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

articles Not indexed

Reform history JSON API

(b) the expenditure is incurred under a contract providing that the person shall or may become the owner of the plant or machinery on the performance of the contract.

(2) The plant or machinery is to be treated for the purposes of this Part as owned by the person (and not by any other person) at any time when he is entitled to the benefit of the contract so far as it relates to the plant or machinery.

This subsection has effect subject to, and in accordance with, subsections (2A) to (2C).

(2A) If the contract is one which, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as a lease, subsection (2B) applies.

(2B) Where that is the case, the plant or machinery is to be treated under subsection (2) as owned by the person at any time only if the contract —

(a) falls (or would fall) to be treated by that person in accordance with generally accepted accounting practice as a finance lease, or

(b) if that person is a lessee under a right-of-use lease, would fall to be treated in that person's accounts as a finance lease were that person required under generally accepted accounting practice to determine whether the lease falls to be so treated.

(2C) Where at any time the plant or machinery—

(a) is not treated under subsection (2) as owned by the person, but

(b) would be treated under that subsection as owned by the person, but for subsection (2B),

the plant or machinery is nevertheless to be treated under subsection (2) as not owned by any other person at that time.

(3) At the time when the plant or machinery is brought into use for the purposes of the qualifying activity or corresponding overseas activity, the person is to be treated for the purposes of this Part as having incurred all capital expenditure in respect of the plant or machinery to be incurred by him under the contract after that time.

(4) If a person—

(a) is treated under subsection (2) as owning plant or machinery,

(b) ceases to be entitled to the benefit of the contract in question so far as it relates to that plant or machinery, and

the person is to be treated as ceasing to own the plant or machinery at the time when he ceases to be entitled to the benefit of the contract.

(6) If—

(a) a person enters into two or more agreements, and

(b) those agreements are such that, if they together constituted a single contract, the condition in subsection (1)(b) would be met in relation to that person and that contract,

the agreements are to be treated for the purposes of this section as parts of a single contract.

In this subsection, any reference to an agreement includes a reference to an undertaking, whether or not legally enforceable.

(7) This section is subject to section 69 (hire-purchase and fixtures) and subsection (3) is subject to section 229 (anti-avoidance).

(8) In this section “corresponding overseas activity” means an activity that would be a qualifying activity if the person carrying it on were resident in the United Kingdom.

Disposal value on cessation of notional ownership

68

(1) This section applies if a person—

(a) is treated under section 67(4) as ceasing to own plant or machinery, and

(b) is required to bring a disposal value into account as a result.

(2) If the plant or machinery has been brought into use for the purposes of the qualifying activity before the person ceases to own the plant or machinery, the disposal value is the total of—

(a) any relevant capital sums, and

(b) any capital expenditure treated under section 67(3) as having been incurred when the plant or machinery was brought into use but which has not in fact been incurred.

(3) If the plant or machinery has not been brought into use for the purposes of the qualifying activity before the person ceases to own the plant or machinery, the disposal value is the total of any relevant capital sums.

(4) “Relevant capital sums” means capital sums that the person receives or is entitled to receive by way of consideration, compensation, damages or insurance money in respect of—

(a) his rights under the contract, or

(b) the plant or machinery.

(5) This section is subject to section 229 (anti-avoidance).

Hire-purchase etc. and fixtures

69

(1) Section 67 does not—

(a) apply to expenditure incurred on plant or machinery which is a fixture, or

(b) prevent Chapter 14 (fixtures) applying in relation to expenditure on plant or machinery incurred under such a contract as is mentioned in section 67(1)(b).

(2) If—

(a) a person is treated under section 67(2) as owning plant or machinery,

(b) the plant or machinery becomes a fixture, and

the person is to be treated for the purposes of this Part as ceasing to own the plant or machinery at the time when it becomes a fixture.

(3) In this section “fixture” has the meaning given by section 173(1).

Plant or machinery provided by lessee

70

(1) This section applies if—

(a) under the terms of a lease, a lessee is required to provide plant or machinery,

(b) the lessee incurs capital expenditure on the provision of that plant or machinery for the purposes of a qualifying activity which the lessee carries on,

(c) the plant or machinery is not so installed or otherwise fixed in or to a building or any other description of land as to become, in law, part of that building or other land, and

(d) the lessee does not own the plant or machinery.

