Legalize / United Kingdom / Public General Act

Capital Allowances Act 2001

Type Public General Act

Publication 2001-03-22

Last updated 2026-03-18

State In force

Department Statute Law Database

Source legislation.gov.uk

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Part 1 — Introduction

Chapter 1 — Capital allowances: general

Capital allowances

1

(1) This Act provides for allowances in respect of capital expenditure (and for charges in connection with those allowances).

(2) The allowances for which this Act provides are those under—

(a) Part 2 (plant and machinery allowances);

(aa) Part 2A (structures and buildings allowances);

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(ba) Part 3A (business premises renovation allowances)

(ca) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) Part 5 (mineral extraction allowances);

(e) Part 6 (research and development allowances);

(f) Part 7 (know-how allowances);

(g) Part 8 (patent allowances);

(h) Part 9 (dredging allowances);

(i) Part 10 (assured tenancy allowances).

(3) This Act also provides for allowances in respect of contributions to expenditure incurred on plant or machinery... for the purposes of a mineral extraction trade or on dredging (see Part 11).

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Energy-saving components of plant or machinery

2

(1) Allowances and charges are to be given effect—

(a) for income tax purposes, in calculating income for a chargeable period, and

(b) for corporation tax purposes, in calculating profits for a chargeable period.

(2) For the meaning of “chargeable period”, see section 6.

(3) Subsection (1) needs to be read with the following provisions about giving effect to allowances and charges—

sections 247 to 262 (plant and machinery allowances);

sections 270HA to 270HI (structures and buildings allowances);

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

sections 360Z and 360Z1 (business premises renovation allowances)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

section 432 (mineral extraction allowances);

section 450 (research and development allowances);

section 463 (know-how allowances);

sections 478 to 480 (patent allowances);

section 489 (dredging allowances);

section 529 (assured tenancy allowances).

(4) In subsection (1)(b) “profits” has the same meaning as in Part 2 of CTA 2009 (see section 2(2) of that Act).

Environmentally beneficial components of plant or machinery

3

(1) No allowance is to be made under this Act... unless a claim for it is made.

(2) The claim must be included in a tax return.

(2ZZA) Any claim for a first-year allowance under section 45O (expenditure on plant and machinery for use in special tax sites) must include, or be accompanied by, such information as Her Majesty's Revenue and Customs may require.

(2ZA) Any claim for an allowance under Part 2A (structures and buildings allowances) —

(a) must be separately identified as such in the return, and

(b) where it relates to special tax site qualifying expenditure (as defined in section 270BNA), must include, or be accompanied by, such information as Her Majesty's Revenue and Customs may require.

(2A) Any claim for an allowance under Part 3A (business premises renovation allowances) must be separately identified as such in the return.

(2B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) In this Act “tax return” means—

(a) for income tax purposes, a return required to be made under TMA 1970, and

(b) for corporation tax purposes, a company tax return required to be made under Schedule 18 to FA 1998 (company tax returns, assessments and related matters).

(4) Subsection (2) does not apply for income tax purposes to a claim for an allowance under—

(a) section 258 (claim for allowance in respect of special leasing of plant or machinery),

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

which is instead subject to section 42 of TMA 1970 (procedure for making claims and claims not included in returns).

(5) Subsection (2) does not apply for corporation tax purposes to a claim for an allowance under—

(a) section 260(3)(b) (claim to carry back allowance in respect of special leasing of plant or machinery), or

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

which is instead subject to paragraphs 54 to 60 of Schedule 18 to FA 1998 (general provisions as to claims).

(6) This section is subject to section 42(6) and (7) of TMA 1970 (special provisions relating to partnerships).

Capital expenditure

4

(1) In this Act “capital expenditure” and “capital sums” are used in the sense given in this section.

(2) “Capital expenditure” and “capital sums” do not include, in relation to a person incurring the expenditure or paying the sums—

(a) any expenditure or sum that may be deducted in calculating the profits or gains of a trade, profession or vocation or property business carried on by the person, ...

(aa) any cash basis expenditure, other than expenditure incurred on the provision of a car, or

(b) any expenditure or sum that may be allowed as a deduction under a relevant provision from the taxable earnings from an employment or office held by the person.

(2ZA) In subsection (2)(aa)—

“cash basis expenditure” means any expenditure incurred—in the case of a trade, profession or vocation, at a time when the cash basis applies in relation to the trade, profession or vocation (see section 24A of ITTOIA 2005), orin the case of a property business, in a tax year for which the profits of the business are calculated on the cash basis (see section 271D of that Act); and

“car” has the same meaning as in Part 2 (see section 268A) .

(2A) In subsection (2)—

“relevant provision” means any of the following—

(a) section 262;

(b) section 232 of ITEPA 2003 (giving effect to mileage allowance relief);

(d) sections 188 to 194of FA 2004 (contributions under registered pension schemes), and

“taxable earnings” has the meaning given by section 10 of ITEPA 2003.

(3) “Capital expenditure” and “capital sums” do not include, in relation to a recipient of the expenditure or sums—

(a) any amounts that are to be added in calculating the profits or gains of a trade, profession or vocation or property business carried on by the recipient, or

(b) any amounts that are earnings of an employment or office held by the recipient.

(4) “Capital expenditure” and “capital sums” do not include, in relation to—

(a) a person incurring the expenditure or paying the sums, or

(b) a recipient of the expenditure or sums,

any expenditure or sum in the case of which a deduction of income tax falls or may fall to be made under Chapter 6 of Part 15 of ITA 2007 (deduction from annual payments or patent royalties) or under section 906 of that Act (certain royalties etc where usual place of abode of owner is abroad).

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

When capital expenditure is incurred

5

(1) For the purposes of this Act, the general rule is that an amount of capital expenditure is to be treated as incurred as soon as there is an unconditional obligation to pay it.

(2) The general rule applies even if the whole or a part of the expenditure is not required to be paid until a later date.

(3) There are the following exceptions to the general rule.

(4) If under an agreement—

(a) the capital expenditure is expenditure on the provision of an asset,

(b) an unconditional obligation to pay an amount of the expenditure comes into being as a result of the giving of a certificate or any other event,

(c) the giving of the certificate, or other event, occurs within the period of one month after the end of a chargeable period, and

(d) at or before the end of that chargeable period, the asset has become the property of, or is otherwise under the agreement attributed to, the person subject to the unconditional obligation to pay,

the expenditure is to be treated as incurred immediately before the end of that chargeable period.

(5) If under an agreement an amount of capital expenditure is not required to be paid until a date more than 4 months after the unconditional obligation to pay has come into being, the amount is to be treated as incurred on that date.

(6) If under an agreement—

(a) there is an unconditional obligation to pay an amount of capital expenditure on a date earlier than accords with normal commercial usage, and

(b) the sole or main benefit which might have been expected to be obtained thereby is that the amount would be treated, under the general rule, as incurred in an earlier chargeable period,

the amount is to be treated as incurred on the date on or before which it is required to be paid.

(7) This section—

(a) is subject to any provision of this Act which has the effect that expenditure is to be treated as incurred on a date later than would result from the application of this section, and

(b) does not apply to expenditure treated as incurred as a result of a person incurring an additional VAT liability.

General limit on amount of writing-down allowance

6

(1) In this Act “chargeable period” means—

(a) for income tax purposes, a period of account, or

(b) for corporation tax purposes, an accounting period of a company.

(2) “Period of account” means—

(a) in the case of a person entitled to an allowance or liable to a charge in calculating the profits of his trade, profession or vocation, a period for which accounts are drawn up for the purposes of the trade, profession or vocation, and

(b) in the case of any other person entitled to an allowance or liable to a charge, a tax year.

(3) Subsection (2)(a) is subject to subsections (4) to (6).

