Office of Public Sector Information
PART 2 continued CHAPTER 14 continued
(1) This section applies if—
(a) a person has at any time claimed an allowance to which he is entitled under Part 6 (research and development allowances) in respect of qualifying expenditure under that Part (“Part 6 expenditure”),
(b) an asset representing the whole or part of the Part 6 expenditure (“the Part 6 asset”) has ceased to be owned by that person (“the past owner”),
(c) the Part 6 asset was or included plant or machinery, and
(d) the current owner makes a claim under this Part in respect of expenditure (“new expenditure”) incurred—
(i) on the provision of the plant or machinery, and
(ii) at a time when it is a fixture.
(2) If the new expenditure exceeds the maximum allowable amount, the excess is to be left out of account in determining the current owner’s qualifying expenditure.
(3) The maximum allowable amount is—
where—
F is the part of the consideration for the disposal of the Part 6 asset by the past owner that is attributable to the fixture,
T is the total consideration for that disposal, and
A is an amount equal to whichever is the smaller of—
(a) the disposal value of the Part 6 asset when the past owner ceased to own it, and
(b) so much of the Part 6 expenditure as related to the provision of the Part 6 asset.
(4) For the purposes of this section the current owner of the plant or machinery is—
(a) the person who acquired the Part 6 asset from the past owner, or
(b) any person who is subsequently treated as the owner of the plant or machinery.
(1) This section applies if a person is treated as the owner of a fixture under—
(a) section 176 (person with interest in land having fixture for purposes of qualifying activity),
(b) section 181 (purchaser of land giving consideration for fixture),
(c) section 182 (purchaser of land discharging obligations of equipment lessee),
(d) section 183 (incoming lessee where lessor entitled to allowances), or
(e) section 184 (incoming lessee where lessor not entitled to allowances).
(2) If the person ceases at any time to have the qualifying interest, he is to be treated as ceasing to be the owner of the fixture at that time.
(3) In this Chapter “the qualifying interest” means—
(a) if section 176, 181 or 182 applies, the interest in the relevant land referred to in that section, and
(b) if section 183 or 184 applies, the lease referred to in that section.
(4) This section is subject to section 189.
(1) If—
(a) a person’s qualifying interest is an agreement to acquire an interest in land, and
(b) that interest is subsequently transferred or granted to that person,
the interest transferred or granted is to be treated as the qualifying interest.
(2) If a person’s qualifying interest ceases to exist as a result of its being merged in another interest acquired by that person, that other interest is to be treated as the qualifying interest.
(3) If—
(a) the qualifying interest is a lease, and
(b) on its termination, a new lease of the relevant land (with or without other land) is granted to the lessee,
the new lease is to be treated as the qualifying interest.
(4) If—
(a) the qualifying interest is a licence, and
(b) on its termination, a new licence to occupy the relevant land (with or without other land) is granted to the licensee,
the new licence is to be treated as the qualifying interest.
(5) If—
(a) the qualifying interest is a lease, and
(b) with the consent of the lessor, the lessee remains in possession of the relevant land after the termination of the lease without a new lease being granted to him,
the qualifying interest is to be treated as continuing so long as the lessee remains in possession of the relevant land.
(1) This section applies if a lessee is treated under section 183 (incoming lessee where lessor entitled to allowances) as the owner of a fixture.
(2) The lessor is to be treated as ceasing to be the owner of the fixture when the lessee begins to be treated as the owner.
If—
(a) a person is treated as the owner of the fixture as a result of any provision of this Chapter,
(b) the fixture is permanently severed from the relevant land (so that it ceases to be a fixture), and
(c) once it is severed, it is not in fact owned by that person,
that person is to be treated as ceasing to be the owner of the fixture when it is severed.
(1) This section applies if an equipment lessor is treated under section 177 as the owner of a fixture.