(2) The lessee—

(a) is to be treated as being the owner of the plant or machinery, as a result of incurring the capital expenditure, for so long as it continues to be used for the purposes of the qualifying activity, but

(b) is not required to bring a disposal value into account because the lease ends.

(3) Subsection (4) applies if—

(a) the plant or machinery continues to be used for the purposes of the lessee’s qualifying activity until the lease ends,

(b) the lessor holds the lease in the course of a qualifying activity, and

(c) on or after the ending of the lease, a disposal event occurs in respect of the plant or machinery at a time when the lessor owns the plant or machinery as a result of the requirement under the terms of the lease.

(4) The lessor is required to bring a disposal value into account in the appropriate pool for the chargeable period in which the disposal event occurs.

(5) “The appropriate pool” means the pool which would be applicable under this Part in relation to the lessor’s qualifying activity if—

(a) the expenditure incurred by the lessee had been qualifying expenditure incurred by the lessor, and

(b) that qualifying expenditure were being allocated to a pool for the chargeable period in which the disposal event occurs.

(6) In this section “lease” includes—

(a) an agreement for a lease if the term to be covered by the lease has begun, and

(b) any tenancy,

but does not include a mortgage (and “lessee” and “lessor” are to be read accordingly).

Chapter 7 — Computer software

Software and rights to software

71

(1) For the purposes of this Part computer software is treated as plant (whether or not it would constitute plant apart from this section).

(2) If a person carrying on a qualifying activity incurs capital expenditure in acquiring, for the purposes of the qualifying activity, a right to use or otherwise deal with computer software, this Part applies as if—

(a) the right and the software to which it relates were plant,

(b) the plant were provided for the purposes of the qualifying activity, and

(c) so long as the person is entitled to the right, the person owned the plant as a result of incurring the capital expenditure.

Disposal values

72

(1) This section applies if a person—

(a) has incurred qualifying expenditure on the provision of plant consisting of computer software or the right to use or otherwise deal with computer software, and

(b) grants to another a right to use or otherwise deal with the whole or part of the computer software in circumstances in which the consideration for the grant—

(i) consists of a capital sum, or

(ii) would consist of a capital sum if the consideration were in money.

(2) The person is required to bring a disposal value into account unless—

(a) while the person owned the computer software or the right to use or otherwise deal with the computer software, and

(b) before the grant of the right referred to in subsection (1)(b),

there has been a disposal event falling within section 61(1)(e) (use for purposes other than those of the qualifying activity) or 61(1)(f) (permanent discontinuance of the qualifying activity).

(3) The disposal value to be brought into account under this section depends on the circumstances of the grant of the right, as shown in the Table—

1. Circumstances of grant	2. Disposal value
1. The grant is for a consideration not consisting entirely of money.	The market value of the right granted at the time of the grant.
2. The grant is made where—it is for no consideration or at less than market value,there is no charge to tax under ITEPA 2003, andthe condition in subsection (5) is met by the grantee.	The market value of the right granted at the time of the grant.
3. The grant is made in circumstances other than those given in item 1 or 2.	The net consideration in money received in respect of the grant, together with—any insurance money received in respect of the computer software as a result of an event affecting the consideration obtainable on the grant, andany other compensation of any description so received, so far as it consists of capital sums.

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

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

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

(b) the grantee is a dual resident investing company which is connected with the grantor.

Limit on disposal values

73

(1) This section applies if a person is required to bring into account a disposal value in respect of—

(a) computer software, or

(b) the right to use or otherwise deal with computer software.

(2) For the purpose only of—

(a) determining whether the limit on the disposal value under section 62 is exceeded, and

(b) reducing the amount of that disposal value so that the limit is not exceeded,

the disposal value is to be taken to be increased by the amount given in subsection (3).

(3) The amount is the total of any disposal values which, in respect of that person and that plant, fall or have fallen to be brought into account under section 72.

Chapter 8 — Cars, etc.

Cars above the cost threshold

Single asset pool

74

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

General limit on amount of writing-down allowance

75

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

Limit where part of expenditure met by another person

76

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

Car used partly for purposes other than those of qualifying activity

77

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

Effect of partial depreciation subsidy

78

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

Cases where Chapter 17 (anti-avoidance) applies

79

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

Vehicles provided for purposes of employment or office

80

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

Interpretation

Extended meaning of “car”

81

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

Qualifying hire cars

82

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

Chapter 9 — Short-life assets

Meaning of “short-life asset”

83

Plant or machinery in respect of which qualifying expenditure has been incurred is a short-life asset if—

(a) its treatment as a short-life asset is not ruled out by section 84, and

(b) the person incurring the expenditure elects for the plant or machinery to be treated as a short-life asset.