(4) If—

(a) two periods of account overlap, or

(b) one period of account includes another,

the period common to both is to be treated as part of the first period of account only.

(5) If there is a gap between two periods of account, the gap is to be treated as part of the first period of account.

(6) If a period of account would (apart from this subsection) be longer than 18 months, that period must be treated as divided into separate periods of account—

(a) the first beginning with the start date of the original period, and

(b) each subsequent one beginning with an anniversary of that date,

so as to ensure that none of the periods of account is longer than 12 months.

Chapter 2 — Exclusion of double relief

Restriction of qualifying expenditure

7

(1) If an allowance is made under any Part of this Act to a person in respect of capital expenditure, no allowance is to be made to him under any other Part in respect of—

(a) that expenditure, or

(b) the provision of any asset to which that expenditure related.

(1A) In subsection (1), the reference to capital expenditure includes a reference to expenditure that is treated as capital expenditure for the purposes of section 270BJ(1) (structures and buildings allowances: expenditure on renovation, conversion and incidental repairs).

(2) This section does not apply in relation to Parts 7 and 8 (know-how and patent allowances).

The relevant interest

8

(1) Subsection (2) applies if, under Part 2—

(a) any capital expenditure has been allocated to a pool, and

(b) an allowance or charge has been made to or on any person in respect of the pool.

(2) The person to or on whom the allowance or charge has been made is not entitled to an allowance under any Part other than Part 2 in respect of—

(a) the expenditure allocated to the pool, or

(b) the provision of any asset to which the allocated expenditure related.

(3) Subsection (4) applies if under any Part other than Part 2 an allowance has been made to a person in respect of any capital expenditure.

(4) The person to whom the allowance has been made is not entitled to allocate to any pool—

(a) that expenditure, or

(b) any expenditure on the provision of any asset to which the expenditure mentioned in paragraph (a) related.

(5) This section does not apply in relation to Parts 7 and 8 (know-how and patent allowances).

Qualifying expenditure

9

(1) A person is not entitled to make a fixtures claim in respect of any capital expenditure relating to an asset if—

(a) any person entitled to do so has at any previous time claimed an allowance under any Part other than Part 2, and

(b) the claim was for an allowance in respect of capital expenditure relating, in whole or part, to the asset.

(2) Subsection (1) does not prevent a person making a fixtures claim in respect of capital expenditure if—

(a) the only previous claim was under Part 3, 3A or 6 (industrial buildings and research and development allowances), and

(b) section 186(2), 186A(2) or 187(2) (limit on amount of expenditure that may be taken into account) applies to that expenditure.

(3) If a person entitled to do so has made a fixtures claim in respect of capital expenditure relating to an asset, no one is entitled to an allowance on a later claim under any Part other than Part 2 in respect of any capital expenditure relating to the asset.

(4) A person makes a fixtures claim in respect of expenditure if he makes a claim (in the sense given in section 202(3)) under Chapter 14 of Part 2 in respect of the expenditure as expenditure on the provision of a fixture.

Meaning of “oil licence” and “interest in an oil licence”

10

(1) In this Chapter “capital expenditure” includes any contribution to capital expenditure.

(2) For the purposes of this Chapter—

(a) expenditure relates to an asset only if it relates to its provision, and

(b) the provision of an asset includes its construction or acquisition.

Part 2 — Plant and machinery allowances

Chapter 1 — Introduction

Transfer of insurance company business

11

(1) Allowances are available under this Part if a person carries on a qualifying activity and incurs qualifying expenditure.

(2) “Qualifying activity” has the meaning given by Chapter 2.

(3) Allowances under this Part must be calculated separately for each qualifying activity which a person carries on.

(4) The general rule is that expenditure is qualifying expenditure if—

(a) it is capital expenditure on the provision of plant or machinery wholly or partly for the purposes of the qualifying activity carried on by the person incurring the expenditure, and

(b) the person incurring the expenditure owns the plant or machinery as a result of incurring it.

(5) But the general rule is affected by other provisions of this Act, and in particular by Chapter 3.

Meaning of “qualifying flat”

12

(1) For the purposes of this Part, expenditure incurred for the purposes of a qualifying activity by a person about to carry on the activity is to be treated as if it had been incurred by him on the first day on which he carries on the activity.

(2) Subsection (3) applies if—

(a) a company that does not have a Northern Ireland regional establishment incurs expenditure for the purposes of a trade,

(b) the activities for the purposes of which the expenditure is incurred would, if the company were a NIRE company, be an NI rate activity treated as a separate trade, and

(3) The expenditure is to be treated as incurred on the first day of the first chargeable period in which the company is a NIRE company.

(4) Subsection (5) applies if—

(a) a partnership that does not have a Northern Ireland regional establishment incurs expenditure for the purposes of a trade,

(b) the activities for the purposes of which the expenditure is incurred would, if the partnership were a Northern Ireland Chapter 7 firm, be an NI rate activity treated as a separate trade, and

(5) The expenditure is to be treated for the purposes of this Part so far as relating to the corporate partner calculation as incurred on the first day of the first chargeable period in which the partnership is a Northern Ireland Chapter 7 firm.

(6) In this section “Northern Ireland regional establishment” has the same meaning as in Part 8B of CTA 2010 (see Chapter 5 of that Part as read, in relation to a partnership, with section 357WA(4) of that Act).

Incoming lessee where lessor entitled to allowances

13

(1) This section applies if a person—

(a) brings plant or machinery into use for the purposes of a qualifying activity carried on by him, and

(b) on the date when he does so, owns the plant or machinery as a result of having incurred capital expenditure (“actual expenditure”) on its provision for purposes other than those of that qualifying activity.

(2) The person is to be treated—

(a) as having incurred capital expenditure (“notional expenditure”) on the provision of the plant or machinery for the purposes of the qualifying activity on the date on which it is brought into use for those purposes, and

(b) as owning the plant or machinery as a result as having incurred that expenditure.

(3) Subject to subsection (4), the amount of the notional expenditure is the market value of the plant or machinery on the date when it is brought into use for the purposes of the qualifying activity.

(4) If the market value is greater than the actual expenditure, the amount of the notional expenditure is the amount of the actual expenditure, less any amount required to be deducted under subsection (5).

(5) The amount to be deducted is any amount that under section 218... would have been left out of account in determining the person’s available qualifying expenditure if the actual expenditure had been incurred on the provision of the plant or machinery for the purposes of the qualifying activity.

(6) The question whether the provision of the plant or machinery is to be treated as wholly or only partly for the purposes of the qualifying activity is to be determined according to whether the use referred to in subsection (1)(a) is wholly or only partly for those purposes.

(7) This section is subject to section 161 (pre-trading expenditure on mineral exploration and access).

Section 87 (taxable premiums etc.)

14

(1) This section applies if a person—

(a) is the owner of plant or machinery as a result of a gift, and

(b) brings the plant or machinery into use for the purposes of a qualifying activity carried on by him.

(2) The person is to be treated—

(a) as having incurred capital expenditure on the provision of the plant or machinery for the purposes of the qualifying activity on the date on which it is brought into use for those purposes, and

(b) as owning the plant or machinery as a result of having incurred that expenditure.

(3) The amount of that capital expenditure is to be treated as being the market value of the plant or machinery on the date when it was brought into use for the purposes of the qualifying activity.

(4) The question whether the provision of the plant or machinery is to be treated as wholly or only partly for the purposes of the qualifying activity is to be determined according to whether the use referred to in subsection (1)(b) is wholly or only partly for those purposes.

(5) This section is subject to section 161 (pre-trading expenditure on mineral exploration and access).