(2) If—
(a) the equipment lessor at any time assigns his rights under the equipment lease, or
(b) the financial obligations of the equipment lessee under an equipment lease are at any time discharged (on the payment of a capital sum or otherwise),
the equipment lessor is to be treated as ceasing to be the owner of the fixture at that time (or, as the case may be, at the earliest of those times).
(3) The reference in subsection (2)(b) to the equipment lessee is, in a case where the financial obligations of the equipment lessee have become vested in another person (by assignment, operation of law or otherwise), a reference to the person in whom the obligations are vested when the capital sum is paid.
If, on the termination of a lease or licence, the outgoing lessee or licensee is treated under section 188 as ceasing to be the owner of a fixture, the lessor or licensor is to be treated, on and after the termination of the lease or licence, as the owner of the fixture.
(1) If section 192(2)(a) applies (cessation of ownership of equipment lessor as a result of assignment), the assignee is to be treated, on and after the assignment—
(a) as having incurred expenditure, consisting of the consideration given by him for the assignment, on the provision of the fixture, and
(b) as being the owner of the fixture.
(2) For the purposes of section 192 (and subsection (1) and section 195) the assignee is to be treated as being an equipment lessor who owns the fixture under section 177.
(1) If section 192(2)(b) applies (discharge of obligations of equipment lessee) because the equipment lessee has paid a capital sum, the equipment lessee is to be treated—
(a) as having incurred expenditure, consisting of the capital sum, on the provision of the fixture, and
(b) as being, on and after the time of payment, the owner of the fixture.
(2) Section 192(3) (assignee of equipment lessee) applies in relation to subsection (1).
(1) The disposal value to be brought into account in relation to a fixture depends on the nature of the disposal event, as shown in the Table—
| 1. Disposal event | 2. Disposal value |
|---|---|
| 1. Cessation of ownership of the fixture under section 188 because of a sale of the qualifying interest except where item 2 applies. | The part of the sale price that— (a)
falls to be treated for the purposes of this Part as expenditure incurred by the purchaser on the provision of the fixture, or (b)
would fall to be so treated if the purchaser were entitled to an allowance. |
2. Cessation of ownership of the fixture under section 188 because of a sale of the qualifying interest where— (a)
the sale is at less than market value, and (b)
the condition in subsection (2) is met by the purchaser. |
The part of the price that would be treated for the purposes of this Part as expenditure by the purchaser on the provision of the fixture if— (a)
the qualifying interest were sold at market value, (b)
that sale took place immediately before the event which causes the former owner to be treated as ceasing to be the owner of the fixture, and (c)
that event were disregarded in determining that market value. |
3. Cessation of ownership of the fixture under section 188 where— (a)
neither item 1 nor 2 applies, but (b)
the qualifying interest continues in existence after that time or would so continue but for its becoming merged in another interest. |
The disposal value given for item 2. |
| 4. Cessation of ownership of the fixture under section 188 because of the expiry of the qualifying interest. | If the person receives a capital sum, by way of compensation or otherwise, by reference to the fixture, the amount of the capital sum. In any other case, nil. |
| 5. Cessation of ownership of the fixture under section 190 because the lessee has become the owner under section 183. | The part of the capital sum given by the lessee for the lease referred to in section 183 that falls to be treated for the purposes of this Part as the lessee’s expenditure on the provision of the fixture. |
| 6. Cessation of ownership of the fixture under section 191 (severance). | The market value of the fixture at the time of the severance. |
| 7. Cessation of ownership of the fixture because section 192(2)(a) (assignment of rights) applies. | The consideration given by the assignee for the assignment. |
| 8. Cessation of ownership of the fixture because section 192(2)(b) (discharge of equipment lessee’s obligations) applies on the payment of a capital sum. | The capital sum paid to discharge the financial obligations of the equipment lessee. |
| 9. Permanent discontinuance of the qualifying activity followed by the sale of the qualifying interest. | The part of the sale price that— (a)
falls to be treated as expenditure incurred by the purchaser on the provision of the fixture, or (b)
would fall to be so treated if the purchaser were entitled to an allowance. |
| 10. Permanent discontinuance of the qualifying activity followed by the demolition or destruction of the fixture. | The net amount received for the remains of the fixture, together with— (a)
any insurance money received in respect of the demolition or destruction, and (b)
any other compensation of any description so received, so far as it consists of capital sums. |
| 11. Permanent discontinuance of the qualifying activity followed by the permanent loss of the fixture otherwise than as a result of its demolition or destruction. | Any insurance money received in respect of the loss and, so far as it consists of capital sums, any other compensation of any description so received. |
| 12. The fixture begins to be used wholly or partly for purposes other than those of the qualifying activity. | The part of the price that would fall to be treated for the purposes of this Part as expenditure incurred by the purchaser on the provision of the fixture if the qualifying interest were sold at market value. |
(2) The condition referred to in item 2 of the Table is met by the purchaser if—
(a) the purchaser’s expenditure on the provision of the fixture cannot be qualifying expenditure under this Part or Part 6 (research and development allowances), or
(b) the purchaser is a dual resident investing company which is connected with the former owner.