Cases in which short-life asset treatment is ruled out

84

Treatment of plant or machinery as a short-life asset is ruled out in any of the cases listed in column 1 of the Table, unless an exception listed in column 2 applies.

Election for short-life asset treatment: procedure

85

(1) An election under section 83 must specify—

(a) the plant or machinery which is the subject of the election,

(b) the qualifying expenditure incurred in respect of it, and

(2) An election under section 83 must be made by notice given to an officer of Revenue and Customs—

(a) for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;

(b) for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.

(3) “The relevant chargeable period” means—

(a) the chargeable period in which the qualifying expenditure was incurred, or

(b) if the qualifying expenditure was incurred in different chargeable periods, the first chargeable period in which any of the qualifying expenditure was incurred.

(4) An election under section 83 is irrevocable.

(5) All such assessments and adjustments of assessments are to be made as are necessary to give effect to the election.

Short-life asset pool

86

(1) Qualifying expenditure in respect of a short-life asset, if allocated to a pool, must be allocated to a single asset pool (a “short-life asset pool”).

(2) If the final chargeable period for the short-life asset pool has not occurred before the relevant cut-off—

(a) the pool ends at the relevant cut-off without a final chargeable period,

(b) the available qualifying expenditure in the pool is allocated to the appropriate pool for the first chargeable period ending after the relevant cut-off, and

(3) In this Chapter “the relevant cut-off” means—

(a) if any of the qualifying expenditure incurred on the provision of the short-life asset was incurred before the designated day, the fourth anniversary of the end of the relevant chargeable period, and

(b) in any other case, the eighth anniversary of the end of the relevant chargeable period.

(3A) In subsection (3)—

“the designated day” means—for corporation tax purposes, 1 April 2011, andfor income tax purposes, 6 April 2011;

“the relevant chargeable period” means—the chargeable period in which the qualifying expenditure was incurred on the provision of the short-life asset, orif the qualifying expenditure was incurred in different chargeable periods, the first chargeable period in which any of the qualifying expenditure was incurred.

(4) For the purposes of subsection (2), the final chargeable period occurs before the relevant cut-off only if it ends on or before it.

(5) In subsection (2)(b) “appropriate pool” means—

(a) in the case of expenditure incurred on the provision of a car that is not a main rate car (as defined by section 104AA), the special rate pool, and

(b) in any other case, the main pool.

Short-life assets provided for leasing

87

(1) This section applies if—

(a) plant or machinery is a short-life asset on the basis that it has been provided for leasing but will be used within the designated period for a qualifying purpose (see item 5 of the Table in section 84),

(b) in a chargeable period ending on or before the relevant cut-off, the short-life asset begins to be used otherwise than for a qualifying purpose, and

(2) If this section applies—

(a) the short-life asset pool ends without a final chargeable period,

(b) the available qualifying expenditure in the pool is allocated to the main pool for the chargeable period in which the asset begins to be used otherwise than for a qualifying purpose, and

Sales at under-value

88

If—

(a) a short-life asset is disposed of at less than market value,

(b) the disposal is not one in respect of which an election is made under section 89(6), and

the disposal value to be brought into account for the purposes of Chapter 5 is the market value of the asset.

Disposal to connected person

89

(1) This section applies if, at any time before the relevant cut-off, a person (“the transferor”) disposes of a short-life asset to a connected person.

(2) Subject to subsection (6)—

(a) the transferor is to be treated as having sold the short-life asset to the connected person for an amount equal to the available qualifying expenditure in the short-life asset pool for the chargeable period in which the disposal occurs, and

(b) the connected person is to be treated as having incurred qualifying expenditure of the same amount in buying the short-life asset.

(3) Subject to subsection (6)—

(a) sections 217 and 218 (restrictions on first-year and other allowances in the case of certain transactions between connected persons, to obtain a tax advantage etc.), and

(b) section 225 (further restrictions in the case of sale and finance leaseback),

do not apply to the disposal.

(4) Immediately after the disposal of the short-life asset, the connected person is to be taken to have made an election under section 83 (so that the plant or machinery is a short-life asset in his hands).

(5) In relation to the connected person, “the relevant cut-off” means the date that would have been the relevant cut-off in relation to the transferor.