Chapter 2 — Qualifying activities

Sections 228A to 228G: supplementary

15

(1) Each of the following is a qualifying activity for the purposes of this Part—

(a) a trade,

(b) a UK property business,

(d) an ... overseas property business,

(da) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) a profession or vocation,

(f) a concern listed in section 12(4) of ITTOIA 2005 or section 39(4) of CTA 2009 (mines, transport undertakings etc.),

(g) managing the investments of a company with investment business,

(h) special leasing of plant or machinery, and

(i) an employment or office,

but to the extent only that the profits or gains from the activity are, or (if there were any) would be, chargeable to tax.

(2) Subsection (1) is subject to the following provisions of this Part.

(2ZA) Where an activity of a company is treated by subsection (1) of section 6D (NI rate activity treated as separate trade) as a separate trade, that activity is an activity separate from any other activity of the company.

(2ZB) Where an activity of a Northern Ireland firm is treated by subsection (2) of section 6D as a separate trade for the purposes of the corporate partner calculation, that activity is for the purposes of this Part, so far as relating to the corporate partner calculation, an activity separate from every other activity of the Northern Ireland firm.

(2A) A business carried on through one or more permanent establishments outside the United Kingdom by a company in relation to which an election under section 18A of CTA 2009 has effect—

(a) is an activity separate from any other activity of the company, and

(b) is to be regarded as an activity all the profits and gains from which are not, or (if there were any) would not be, chargeable to tax.

(2B) Subsection (2A) does not apply to the business so far as it consists of a plant or machinery lease under which the company is a lessor if any profits or losses arising from the lease are to be left out of account as mentioned in section 18C(3) of CTA 2009.

(3) This section, in so far as it provides for—

(a) a UK property business,

(b) an ... overseas property business, or

to be a qualifying activity, needs to be read with section 35 (expenditure on plant or machinery for use in a dwelling-house not qualifying expenditure in certain cases).

(4) Also, subsection (1)(i) needs to be read with sections 36 (restriction on qualifying expenditure in case of employment or office) and 80 (vehicles provided for purposes of employment or office).

Schedule 2 (provisions relating to carrying out approved schemes or reorganisation)

16

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Schedule 2 (provisions relating to carrying out approved schemes or reorganisation)

17

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Schedule 24 (assumptions for calculating chargeable profits, creditable tax and corresponding United Kingdom tax of foreign companies)

18

(1) For the purposes of this Part, managing the investments of a company with investment business consists of pursuing those purposes expenditure on which would be treated as expenses of management within section 1219 of CTA 2009.

(2) In this Part “company with investment business” has the meaning given by section 1218B of CTA 2009.

Section 37 (consideration chargeable to tax on income)

19

(1) In this Part “special leasing”, in relation to plant or machinery, means hiring out the plant or machinery otherwise than in the course of any other qualifying activity (and references to a lessor or lessee in the context of special leasing are to be read accordingly).

(2) A qualifying activity consisting of special leasing of plant or machinery begins when the plant or machinery is first hired out in the circumstances given in subsection (1).

(3) A qualifying activity consisting of special leasing of plant or machinery is permanently discontinued if the lessor permanently ceases to hire out the plant or machinery otherwise than in the course of any other qualifying activity.

(4) A person who has more than one item of plant or machinery that is the subject of special leasing has a separate qualifying activity in relation to each item.

(5) If a company carrying on any long-term business—

(a) hires out plant or machinery which is an investment asset (as defined by section 545(2)), and

(b) does not do so in the course of a property business,

the company is to be treated for the purposes of subsection (1) as hiring out the plant or machinery otherwise than in the course of a qualifying activity.

Additional VAT liabilities and writing off initial allowances

20

(1) In section 15(1)(i) “employment” does not include an employment the performance of the duties of which is treated as the carrying on of a trade under section 15 of ITTOIA 2005 (divers and diving supervisors in the North Sea etc.).

(2) Subsection (3) applies if the earnings for any duties of an employment or office fall within section 22 or 26 of ITEPA 2003.

(3) This Part applies in relation to—

(a) those earnings , or

(b) any other taxable earnings (as defined by section 10 of ITEPA 2003) of the employment or office,

as if the performance of the duties did not belong to that employment or office.

Chapter 3 — Qualifying expenditure

Buildings, structures and land

Section 42 (procedure for making claims etc.)

21

(1) For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on the provision of a building.

(2) The provision of a building includes its construction or acquisition.

(3) In this section, “building” includes an asset which—

(a) is incorporated in the building,

(b) although not incorporated in the building (whether because the asset is moveable or for any other reason), is in the building and is of a kind normally incorporated in a building, or

1.	Walls, floors, ceilings, doors, gates, shutters, windows and stairs.
2.	Mains services, and systems, for water, electricity and gas.
3.	Waste disposal systems.
4.	Sewerage and drainage systems.
5.	Shafts or other structures in which lifts, hoists, escalators and moving walkways are installed.
6.	Fire safety systems.

(4) This section is subject to section 23 (but any reference in list C in subsection (4) of that section to “plant” does not include anything where expenditure on its provision is excluded by this section).

Section 403ZB (amounts eligible for group relief: excess capital allowances)

22

(1) For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on—

(a) the provision of a structure or other asset in list B, or

(b) any works involving the alteration of land.

1.	A tunnel, bridge, viaduct, aqueduct, embankment or cutting.
2.	A way, hard standing (such as a pavement), road, railway, tramway, a park for vehicles or containers, or an airstrip or runway.
3.	An inland navigation, including a canal or basin or a navigable river.
4.	A dam, reservoir or barrage, including any sluices, gates, generators and other equipment associated with the dam, reservoir or barrage.
5.	A dock, harbour, wharf, pier, marina or jetty or any other structure in or at which vessels may be kept, or merchandise or passengers may be shipped or unshipped.
6.	A dike, sea wall, weir or drainage ditch.
7.	Any structure not within items 1 to 6 other than—a structure (but not a building) within Chapter 2 of Part 3 (meaning of “industrial building”),a structure in use for the purposes of an undertaking for the extraction, production, processing or distribution of gas, anda structure in use for the purposes of a trade which consists in the provision of telecommunication, television or radio services.

(2) The provision of a structure or other asset includes its construction or acquisition.

(3) In this section—

(a) “structure” means a fixed structure of any kind, other than a building (as defined by section 21(3)), and

(b) “land” does not include buildings or other structures, but otherwise has the meaning given in Schedule 1 to the Interpretation Act 1978 (c. 30).

(4) This section is subject to section 23 (but any reference in list C in subsection (4) of that section to “plant” does not include anything where expenditure on its provision is excluded by this section).

Section 48 (films: relief for production or acquisition expenditure)

23

(1) Sections 21 and 22 do not apply to any expenditure to which any of the provisions listed in subsection (2) applies.

(2) The provisions are—

section 28 (thermal insulation of ...buildings);

section 33 (personal security);

section 33A (integral features);

section 71 (software and rights to software);

section 143 of ITTOIA 2005 or section 40D of F(No.2)A 1992 (election relating to tax treatment of films expenditure).

(3) Sections 21 and 22 also do not affect the question whether expenditure on any item described in list C is, for the purposes of this Act, expenditure on the provision of plant or machinery.

(4) But items 1 to 16 of list C do not include any asset whose principal purpose is to insulate or enclose the interior of a building or to provide an interior wall, floor or ceiling which (in each case) is intended to remain permanently in place.