(3) Items 1 and 5 of the Table are subject to sections 198 and 199 (election to fix apportionment on sale of qualifying interest or grant of lease).
(4) Section 192(3) (assignee of equipment lessee) applies in relation to item 8 of the Table.
(5) Nothing in sections 188 to 192 or this section prevents a disposal value having to be brought into account under Chapter 5 because of a disposal event not dealt with in these sections.
(6) This section is subject to section 197.
(1) This section applies if—
(a) a person (“the taxpayer”) is treated under this Chapter as the owner of any plant or machinery as a result of incurring any expenditure,
(b) any disposal event occurs in relation to the plant or machinery,
(c) the disposal value to be brought into account by the taxpayer would (but for this section) be less than the notional written-down value of the plant or machinery, and
(d) the disposal event is part of, or occurs as a result of, a scheme or arrangement the main purpose or one of the main purposes of which is the obtaining by the taxpayer of a tax advantage under this Part.
(2) The disposal value that the taxpayer must bring into account is the notional written-down value of the plant or machinery.
(3) The notional written-down value is—
QE - A
where—
QE is the taxpayer’s expenditure on the plant or machinery that is qualifying expenditure,
A is the total of all allowances which could have been made to the taxpayer in respect of that expenditure if—
(a) that expenditure had been the only expenditure that had ever been taken into account in determining his available qualifying expenditure, and
(b) all allowances had been made in full.
(1) This section applies if the disposal value of a fixture is required to be brought into account in accordance with item 1 of the Table in section 196 (sale of qualifying interest at not less than market value, etc.).
(2) The seller and the purchaser may jointly, by an election, fix the amount that is to be treated—
(a) for the purposes of item 1 of the Table, and
(b) for the other purposes of this Part,
as the part of the sale price that is expenditure incurred by the purchaser on the provision of the fixture.
(3) The amount fixed by the election must not exceed—
(a) the amount of the capital expenditure which was treated as incurred by the seller on the provision of the fixture or of the plant or machinery which became the fixture, or
(b) the actual sale price.
(4) If an election fixes the amount to be treated as the part of the sale price—
(a) the remaining amount (if any) of the sale price is to be treated for the purposes of this Act as expenditure attributable to the acquisition of the property which is not the fixture but is acquired for that amount, and
(b) if there is no remaining amount, the expenditure so attributable is to be treated for the purposes of this Act as nil.
(5) This section is subject to—
(a) sections 186 and 187 (fixtures on which industrial buildings allowance or research and development allowance has been made),
(b) section 197 (disposal values in avoidance cases), and
(c) sections 200 and 201 (further provisions about elections).
(1) This section applies if the disposal value of a fixture is required to be brought into account in accordance with item 5 of the Table in section 196 (on acquisition of ownership by incoming lessee under section 183).
(2) The persons who are the lessor and the lessee for the purposes of section 183 may jointly, by an election, fix the amount that is to be treated—
(a) for the purposes of item 5 of the Table, and
(b) for the other purposes of this Part,
as the part of the capital sum that is expenditure incurred by the lessee on the provision of the fixture.