(6) Subsections (2) and (3) apply in relation to a disposal only if—

(a) the transferor, and

(b) the connected person,

elect that they should apply.

(7) An election under subsection (6) must be made by notice given to an officer of Revenue and Customs no later than 2 years after the end of the chargeable period in which the disposal occurred.

Chapter 10 — Long-life assets

Long-life asset expenditure

90

“Long-life asset expenditure” means qualifying expenditure—

(a) incurred on the provision of a long-life asset for the purposes of a qualifying activity, and

(b) not excluded from being long-life asset expenditure by any of sections 93 to 100.

Meaning of “long-life asset”

91

(1) For the purposes of this Chapter “long-life asset” means plant or machinery which—

(a) if new, can reasonably be expected to have a useful economic life of at least 25 years, and

(b) if not new, could reasonably have been expected when new to have a useful economic life of at least 25 years.

(2) “New” means unused and not second-hand.

(3) The useful economic life of plant or machinery is the period—

(a) beginning when it is first brought into use by any person for any purpose, and

(b) ending when it is no longer used or likely to be used by anyone for any purpose as a fixed asset of a business.

Application of Chapter to part of expenditure

92

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

Expenditure excluded from being long-life asset expenditure

Fixtures etc.

93

(1) Expenditure is not long-life asset expenditure if it is incurred on the provision of plant or machinery which is a fixture in, or is provided for use in, any building used wholly or mainly—

(a) as a dwelling-house, hotel, office, retail shop or showroom, or

(b) for purposes ancillary to the use referred to in paragraph (a).

(2) In this section—

“fixture” has the meaning given by section 173(1);

“retail shop” includes any premises of a similar character where a retail trade or business, including repair work, is carried on.

Ships

94

(1) Expenditure is not long-life asset expenditure if—

(a) it is incurred before 1st January 2011 on the provision of a ship of a sea-going kind, and

(b) each of the conditions in subsection (2) is met.

(2) The conditions are that—

(a) the ship is not an offshore installation,

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

(c) the primary use to which ships of the same kind are put by their owners (or, if their use is made available to others, those others) is a use otherwise than for sport or recreation.

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

Railway assets

95

(1) Expenditure is not long-life asset expenditure if it is incurred before 1st January 2011 on the provision of a railway asset used by any person wholly and exclusively for the purposes of a railway business.

(2) “Railway asset” means—

(a) a locomotive, tram or other vehicle, or a carriage, wagon or other rolling stock designed or adapted for use on a railway;

(b) anything which is, or is to be, comprised in any railway station, railway track or light maintenance depot or any apparatus which is, or is to be, installed in association with such a station, track or depot.

(3) “Railway business” means a business so far as carried on to provide a service to the public for carrying goods or passengers by means of a railway in the United Kingdom or the Channel Tunnel.

(4) For the purposes of subsection (1), a railway asset of a kind described in subsection (2)(a) is not to be treated as used otherwise than wholly and exclusively for the purposes of a railway business merely because it is used to carry goods or passengers—

(a) from places inside the United Kingdom to places outside the United Kingdom, or

(b) from places outside the United Kingdom to places inside the United Kingdom.

(5) In subsections (2) and (3), “railway” has the same meaning as in section 81(2) of the 1993 Act (“railway” includes tramways and other modes of guided transport).

(6) In this section—

“the 1993 Act” means the Railways Act 1993 (c. 43);

“goods” has the same meaning as in Part I of the 1993 Act;

“railway station” and “railway track” include—anything included in the definitions of “station” and “track” in section 83 of the 1993 Act, andanything else that would be included if in section 83 “railway” had the meaning given in section 81(2) of the 1993 Act;

“light maintenance depot” means—any light maintenance depot within the meaning of Part I of the 1993 Act, andany land or other property which is the equivalent of such a depot in relation to anything which is a railway only when “railway” has the meaning given by section 81(2) of the 1993 Act.

Cars

96

Expenditure is not long-life asset expenditure if it is incurred on the provision of a car or motor cycle (as defined by section 268A).

Expenditure within the relevant monetary limit: general

97

Expenditure is not long-life asset expenditure if it is—

(a) expenditure to which the monetary limits apply, and

(b) incurred in a chargeable period for which the relevant monetary limit is not exceeded.