1.	Machinery (including devices for providing motive power) not within any other item in this list.
2.	...Gas and sewerage systems provided mainly—to meet the particular requirements of the qualifying activity, orto serve particular plant or machinery used for the purposes of the qualifying activity.
3.	. . .
4.	Manufacturing or processing equipment; storage equipment (including cold rooms); display equipment; and counters, checkouts and similar equipment.
5.	Cookers, washing machines, dishwashers, refrigerators and similar equipment; washbasins, sinks, baths, showers, sanitary ware and similar equipment; and furniture and furnishings.
6.	Hoists.
7.	Sound insulation provided mainly to meet the particular requirements of the qualifying activity.
8.	Computer, telecommunication and surveillance systems (including their wiring or other links).
9.	Refrigeration or cooling equipment.
10.	Fire alarm systems; sprinkler and other equipment for extinguishing or containing fires.
11.	Burglar alarm systems.
12.	Strong rooms in bank or building society premises; safes.
13.	Partition walls, where moveable and intended to be moved in the course of the qualifying activity.
14.	Decorative assets provided for the enjoyment of the public in hotel, restaurant or similar trades.
15.	Advertising hoardings; signs, displays and similar assets.
16.	Swimming pools (including diving boards, slides and structures on which such boards or slides are mounted).
17.	Any glasshouse constructed so that the required environment (namely, air, heat, light, irrigation and temperature) for the growing of plants is provided automatically by means of devices forming an integral part of its structure.
18.	Cold stores.
19.	Caravans provided mainly for holiday lettings.
20.	Buildings provided for testing aircraft engines run within the buildings.
21.	Moveable buildings intended to be moved in the course of the qualifying activity.
22.	The alteration of land for the purpose only of installing plant or machinery.
23.	The provision of dry docks.
24.	The provision of any jetty or similar structure provided mainly to carry plant or machinery.
25.	The provision of pipelines or underground ducts or tunnels with a primary purpose of carrying utility conduits.
26.	The provision of towers to support floodlights.
27.	The provision of—any reservoir incorporated into a water treatment works, orany service reservoir of treated water for supply within any housing estate or other particular locality.
28.	The provision of—silos provided for temporary storage, orstorage tanks.
29.	The provision of slurry pits or silage clamps.
30.	The provision of fish tanks or fish ponds.
31.	The provision of rails, sleepers and ballast for a railway or tramway.
32.	The provision of structures and other assets for providing the setting for any ride at an amusement park or exhibition.
33.	The provision of fixed zoo cages.

(5) In item 19 of list C, “caravan” includes, in relation to a holiday caravan site, anything that is treated as a caravan for the purposes of—

(a) the Caravan Sites and Control of Development Act 1960 (c. 62), or

(b) the Caravans Act (Northern Ireland) 1963 (c. 17 (N.I.)).

Section 528 (patents: manner of making allowances and charges)

24

(1) For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on the acquisition of an interest in land.

(2) In this section “land” does not include—

(a) buildings or other structures, or

(b) any asset which is so installed or otherwise fixed to any description of land as to become, in law, part of the land,

but otherwise has the meaning given in Schedule 1 to the Interpretation Act 1978 (c. 30).

(3) Subject to subsection (2), “interest in land” has the meaning given by section 175 (definitions in connection with provisions about fixtures).

Schedule 6 (adjustment on change of accounting basis)

25

If a person carrying on a qualifying activity incurs capital expenditure on alterations to an existing building incidental to the installation of plant or machinery for the purposes of the qualifying activity, this Part applies as if—

(a) the expenditure were expenditure on the provision of the plant or machinery, and

(b) the works representing the expenditure formed part of the plant or machinery.

Demolition costs

Balancing allowances

26

(1) This section applies if—

(a) plant or machinery is demolished, and

(b) the last use of the plant or machinery was for the purposes of a qualifying activity.

(2) If the person carrying on the qualifying activity replaces the plant or machinery with other plant or machinery then, for the purposes of this Part, the net cost of the demolition to that person is treated as expenditure incurred on the provision of the other plant or machinery.

(3) If the person carrying on the qualifying activity does not replace the plant or machinery, the net cost of the demolition to that person is allocated to the appropriate pool for the chargeable period in which the demolition takes place.

(4) In subsection (3)—

“the appropriate pool” means the pool to which the expenditure on the demolished plant or machinery has been or would be allocated in accordance with this Part, and

“the net cost of the demolition” means the amount, if any, by which the cost of the demolition exceeds any money received for the remains of the plant or machinery.

(5) Subsection (3) is subject to section 164(4) (general decommissioning expenditure before cessation of ring fence trade: election for special allowance) and sections 165A to 165E (restrictions on allowances: anti-avoidance).

Expenditure on thermal insulation and personal security

Apportionment where property sold together

27

(1) Subsection (2) has effect in relation to expenditure if—

(a) it is expenditure to which section 28 or 33 applies, and

(b) an allowance under Part 2 or a deduction in respect of the expenditure could not, in the absence of this section, be made in calculating the income from the qualifying activity in question.

(2) This Part (including in particular section 11(4)) applies as if—

(a) the expenditure were capital expenditure on the provision of plant or machinery for the purposes of the qualifying activity in question, and

(b) the person who incurred the expenditure owned plant or machinery as a result of incurring it.

Thermal insulation of industrial buildings

28

(1) This section applies to expenditure if a person carrying on a qualifying activity other than a UK property business or an overseas property business has incurred it in adding insulation against loss of heat to a building occupied by him for the purposes of the qualifying activity.

(2) This section also applies to expenditure if a person carrying on a qualifying activity consisting of a UK property business or an overseas property business has incurred it in adding insulation against loss of heat to a building let by him in the course of the business.

(2A) Subsection (2) is subject to section 35 (expenditure on plant or machinery for use in dwelling-house not qualifying expenditure).

(2B) This section does not apply to expenditure within subsection (2) if a deduction for that expenditure is allowable—

(a) under section 251 of CTA 2009, or

(b) under section 312 of ITTOIA 2005,

(deductions for expenditure on energy-saving items).

(2C) For the purposes of subsection (2B), whether such a deduction is allowable is to be determined without regard to subsection (1)(e) of the section in question.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Schedule 26 (transfers: tax)

29

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balancing allowances

30

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Section 533 (interpretation of sections 520 to 532)

31

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Safety at other sports grounds

32

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sections 520 to 523 (patents)

33

(1) This section applies to expenditure if—

(a) it is incurred by an individual or partnership of individuals in connection with the provision for, or for use by, the individual, or any of the individuals, of a security asset,

(b) the individual or partnership is carrying on a relevant qualifying activity, and

(2) The special threat conditions are that—

(a) the asset is provided or used to meet a threat which—

(i) is a special threat to the individual’s personal physical security, and

(ii) arises wholly or mainly because of the relevant qualifying activity, and

(b) the person incurring the expenditure—

(i) has the sole object of meeting that threat in incurring that expenditure, and

(ii) intends the asset to be used solely to improve personal physical security.

(3) If—

(a) the person incurring the expenditure intends the asset to be used solely to improve personal physical security, but

(b) there is another use which is incidental to improving personal physical security,

that other use is ignored for the purposes of this section.

(4) The fact that an asset improves the personal physical security of any member of the family or household of the individual concerned, as well as that of the individual, does not prevent this section from applying.

(5) If—

(a) the asset is not intended to be used solely to improve personal physical security, but the expenditure incurred on it would otherwise be expenditure to which this section applies, and

(b) the person incurring the expenditure intends the asset to be used partly to improve personal physical security,

this section applies only to the proportion of the expenditure attributable to the intended use to improve personal physical security.

(6) In this section “security asset” means an asset which improves personal security; and here “asset”—

(a) does not include—

(i) a car, ship or aircraft, or

(ii) a dwelling or grounds appurtenant to a dwelling, but

(b) subject to paragraph (a), includes equipment, a structure (such as a wall) and an asset which becomes fixed to land.

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) In this section “relevant qualifying activity” means a qualifying activity consisting of—

(a) a trade,

(b) a UK property business,

(d) an ... overseas property business, ...

(da) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) a profession or vocation.

