in determining the allowance or charge under that section which would fall to be made for any subsequent chargeable period in the case of the notional trade, any allowance falling to be made in the case of that trade for the first-mentioned chargeable period shall be treated as not claimed or as disclaimed or, as the case may require, as proportionately reduced.

In subsections (4) and (5) above “the relevant period” means the chargeable period in which or, as the case may be, in the basis period for which the first sum is paid as mentioned in subsection (1) above in respect of the machinery or plant in question.

Subject to section 63, where a person— sections 24, 25 and 26 shall have effect as if that person had incurred capital expenditure on the provision of the machinery or plant for the purposes of the trade in the chargeable period related to its bringing into use for those purposes, the amount of that expenditure being taken as the price which the machinery or plant would have fetched if sold in the open market on the date when it was so brought into use, and the machinery or plant being treated as belonging to that person in consequence of his having incurred that expenditure.

Where subsection (1) above applies, the question whether the provision of the machinery or plant is to be taken to be wholly and exclusively or only partly for the purposes of the trade shall be determined according to whether the use referred to in paragraph (a) or, as the case may be, (b) of that subsection is wholly and exclusively or only partly for those purposes.

Where a person is treated as having incurred capital expenditure on the provision of machinery or plant by virtue of subsection (1)(b) above, he shall for the purposes of section 75 be treated as having done so by way of purchase from the donor.

This section shall have effect in any case where the machinery or plant in question was brought into use before 27th July 1989—

In this Part, except where the context otherwise requires—

For the purposes of this Part, any expenditure incurred for the purposes of a trade by a person about to carry it on shall be treated as if it had been incurred by him on the first day on which he does carry it on.