Expenditure to which the monetary limits apply

98

(1) The monetary limits apply to expenditure incurred by an individual for a chargeable period if—

(a) the expenditure was incurred by him for the purposes of a qualifying activity carried on by him,

(b) the whole of his time is substantially devoted in that period to the carrying on of that qualifying activity, and

(2) The monetary limits apply to expenditure incurred by a partnership for a chargeable period if—

(a) all of the members of the partnership are individuals,

(b) the expenditure was incurred by the partnership for the purposes of a qualifying activity carried on by it,

(c) at all times throughout that period at least half the partners for the time being devote the whole or a substantial part of their time to the carrying on of that qualifying activity, and

(d) the expenditure is not within subsection (4).

(3) The monetary limits apply for the purposes of corporation tax to any expenditure incurred by a company for a chargeable period other than expenditure within subsection (4).

(4) Expenditure is within this subsection if it is—

(a) incurred on the provision of a share in plant or machinery,

(b) treated as a result of section 538 (contribution allowances: plant and machinery) as incurred on the provision of plant or machinery, or

(c) incurred on the provision of plant or machinery for leasing (whether or not the leasing is in the course of a trade).

The monetary limit

99

(1) The monetary limit in the case of a chargeable period of 12 months is £100,000.

(2) If, in the case of an individual or partnership, the chargeable period is longer or shorter than 12 months, the monetary limit is the amount given by a proportional increase or reduction of £100,000.

(3) If, in the case of a company, the chargeable period is shorter than 12 months, the monetary limit is the amount given by a proportional reduction of £100,000.

(4) If, in a chargeable period, a company has one or more associated companies, the monetary limit for that period is—

$$LN+1$where—L is the monetary limit applicable under subsection (1) or (3), andN is the number of associated companies.$

(4A) The rules in Part 3A of CTA 2010 (see sections 18E to 18J) which apply for determining whether a company is another company's associated company in an accounting period for the purposes of section 18D of that Act apply for the purposes of subsection (4).

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

Exceeding the monetary limit

100

(1) The monetary limit for a chargeable period is exceeded if the total expenditure in that period that meets the conditions in subsection (2) exceeds that limit.

(2) The conditions are that the expenditure—

(a) is long-life asset expenditure, or would be long-life asset expenditure in the absence of section 97 (expenditure within monetary limit), and

(b) is expenditure to which the monetary limits apply.

(3) Subsection (4) applies if, in the case of any contract for the provision of plant or machinery, the capital expenditure which is (or is to be) incurred under the contract is (or may fall to be) treated for the purposes of this Act as incurred in different chargeable periods.

(4) All of the expenditure falling to be incurred under the contract on the provision of the plant or machinery is to be treated for the purposes of this section as incurred in the first chargeable period in which any of the expenditure is incurred.

Rules applying to long-life asset expenditure

Long-life asset pool

101

Chapter 10A (special rate expenditure and the special rate pool) provides for long-life asset expenditure to be allocated to the special rate pool.

Writing-down allowances at 6%

102

Chapter 10A (special rate expenditure and the special rate pool) provides for the writing-down allowance to which a person is entitled in respect of long-life asset expenditure.

Anti-avoidance provisions

Later claims

103

(1) Subsection (2) applies if—

(a) a person entitled to do so has made a Part 2 claim in respect of expenditure incurred on the provision of plant or machinery, and

(b) the expenditure fell to be treated as long-life asset expenditure for the purposes of the claim.

(2) If—

(a) at any time after making the Part 2 claim, that claimant or another person makes a Part 2 claim in respect of any qualifying expenditure incurred at any time (including a time before the incurring of the expenditure to which the earlier claim relates) on the provision of the same plant or machinery, and

(b) the expenditure to which the later claim relates—

(i) would not (but for this subsection) be treated for the purposes of the later claim as long-life asset expenditure, and

(ii) is not prevented from being long-life asset expenditure by any of sections 93 to 96,

this Part has effect in relation to the later claim as if the expenditure to which it relates were long-life asset expenditure.

(3) A person makes a Part 2 claim in respect of any expenditure if he—

(a) makes a tax return in which the expenditure is taken into account in determining his available qualifying expenditure for the purposes of this Part;

(b) gives notice of an amendment of a tax return which provides for the expenditure to be so taken into account;

Disposal value of long-life assets

104

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

Chapter 11 — Overseas leasing

Basic terms

“Leasing”, “overseas leasing” etc.

105

(1) In this Chapter—

(a) “leasing” includes letting a ship or aircraft on charter or letting any other asset on hire, and

(b) references to a lease include a sub-lease (and references to a lessor or lessee are to be read accordingly).