Exclusion of certain types of expenditure

Schedule 12 (leasing arrangements: finance leases and loans)

34

(1) Expenditure is not qualifying expenditure if it is incurred by—

(a) a member of the House of Commons,

(b) a member of the Scottish Parliament,

(d) a member of the Northern Ireland Assembly,

in or in connection with the provision or use of residential or overnight accommodation for the purpose given in subsection (2).

(2) The purpose is enabling the member to perform the duties of a member of the body in or about—

(a) the place where the body sits, or

(b) the constituency or region for which the member has been returned.

Expenditure on plant or machinery for use in dwelling-house not qualifying expenditure in certain cases

35

(1) This section applies if a person is carrying on a qualifying activity consisting of—

(a) a UK property business,

(b) an ... overseas property business, or

(2) The person’s expenditure is not qualifying expenditure if it is incurred in providing plant or machinery for use in a dwelling-house.

(3) If plant or machinery is provided partly for use in a dwelling-house and partly for other purposes, such apportionment of the expenditure incurred in providing that plant or machinery is to be made for the purposes of subsection (2) as is just and reasonable.

Restriction on qualifying expenditure in case of employment or office

36

(1) Where the qualifying activity consists of an employment or office—

(a) expenditure on the provision of a mechanically propelled road vehicle, or a cycle, is not qualifying expenditure, and

(b) other expenditure is qualifying expenditure only if the plant or machinery is necessarily provided for use in the performance of the duties of the employment or office.

(2) In this section “ cycle ” has the meaning given by section 192(1) of the Road Traffic Act 1988.

Exclusion where sums payable in respect of depreciation

37

(1) Expenditure incurred by a person in providing plant or machinery for the purposes of a qualifying activity is not qualifying expenditure if it appears—

(a) that during the period during which the plant or machinery will be used for the purposes of the qualifying activity sums are, or are to be, payable to that person directly or indirectly, and

(b) that those sums are in respect of, or take account of, the whole of the depreciation of the plant or machinery resulting from its use for those purposes.

(2) Subsection (1) does not apply if the sums fall to be taken into account as income of the person or in calculating the profits of a qualifying activity carried on by him.

Production animals etc.

38

Expenditure is not qualifying expenditure if it is incurred on—

(a) animals or other creatures to which section 30 of ITTOIA 2005 or section 50 of CTA 2009 (animals kept for trade purposes) applies,

(b) animals or other creatures to which Chapter 8 of Part 2 of ITTOIA 2005 or Chapter 8 of Part 3 of CTA 2009 (herd basis rules) applies, or

Chapter 4 — First-year qualifying expenditure

General

First-year allowances available for certain types of qualifying expenditure only

39

A first-year allowance is not available unless the qualifying expenditure is first-year qualifying expenditure under any of the following provisions—

Types of expenditure which may qualify for first-year allowances

Expenditure incurred for Northern Ireland purposes by small or medium-sized enterprises

40

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Miscellaneous exclusions from section 40 (expenditure for Northern Ireland purposes etc.)

41

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exclusion of plant or machinery partly for use outside Northern Ireland

42

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effect of plant or machinery subsequently being primarily for use outside Northern Ireland

43

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expenditure incurred by small or medium-sized enterprises

44

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ICT expenditure incurred by small enterprises

45

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General exclusions applying to sections 40, 44 and 45

46

(1) Expenditure within any of the general exclusions in subsection (2) is not first-year qualifying expenditure under any of the following provisions—

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

section 45D (expenditure on cars with low CO₂ emissions),

section 45DA (expenditure on zero-emission goods vehicles),

section 45E (expenditure on plant or machinery for gas refuelling station), ...

section 45EA (expenditure on plant or machinery for electric vehicle charging point)

section 45F (expenditure on plant and machinery for use wholly in a ring fence trade). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

section 45K (expenditure on plant and machinery for use in designated assisted areas).

section 45O (expenditure on plant and machinery for use in special tax sites).

section 45S (expenditure on plant or machinery in other cases)

section 45U (expenditure on plant or machinery in cases not falling within section 45S etc)

(2) The general exclusions are—

General exclusion 1The expenditure is incurred in the chargeable period in which the qualifying activity is permanently discontinued.

General exclusion 2The expenditure is incurred on the provision of a car (as defined by section 268A).

...

...

General exclusion 5The expenditure would be long-life asset expenditure but for paragraph 20 of Schedule 3 (transitional provisions).

General exclusion 6The expenditure is on the provision of plant or machinery for leasing (whether in the course of a trade or otherwise).For this purpose, the letting of a ship on charter, or of any other asset on hire, is to be regarded as leasing (whether or not it would otherwise be so regarded).

General exclusion 7The circumstances of the incurring of the expenditure are that—the provision of the plant or machinery on which the expenditure is incurred is connected with a change in the nature or conduct of a trade or business carried on by a person other than the person incurring the expenditure, andthe obtaining of a first-year allowance is the main benefit, or one of the main benefits, which could reasonably be expected to arise from the making of the change.

General exclusion 8 Any of the following sections applies—section 13 (use for qualifying activity of plant or machinery provided for other purposes); section 13A (use for other purposes of plant or machinery provided for long funding leasing); section 14 (use for qualifying activity of plant or machinery which is a gift).This is subject to section 161 (pre-trading expenditure on mineral exploration and access).

(3) Subsection (1) is subject to the following provisions of this section.

(4) General exclusion 2 does not prevent expenditure being first-year qualifying expenditure under section 45D.

(4A) General exclusion 6 does not prevent expenditure being first-year qualifying expenditure under section 45S if the plant or machinery is provided for leasing under an excluded lease of background plant or machinery for a building.

(4B) General exclusion 6 does not prevent expenditure being first-year qualifying expenditure under section 45U if—

(a) the plant or machinery is provided for leasing to a lessee for use by the lessee wholly, or almost wholly, for the purpose of earning income which is within the charge to tax, or

(b) the plant or machinery is provided for leasing to a lessee who is resident in the United Kingdom where the circumstances are such that the plant or machinery is not for use (to a significant extent) by the lessee for the purpose of earning income which is from a source outside the United Kingdom and which is outside the charge to tax.

(4C) For the purposes of subsection (4B) income is to be regarded as being outside the charge to tax if the income arises to a person who under—

(a) double taxation arrangements, or

(b) unilateral relief arrangements,

is afforded or is entitled to claim any relief from the tax chargeable on the income.

(4D) For this purpose “double taxation arrangements” and “unilateral relief arrangements” have the same meaning as they have in Part 2 of the Taxation (International and Other Provisions) Act 2010 (see sections 2(4) and 8(1) respectively).

(4E) For the purposes of subsection (4B) it is to be presumed that, unless the contrary is shown, a lessee has made every claim or election for relief from tax, and every claim or election for an exemption from tax, which the lessee is entitled to make.

(4F) For the purposes of subsection (4B), if there is more than one lessee, references to the lessee are to each of the lessees.

(4G) For the purposes of subsections (4B) to (4F), any reference to leasing or a lessee includes sub-leasing and a sub-lessee.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expenditure of small or medium-sized enterprises

Expenditure of small or medium-sized enterprises: companies

47

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expenditure of small or medium-sized enterprises: businesses

48

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Whether company is a member of a large or medium-sized group

49

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary

Time when expenditure is incurred

50

In determining whether expenditure is first-year qualifying expenditure under this Chapter, any effect of section 12 on the time at which it is to be treated as incurred is to be disregarded.

Disclosure of information between UK tax authorities

51

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 5 — Allowances and charges

First-year allowances

52

(1) A person is entitled to a first-year allowance in respect of first-year qualifying expenditure if—

(a) the expenditure is incurred in a chargeable period to which this Act applies, and

(b) the person owns the plant or machinery at some time during that chargeable period.

(2) Any first-year allowance is made for the chargeable period in which the first-year qualifying expenditure is incurred.