(3) The amount fixed by the election must not exceed—
(a) the amount of the capital expenditure which was treated as incurred by the lessor on the provision of the fixture or of the plant or machinery which became the fixture, or
(b) the actual capital sum.
(4) If an election fixes the amount to be treated as the part of the capital sum—
(a) the remaining amount (if any) of the capital sum is to be treated for the purposes of this Act as expenditure attributable to the acquisition of the property which is not the fixture but is acquired for that amount, and
(b) if there is no remaining amount, the expenditure so attributable is to be treated for the purposes of this Act as nil.
(5) This section is subject to—
(a) sections 186 and 187 (fixtures on which industrial buildings allowance or research and development allowance has been made),
(b) section 197 (disposal values in avoidance cases), and
(c) sections 200 and 201 (further provisions about elections).
(1) In this section and section 201, references to an election are to an election under section 198 or 199.
(2) An apportionment made by an election has effect in place of any apportionment that would otherwise be made under sections 562, 563 and 564(1) (apportionment and procedure for determining apportionment).
(3) An election is irrevocable.
(4) If, as a result of circumstances arising after the making of an election, the maximum amount which could be fixed by the election is reduced to an amount which is less than the amount specified in the election, the election is to be treated, for the purposes of this Act, as having specified the amount to which the maximum is reduced.
(1) An election must be made by notice to the Inland Revenue no later than 2 years after the date when—
(a) the purchaser acquires the qualifying interest, in the case of an election under section 198, or
(b) the lessee is granted the lease, in the case of an election under section 199.
(2) The amount fixed by an election must be quantified at the time when the election is made.
(3) The notice must state—
(a) the amount fixed by the election,
(b) the name of each of the persons making the election,
(c) information sufficient to identify the plant or machinery,
(d) information sufficient to identify the relevant land,
(e) particulars of—
(i) the interest acquired by the purchaser, in the case of an election under section 198, or
(ii) the lease granted to the lessee, in the case of an election under section 199, and
(f) the tax district references of each of the persons making the election.
(4) If a person—
(a) has joined in making an election, and
(b) subsequently makes a tax return for a period which is the first period for which he is making a tax return in which the election has an effect for tax purposes in his case,
a copy of the notice containing the election must accompany the return.
(5) The following provisions do not apply to the election—
(a) section 42 of, and Schedule 1A to, TMA 1970 (claims and elections for income tax purposes);
(b) paragraphs 54 to 60 of Schedule 18 to FA 1998 (claims and elections for corporation tax purposes).
(6) References in this section to a tax return, in the case of an election for the purposes of a trade, profession or business carried on by persons in partnership, are to be read, in relation to those persons, as references to a return under section 12AA of TMA 1970 (partnership returns).
(1) Any reference in this Chapter to a person being entitled to an allowance in respect of expenditure on the provision of a fixture includes the person having a pool to which expenditure on the provision of the fixture has been allocated.
But this is subject to subsection (2).
(2) If—
(a) expenditure on the provision of the fixture has been allocated to a pool, and
(b) the person is required under section 61(1) to bring the disposal value of the fixture into account in the pool,
the person is not entitled to an allowance in respect of the expenditure allocated to that pool for any chargeable period after that in which the disposal event occurs.
(3) For the purposes of this Chapter, a person makes a claim in respect of expenditure if he—
(a) makes a claim for an allowance in respect of that expenditure,
(b) makes a tax return in which that expenditure is taken into account in determining his available qualifying expenditure for the purposes of this Part, or
(c) gives notice of an amendment of a tax return which provides for that expenditure to be so taken into account.
(1) If a person who has made a tax return (“the taxpayer”) becomes aware that, after making it, anything in it has become incorrect for any of the reasons given in subsection (2), the taxpayer must give notice to the Inland Revenue specifying how the return needs to be amended.