(2) Plant or machinery is used for overseas leasing if it is used for the purpose of being leased to a person who—

(a) is not resident in the United Kingdom, and

(b) does not use the plant or machinery exclusively for earning profits chargeable to tax.

(2A) In determining whether plant or machinery is used for overseas leasing, no account shall be taken of any lease finalised, within the meaning of Part 4 of Schedule 8 to FA 2006, on or after 1st April 2006.

(3) In this Chapter “profits chargeable to tax”—

(a) includes profits chargeable under section 1313(2) of CTA 2009 (profits from exploration and exploitation of the seabed etc.), but

(b) excludes profits arising to a person who, under double taxation arrangements, is afforded or is entitled to claim any relief from the tax chargeable on those profits.

(4) “Double taxation arrangements” means arrangements which have effect under section 2(1) of the Taxation (International and Other Provisions) Act 2010 (double taxation relief by agreement with territories outside the United Kingdom).

(5) “Protected leasing” of plant or machinery means—

(a) short-term leasing of the plant or machinery (as defined in section 121), or

(b) if the plant or machinery is a ship, aircraft or transport container, the use of the ship, aircraft or transport container for a qualifying purpose under section 123 or 124 (letting on charter to UK resident etc.).

(6) In this Chapter “qualifying activity” includes (subject to any provision to the contrary) any activity listed in section 15(1) even if any profits or gains from it are not chargeable to tax.

The designated period

106

(1) Subject to subsection (2), the designated period, in relation to expenditure incurred by a person on the provision of plant or machinery, is the period of 10 years beginning with the date on which he first brought the plant or machinery into use.

(2) If the person who incurred the expenditure ceases to own the plant or machinery before the end of the 10 year period, the designated period ends on the date when he ceases to own it.

(3) For the purposes of subsection (2), a person is to be treated as continuing to own plant or machinery so long as it is owned by a person who—

(a) is connected with him, or

(b) acquired it from him as a result of one or more disposals on the occasion of which, or each of which there was a change in the persons carrying on the qualifying activity in relation to which Condition A or Condition B was met.

(3A) Condition A is that—

(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and

(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.

(3B) Condition B is that—

(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,

(b) a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and

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

Certain expenditure to be pooled

The overseas leasing pool

107

(1) Qualifying expenditure to which this section applies, if allocated to a pool, must be allocated to a class pool (“the overseas leasing pool”).

(2) This section applies to qualifying expenditure if—

(a) it is incurred on the provision of plant or machinery for leasing,

(b) the plant or machinery is at any time in the designated period used for overseas leasing which is not protected leasing, and

(i) long-life asset expenditure, or

(ii) expenditure that is required to be allocated to a single asset pool.

Effect of disposal to connected person on overseas leasing pool

108

(1) This section applies if—

(a) a person who has incurred qualifying expenditure which has been allocated to an overseas leasing pool disposes of the plant or machinery to a connected person,

(b) the disposal does not occur on the occasion of a change in the persons carrying on the qualifying activity—

(i) which falls within Chapter 1 of Part 22 of CTA 2010 (transfers of trade without a change of ownership), or

(ii) in relation to which Condition A or Condition B is met, and

(1A) Condition A is that—

(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and

(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.

(1B) Condition B is that—

(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,

(b) a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and

(2) The disposal value to be brought into account is—

(a) the market value of the plant or machinery at the time of the disposal, or

(b) if less, the qualifying expenditure incurred by the person disposing of the plant or machinery.

(3) The person acquiring the plant or machinery is to be treated for the purposes of this Part as having incurred expenditure on its provision of an amount equal to the disposal value given by subsection (2).

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

Allowances reduced or, in certain cases, prohibited

Writing-down allowances at 10%

109

(1) The amount of the writing-down allowance to which a person is entitled for a chargeable period in respect of expenditure to which this section applies is 10% of the amount by which AQE exceeds TDR (see Chapter 5).

(2) This section applies to expenditure incurred on the provision of plant or machinery for leasing if—

(a) the plant or machinery is at any time in the designated period used for overseas leasing which is not protected leasing, and

(b) the expenditure is not long-life asset expenditure.

(3) Subsection (2) applies to expenditure even if the expenditure is in a single asset pool.

(4) Subsections (3) and (4) of section 56 (proportionate increases or reductions in amount in certain cases) apply for the purposes of subsection (1) of this section as they apply for the purposes of subsection (1) of that section.