(3) The amount of the allowance is a percentage of the first-year qualifying expenditure in respect of which the allowance is made, as shown in the Table—

Type of first-year qualifying expenditure	Amount
. . .	. . .
. . .	. . .
. . .	. . .
. . .	. . .
Expenditure qualifying under section 45D (expenditure on cars with low CO₂ emissions)	100%
Expenditure qualifying under section 45DA (expenditure on zero-emission goods vehicles)	100%
Expenditure qualifying under section 45E (expenditure on plant or machinery for gas refuelling station)	100%
Expenditure qualifying under section 45EA (expenditure on plant or machinery for electric vehicle charging point)	100%
Expenditure qualifying under section 45F (expenditure for use wholly in a ring fence trade)	100%
. . .	. . .
Expenditure qualifying under section 45K (expenditure on plant and machinery for use in designated assisted areas)	100%
Expenditure qualifying under section 45O (expenditure on plant and machinery for use in special tax sites)	100%
Expenditure qualifying under section 45S (expenditure on plant or machinery in other cases) which is not special rate expenditure	100%
Expenditure qualifying under section 45S (expenditure on plant or machinery in other cases) which is special rate expenditure	50%
Expenditure qualifying under section 45U (expenditure on plant or machinery in cases not falling within section 45S etc)	40%

...

(3A) Subsection (3B) applies where the Treasury make regulations under section 45EA(4) (power to extend relevant period).

(3B) The regulations may amend the amount specified in column 2 of the Table in subsection (3) for expenditure qualifying under section 45EA, but only in relation to expenditure incurred after the date on which the relevant period would have ended but for the regulations.

(4) A person who is entitled to a first-year allowance may claim the allowance in respect of the whole or a part of the first-year qualifying expenditure.

(5) Subsection (1) needs to be read with section 236 (first-year allowances in respect of additional VAT liabilities) and is subject to—

section 70DA(2) (transfer and long funding leaseback: no first-year allowance for lessee),

section 205 (reduction of first-year allowance if plant or machinery provided partly for purposes other than those of qualifying activity),

section 210 (reduction of first-year allowance if it appears that a partial depreciation subsidy is or will be payable), ...

section 212T (cap on first-year allowances: zero-emission goods vehicles), ...

section 212U (cap on first-year allowances: expenditure on plant and machinery for use in designated assisted areas), and

sections 217, 229A(2) ... and 241 (anti-avoidance: no first-year allowance in certain cases).

Pooling

Pooling of qualifying expenditure

53

(1) Qualifying expenditure has to be pooled for the purpose of determining a person’s entitlement to writing-down allowances and balancing allowances and liability to balancing charges.

(2) If a person carries on more than one qualifying activity, expenditure relating to the different activities must not be allocated to the same pool.

The different kinds of pools

54

(1) There are single asset pools, class pools and the main pool.

(2) A single asset pool may not contain expenditure relating to more than one asset.

(3) The following provide for qualifying expenditure to be allocated to a single asset pool—

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ;

section 86 (short-life asset);

section 127 (ship);

section 206 (plant or machinery provided or used partly for purposes other than those of qualifying activity);

section 211 (payment of partial depreciation subsidy);

section 538 (contribution allowances: plant and machinery).

(4) A class pool is a pool which may contain expenditure relating to more than one asset.

(5) The following provide for qualifying expenditure to be allocated to a class pool—

section 104C (special rate expenditure);

section 107 (overseas leasing).

(6) Qualifying expenditure may be allocated to the main pool only if it does not fall to be allocated to a single asset pool or a class pool.

Writing-down and balancing allowances and balancing charges

Determination of entitlement or liability

55

(1) Whether a person is entitled to a writing-down allowance or a balancing allowance, or liable to a balancing charge, for a chargeable period is determined separately for each pool of qualifying expenditure and depends on—

(a) the available qualifying expenditure in that pool for that period (“AQE”), and

(b) the total of any disposal receipts to be brought into account in that pool for that period (“TDR”).

(2) If AQE exceeds TDR, the person is entitled to a writing-down allowance or a balancing allowance for the period.

(3) If TDR exceeds AQE, the person is liable to a balancing charge for the period.

(4) The entitlement under subsection (2) is to a writing-down allowance except for the final chargeable period when it is to a balancing allowance.

(5) The final chargeable period is given by section 65.

(6) Subsection (2) is subject to section 104F (special rate cars: discontinued activity continued by relevant company) and section 110(1) (overseas leasing: allowances prohibited in certain cases).

Amount of allowances and charges

56

(1) The amount of the writing-down allowance to which a person is entitled for a chargeable period is 14% of the amount by which AQE exceeds TDR.

(1A) But in relation to qualifying expenditure incurred wholly for the purposes of a ring fence trade in respect of which tax is chargeable under section 330(1) of CTA 2010 (supplementary charge in respect of ring fence trades), the amount of the writing-down allowance to which a person is entitled for a chargeable period is 25% of the amount by which AQE exceeds TDR.

(2) Subsections (1) and (1A) are subject to—

(za) section 56A (small main pools and special rate pools),

(a) section 104D (special rate expenditure: 6% or 10%), and

(b) section 109 (overseas leasing: 10%).

(3) If the chargeable period is more or less than a year, the amount is proportionately increased or reduced.

(4) If the qualifying activity has been carried on for part only of the chargeable period, the amount is proportionately reduced.

(5) A person claiming a writing-down allowance may require the allowance to be reduced to a specified amount.

(6) The amount of the balancing charge to which a person is liable for a chargeable period is the amount by which TDR exceeds AQE.

(7) The amount of the balancing allowance to which a person is entitled for the final chargeable period is the amount by which AQE exceeds TDR.

Available qualifying expenditure

57

(1) The general rule is that a person’s available qualifying expenditure in a pool for a chargeable period consists of—

(a) any qualifying expenditure allocated to the pool for that period in accordance with section 58, and

(b) any unrelieved qualifying expenditure carried forward in the pool from the previous chargeable period under section 59.

(2) A person’s available qualifying expenditure in a pool for a chargeable period also includes any amount allocated to the pool for that period under—

section 26(3) (net costs of demolition);

section 86(2) or 87(2) (allocation of expenditure in short-life asset pool);

section 111(3) (overseas leasing: standard recovery mechanism);

section 129(1), 132(2), 133(3) or 137 (provisions relating to operation of single ship pool and deferment of balancing charges in respect of ships);

section 161C(2)(decommissioning expenditure incurred by person carrying on trade of oil extraction);

section 165(3) (general decommissioning expenditure incurred after cessation of ring fence trade);

section 206(3) (plant or machinery used partly for purposes other than those of the qualifying activity);

section 211(4) (partial depreciation subsidy paid).

(3) A person’s available qualifying expenditure does not include any expenditure excluded by—

section 8(4) or 9(1) (rules against double relief);

section 70DA (transfer and long funding leaseback);

sections 165A to 165E (restrictions on allowances: anti-avoidance);

section 166(2) (transfers of interests in oil fields: anti-avoidance);

section 185(2), 186(2), 186A(2) or 187(2) (restrictions where other claims made in respect of fixture);

section 218(1), 218ZA(1) or (3), ... 228(2), 229A, 242(2), or 243(2) (general anti-avoidance provisions).

(4) Subsection (1) is also subject to section 220 (allocation to chargeable periods of expenditure incurred on plant or machinery for leasing under finance lease).

Initial allocation of qualifying expenditure to pools

58

(1) The following rules apply to the allocation of a person’s qualifying expenditure to the appropriate pool.

(2) An amount of qualifying expenditure is not to be allocated to a pool for a chargeable period if that amount has been taken into account in determining the person’s available qualifying expenditure for an earlier chargeable period.