(2) The reasons are that—
(a) an approval given for the purposes of section 180 (affordable warmth programme) has been withdrawn;
(b) section 181(2), 182(2) or 184(2) (another person has a prior right) applies in the taxpayer’s case;
(c) section 185 (restriction on qualifying expenditure where another person has claimed an allowance) applies in the taxpayer’s case;
(d) an election is made under section 198 or 199 (election to fix apportionment);
(e) section 200(4) (reduction in amount which can be fixed by an election) applies in the taxpayer’s case.
(3) The notice must be given within 3 months beginning with the day on which the taxpayer first became aware that anything contained in the tax return had become incorrect for any of the reasons given in subsection (2).
(4) All such assessments and adjustments of assessments are to be made as are necessary to give effect to this Chapter.
(1) Subsections (2) and (3) apply if—
(a) any question arises as to whether any plant or machinery has become, in law, part of a building or other land, and
(b) that question is material to the tax liability (for whatever period) of two or more persons.
(2) The question is to be determined, for the purposes of the tax of all the persons concerned, by the Special Commissioners.
(3) The Special Commissioners must determine the question in the same way as an appeal, but all the persons concerned are entitled—
(a) to appear before and be heard by the Special Commissioners, or
(b) to make representations to them in writing.
(4) Subsections (5) and (6) apply if any question relating to an election under section 198 or 199 (apportionments) arises for determination by any body of Commissioners for the purposes of any proceedings before them.
(5) The Commissioners must determine the question separately from any other questions in those proceedings.
(6) Each of the persons who has joined in making the election is entitled—
(a) to appear before and be heard by the Commissioners, or
(b) to make representations to them in writing;
and the Commissioners' determination has effect as if made in an appeal to which each of those persons was a party.
(1) If it appears that a person carrying on a qualifying activity has incurred expenditure on the provision of plant or machinery—
(a) partly for the purposes of the qualifying activity, and
(b) partly for other purposes,
any first-year allowance to which he is entitled in respect of the expenditure must be reduced to an amount which is just and reasonable having regard to the relevant circumstances.
(2) The relevant circumstances include, in particular, the extent to which it appears that the plant or machinery is likely to be used for purposes other than those of the qualifying activity in question.
(3) In calculating for the purposes of section 58 the balance left after deducting a first-year allowance, a reduction under subsection (1) is to be disregarded.
(1) Qualifying expenditure to which this subsection applies, if allocated to a pool, must be allocated to a single asset pool.
(2) Subsection (1) applies to qualifying expenditure incurred by a person carrying on a qualifying activity—
(a) partly for the purposes of the qualifying activity, and
(b) partly for other purposes.
(3) If a person is required to bring a disposal value into account in a pool for a chargeable period because the plant or machinery begins to be used partly for purposes other than those of the qualifying activity, an amount equal to that disposal value is allocated (as expenditure on the plant or machinery) to a single asset pool for that chargeable period.
(4) In the case of a single asset pool under subsection (1), there is no final chargeable period or disposal event merely because the plant or machinery begins to be used partly for purposes other than those of the qualifying activity.
(1) This section applies if a person’s expenditure is in a single asset pool under section 206(1) or (3).
(2) The amount of—
(a) any writing-down allowance or balancing allowance to which the person is entitled, or
(b) any balancing charge to which the person is liable,
must be reduced to an amount which is just and reasonable having regard to the relevant circumstances.
(3) The relevant circumstances include, in particular, the extent to which it appears that the plant or machinery was used in the chargeable period in question for purposes other than those of the person’s qualifying activity.
(4) In calculating under section 59 the amount of unrelieved qualifying expenditure carried forward, a reduction of a writing-down allowance under subsection (2) is to be disregarded.
(5) If a person entitled to a writing-down allowance for a chargeable period—
(a) does not claim the allowance, or
(b) claims less than the full amount of the allowance,
the unrelieved qualifying expenditure carried forward from the period is to be treated as not reduced or (as the case may be) only proportionately reduced.
Capital Allowances Act 2001