(3) Qualifying expenditure is not to be allocated to a pool for a chargeable period before that in which the expenditure is incurred.

(4) Qualifying expenditure is not to be allocated to a pool for a chargeable period unless the person owns the plant or machinery at some time in that period.

(4A) If an annual investment allowance is made to a person for a chargeable period—

(a) the AIA qualifying expenditure in respect of which the allowance is made must be allocated to the appropriate pool (or pools) in that chargeable period, and

(b) the available qualifying expenditure in a pool to which the expenditure (or some of it) is allocated is reduced by the amount of that expenditure.

(5) If a first-year allowance is made in respect of an amount of first-year qualifying expenditure—

(a) subject to subsection (6), none of that amount is to be allocated to a pool for the chargeable period in which the expenditure is incurred, and

(b) the amount that may be allocated to a pool for any chargeable period is limited to the balance left after deducting the first-year allowance.

(6) If—

(a) a first-year allowance is made in respect of an amount of first-year qualifying expenditure,

(b) a disposal event occurs in respect of the plant or machinery in any chargeable period, and

(c) none of the balance left after deducting the first-year allowance has been allocated to a pool for an earlier chargeable period,

the balance (or some of it) must be allocated to a pool for the chargeable period in which the disposal event occurs.

(7) Subsection (6) applies even if the balance is nil (because of a 100% first-year allowance).

(8) “The appropriate pool” means whichever pool is applicable under the provisions of this Part apart from this section.

Unrelieved qualifying expenditure

59

(1) A person has unrelieved qualifying expenditure to carry forward from a chargeable period if for that period—

(a) AQE exceeds TDR, and

(b) where section 56A(2) applies, the person does not claim a writing-down allowance of the amount by which AQE exceeds TDR.

(2) The amount of the unrelieved qualifying expenditure is—

(a) the excess less the writing-down allowance made for the period, or

(b) if no writing-down allowance is claimed for the period, the excess.

(3) No amount may be carried forward as unrelieved qualifying expenditure from the final chargeable period.

(4) If a person carrying on a trade, profession or vocation enters the cash basis for a tax year, any cash basis deductible amount may not be carried forward as unrelieved qualifying expenditure in a pool for the trade, profession or vocation from the chargeable period ending in the previous tax year (or, if there is more than one such period, the latest of them).

(4A) If a person carrying on a property business enters the cash basis for a tax year, any cash basis deductible amount may not be carried forward as unrelieved qualifying expenditure in a pool for the property business from the chargeable period which is the previous tax year.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5A) A “cash basis deductible amount” means any amount of unrelieved qualifying expenditure for which a deduction would be allowed in calculating the profits of the trade, profession, vocation or property business (as the case may be) on the cash basis on the assumption that the expenditure was paid in the tax year for which the person enters the cash basis.

(6) Where a person has unrelieved qualifying expenditure to carry forward from a chargeable period that is not expenditure allocated to a single asset pool, any cash basis deductible amount is to be determined on such basis as is just and reasonable in all the circumstances.

(7) Subsections (9), (10) and (11) of section 1A (capital allowances and charges: cash basis) apply for the purposes of this section as they apply for the purposes of that section.

(7A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) Subsection (9) applies if—

(a) a person carrying on a trade, profession or vocation incurs expenditure in relation to a vehicle,

(b) at the end of ... a tax year, the person has unrelieved qualifying expenditure incurred in relation to the vehicle to carry forward from the chargeable period ending in that tax year (or, if there is more than one such period, the latest of them) (“the relevant chargeable period”), and

(c) in calculating the profits of a trade, profession or vocation of a person for the following tax year, a deduction is made under section 94D of ITTOIA 2005 in respect of expenditure incurred in relation to the vehicle, ...

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) None of the unrelieved qualifying expenditure incurred in relation to the vehicle may be carried forward as unrelieved qualifying expenditure from the relevant chargeable period.

(9A) Subsection (9B) applies if—

(a) a person carrying on a property business incurs expenditure in relation to a vehicle,

(b) at the end of a tax year, the person has unrelieved qualifying expenditure incurred in relation to the vehicle to carry forward from the chargeable period ending with that tax year (“the relevant chargeable period”), and

(c) in calculating the profits of a property business of a person for the following tax year, a deduction is made under section 94D of ITTOIA 2005 (as applied by section 271E of that Act) in respect of expenditure incurred in relation to the vehicle.

(9B) None of the unrelieved qualifying expenditure incurred in relation to the vehicle may be carried forward as unrelieved qualifying expenditure from the relevant chargeable period.

(10) Where a person has unrelieved qualifying expenditure to carry forward from a chargeable period that is not expenditure allocated to a single asset pool, the amount of the unrelieved qualifying expenditure incurred in relation to the vehicle is to be determined on such basis as is just and reasonable in all the circumstances.

Disposal events and disposal values: general

Meaning of “disposal receipt” and “disposal event”

60

(1) In this Part “disposal receipt” means a disposal value that a person is required to bring into account in accordance with—

(a) sections 61, 62 and 63 (disposal events, disposal values and the general limit on the amount of a disposal value),

(b) any of the provisions of this Part listed in section 66, or

(c) section 614BS of ITA 2007 or section 918 of CTA 2010 (cases where expenditure taken into account under Part 2, 5 or 8 of this Act) or any other enactment,

when read with sections 64 and 264(3) (cases in which no disposal value need be brought into account).

(2) In this Part “disposal event” means any event of a kind that requires a disposal value to be brought into account under this Part (whether under section 61(1) or otherwise).

(3) If—

(a) qualifying expenditure has been allocated to a pool, and

(b) more than one disposal event occurs in respect of the plant or machinery,

a disposal value is required to be brought into account in the pool in connection with the first event only.

(4) In subsection (3) “disposal event” does not include a disposal event arising under—

section 72 (computer software),

sections 140 and 143 (attribution of deferred balancing charge), or

section 238(2) (additional VAT rebates).

Disposal events and disposal values

61

(1) A person who has incurred qualifying expenditure is required to bring the disposal value of the plant or machinery into account for the chargeable period in which—

(a) the person ceases to own the plant or machinery;

(b) the person loses possession of the plant or machinery in circumstances where it is reasonable to assume that the loss is permanent;

(c) the plant or machinery has been in use for mineral exploration and access and the person abandons it at the site where it was in use for that purpose;

(d) the plant or machinery ceases to exist as such (as a result of destruction, dismantling or otherwise);

(e) the plant or machinery begins to be used wholly or partly for purposes other than those of the qualifying activity;

(ee) the plant or machinery begins to be leased under a long funding lease (see Chapter 6A);

(f) the qualifying activity is permanently discontinued.

(2) The disposal value to be brought into account depends on the disposal event, as shown in the Table—

1. Disposal event	2. Disposal value
1. Sale of the plant or machinery, except in a case where item 2 or 2A applies.	The net proceeds of the sale, together with—any insurance money received in respect of the plant or machinery as a result of an event affecting the price obtainable on the sale, andany other compensation of any description so received, so far as it consists of capital sums.
2. Sale of the plant or machinery where—the sale is at less than market value,there is no charge to tax under ITEPA 2003, andthe condition in subsection (4) is met by the buyer.	The market value of the plant or machinery at the time of the sale.
2A. Sale of the plant or machinery where—the sale is at less than market value,the condition in subsection (4A) is met by the seller, andthe condition in subsection (4B) is met by the buyer.	The market value of the plant or machinery at the time of the sale.
3. Demolition or destruction of the plant or machinery.	The net amount received for the remains of the plant or machinery, together with—any insurance money received in respect of the demolition or destruction, andany other compensation of any description so received, so far as it consists of capital sums.
4. Permanent loss of the plant or machinery otherwise than as a result of its demolition or destruction.	Any insurance money received in respect of the loss and, so far as it consists of capital sums, any other compensation of any description so received.
5. Abandonment of the plant or machinery which has been in use for mineral exploration and access at the site where it was in use for that purpose.	Any insurance money received in respect of the abandonment and, so far as it consists of capital sums, any other compensation of any description so received.
5A. Commencement of the term of a long funding finance lease of the plant or machinery.	The greater of—the market value of the plant or machinery at the commencement of the term of the lease, andthe qualifying lease payments.
5B. Commencement of the term of a long funding operating lease of the plant or machinery.	An amount equal to the market value of the plant or machinery at the commencement of the term of the lease.
6. Permanent discontinuance of the qualifying activity followed by the occurrence of an event within any of items 1 to 5B.	The disposal value for the item in question.
6A. Disposal event to which section 62A applies.	The relevant transition value (see section 62A).
7. Any event not falling within any of items 1 to 6A.	The market value of the plant or machinery at the time of the event.

(3) The amounts referred to in column 2 of the Table are those received by the person required to bring the disposal value into account.

(4) The condition referred to in item 2 of the Table is met by the buyer if—

(a) the buyer’s expenditure on the acquisition of the plant or machinery cannot be qualifying expenditure under this Part or Part 6 (research and development allowances), or

(b) the buyer is a dual resident investing company which is connected with the seller.

(4A) The condition referred to in paragraph (b) of item 2A in the Table is met by the seller if—

(a) the seller is—

(i) a company, or

(ii) a partnership whose partners include one or more companies, and

(b) before the sale the plant or machinery is used wholly or partly for the purposes of a qualifying activity that is not an NI rate activity.

(4B) The condition referred to in paragraph (c) of item 2A in the Table is met by the buyer if—

(a) the buyer is an SME (Northern Ireland employer) company, a NIRE company or a Northern Ireland firm in the chargeable period of the buyer in which the plant or machinery is bought,

(b) the buyer's expenditure on the acquisition of the plant or machinery is qualifying expenditure under this Part or Part 6 (research and development allowances), and

(5) In this section “mineral exploration and access” has the same meaning as in Chapter 13 (provisions affecting the mining and oil industries) and Part 5 (mineral extraction allowances).

(5A) In item 5A of the Table “qualifying lease payments” means the minimum payments under the lease (including any initial payment), excluding the following—

(a) so much of any payment as, under generally accepted accounting practice, falls (or would fall) to be treated as the gross return on investment in respect of the lease,

(b) so much of any payment as represents charges for services, and

(c) so much of any payment as represents qualifying UK or foreign tax (within the meaning of section 70YE) to be paid by the lessor.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General limit on amount of disposal value

62

(1) The amount of any disposal value required to be brought into account by a person in respect of any plant or machinery is limited to the qualifying expenditure incurred by the person on its provision.

(2) Subsection (3) applies if a person who is required to bring a disposal value into account has acquired the plant or machinery as a result of a transaction which was, or a series of transactions each of which was, between connected persons.

(3) The amount of the disposal value is limited to the amount of the qualifying expenditure on the provision of the plant or machinery incurred by whichever party to the transaction, or to any of the transactions, incurred the greatest such expenditure.

(4) This section is subject to section 239 (limit on disposal value where additional VAT rebate or rebates has or have been made in respect of original expenditure).

Cases in which disposal value is nil

63

(1) If a person disposes of plant or machinery by way of gift in circumstances such that there is a charge to tax under ITEPA 2003, the disposal value of the plant or machinery is nil.

(2) If a person carrying on a relevant qualifying activity makes a gift of plant or machinery used in the course of the activity—

(a) to a charitable trust ...,

(aa) to a charitable company ...,

(ab) to a registered club within the meaning of Chapter 9 of Part 13 of CTA 2010 (community amateur sports clubs),

(b) to a body listed in section 468 of CTA 2010 (various heritage bodies and museums), or

(c) for the purposes of a designated educational establishment within the meaning of section 110 of ITTOIA 2005 or section 106 of CTA 2009 (gifts to educational establishments),

the disposal value of the plant or machinery is nil.

(3) In subsection (2) “relevant qualifying activity” means a qualifying activity consisting of—

(a) a trade,

(b) a UK property business,

(d) an ... overseas property business, ...

(da) ... or

(e) a profession or vocation.

(4) Subsection (2) —

(a) needs to be read with section 109 of ITTOIA 2005 and section 108 of CTA 2009 (which provide for a charge to tax if subsection (2) applies in circumstances in which the donor or a connected person receives a benefit attributable to the gift), and

(b) is subject to sections 809ZM and 809ZMB of ITA 2007 and sections 939F and 939FB of CTA 2010 (removal of tax relief in respect of tainted charity donations etc).

(5) If expenditure is treated under section 27(2) (expenditure on thermal insulation, safety measures, etc.) as having been incurred on plant or machinery, the disposal value of the plant or machinery is nil.

Case in which no disposal value need be brought into account

64

(1) A person is not required to bring a disposal value into account in a pool for a chargeable period in respect of plant or machinery if none of the qualifying expenditure is or has been taken into account in a claim in determining the person’s available qualifying expenditure in the pool for that or any previous chargeable period.

(2) Subsection (3) applies if—

(a) a person (“C”) has incurred qualifying expenditure on plant or machinery,

(b) C acquired the plant or machinery as a result of a transaction which was, or a series of transactions each of which was, between connected persons,

(c) any connected person (apart from C) who was a party to the transaction, or one of the series of transactions, is or has been required to bring a disposal value into account as a result of the transaction,

(d) a disposal event (“the relevant disposal event”) occurs in respect of the plant or machinery at a time when it is owned by C, and

(e) none of C’s qualifying expenditure is or has been taken into account in a claim in determining C’s available qualifying expenditure for the chargeable period in which the relevant disposal event occurs or any previous chargeable period.

(3) If this subsection applies—

(a) subsection (1) does not apply in relation to the relevant disposal event, and

(b) C’s qualifying expenditure is to be treated as allocated to the appropriate pool for the chargeable period in which the relevant disposal event occurs.

(4) In subsection (3)—

(a) “qualifying expenditure” means, if a first-year allowance has been made to C, the amount (including a nil amount) remaining after deducting the allowance, and

(b) “the appropriate pool” means whichever pool is applicable in relation to C under the provisions of this Part.

(5) A person takes expenditure into account in a claim if he takes it into account—

(a) in a tax return;

(b) by giving notice of an amendment of a tax return;

The final chargeable period

65

(1) The final chargeable period for—

(a) the main pool, or

(b) a special rate pool,

is the chargeable period in which the qualifying activity is permanently discontinued.

(2) The final chargeable period for a single asset pool is the first chargeable period in which any disposal event given in section 61(1) occurs.

(3) Subsection (2) is subject to—

section 206(4) (no final chargeable period merely because plant or machinery begins to be used partly for purposes other than those of qualifying activity);

sections 86(2) and 87(2) (ending of short-life asset pool at relevant cut-off without final chargeable period);

section 132(2) (no final chargeable period for single ship pool).

(4) The final chargeable period for a class pool under section 107 (overseas leasing) is the chargeable period at the end of which the circumstances are such that there can be no more disposal receipts in any subsequent chargeable period.

List of provisions outside this Chapter about disposal values

66

The provisions of this Part referred to in section 60(1)(b) are—

Chapter 6 — Hire-purchase etc. and plant or machinery provided by lessee

Hire-purchase and similar contracts

Plant or machinery treated as owned by person entitled to benefit of contract, etc.

67

(1) This section applies if—

(a) a person carrying on a qualifying activity or corresponding overseas activity incurs capital expenditure on the provision of plant or machinery for the purposes of the qualifying activity or corresponding overseas activity, and

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