Cases where allowances are prohibited

110

(1) A person is not entitled to any writing-down or balancing allowances in respect of qualifying expenditure which is within subsection (2).

(2) Expenditure is within this subsection if—

(a) it is incurred on the provision of plant or machinery for leasing,

(b) the plant or machinery is at any time in the designated period used for overseas leasing which is not protected leasing,

(d) the lease is within any of the items in the list below.

1.	The lease is expressed to be for a period of more than 13 years.
2.	The lease, or a separate agreement, provides for—extending or renewing the lease, orthe grant of a new lease,making it possible for the plant or machinery to be leased for a period of more than 13 years.
3.	There is a period of more than one year between the dates on which any two consecutive payments become due under the lease.
4.	Any payments are due under the lease or a collateral agreement other than periodical payments.
5.	If payments due under the lease or a collateral agreement are expressed as monthly amounts due over a period, any payment due for that period is not the same as any of the others.But, for this purpose, ignore variations made under the terms of the lease which are attributable to changes in—the rate of corporation tax or income tax,the rate of capital allowances,any rate of interest where the changes are linked to changes in the rate of interest applicable to inter-bank loans, orthe premiums charged for insurance of any description by a person who is not connected with the lessor or the lessee.
6.	The lessor or a person connected with the lessor will, or may in certain circumstances, become entitled at any time to receive from the lessee or any other person a payment, other than a payment of insurance money, which is—of an amount determined before the expiry of the lease, andreferable to a value of the plant or machinery at or after the expiry of the lease.For this purpose, it does not matter whether the payment relates to a disposal of the plant or machinery.

(3) In items 4 and 5 of the list “collateral agreement” means an agreement which might reasonably be construed as being collateral to the lease.

Recovery of excess allowances

Excess allowances: standard recovery mechanism

111

(1) If—

(a) expenditure incurred by a person in providing plant or machinery has qualified for a first-year allowance or a normal writing-down allowance, and

(b) at any time in the designated period, the plant or machinery is used for overseas leasing which is not protected leasing,

the following provisions of this section have effect in relation to the person who is the owner of the plant or machinery when it is first so used.

(2) For the chargeable period in which the plant or machinery is first used as described in subsection (1)(b), the owner is—

(a) liable to a balancing charge of an amount given by subsection (4), and

(b) required to bring into account a disposal value of an amount given by that subsection.

(3) For the chargeable period following that in which the plant or machinery is first used as described in subsection (1)(b), an amount given by subsection (4) is to be allocated to whatever pool is appropriate for plant or machinery which is of that description and is provided for leasing and used for overseas leasing.

(4) The amounts are—

The balancing charge

The amount, if any, by which F + N exceeds T, where—

F is the amount of any first-year allowance made in respect of the qualifying expenditure referred to in subsection (1)(a) (“E”),

N is the total of any normal writing-down allowances made in respect of E for the relevant chargeable periods, and

T is the total of the allowances that could have been made for the relevant chargeable periods if no first-year allowance or normal writing-down allowances had been or could have been made.

The disposal value

The amount, if any, by which E exceeds (F + N), where E, F and N have the meaning given in relation to the amount of the balancing charge.

The amount to be allocated to the pool

The aggregate of the balancing charge and the disposal value.

(5) For the purpose of calculating N, the normal writing-down allowances that were made in respect of expenditure on an item of plant or machinery are to be determined as if that item were the only item of plant or machinery in relation to which Chapter 5 had effect.

(6) “The relevant chargeable periods” means the chargeable period in which the qualifying expenditure was incurred and any subsequent chargeable period up to and including the one in which the plant or machinery was first used as described in subsection (1)(b).

Excess allowances: connected persons

112

(1) Section 111 applies with the modifications in subsections (2) to (4) in a case in which—

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

(b) the transaction was not effected (or, if more than one, none of the transactions was effected) on the occasion of a change in the persons carrying on the qualifying activity—

(i) which falls within Chapter 1 of Part 22 of CTA 2010 (transfers of trade without change of ownership), or

(ii) in relation to which Condition A or Condition B is met, and

(i) a first-year allowance or a normal writing-down allowance has been made in respect of expenditure on the provision of the plant or machinery, or

(ii) a balancing allowance has been made in respect of such expenditure without a first-year allowance or normal writing-down allowance having been claimed.

(1A) Condition A is that—

(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and

(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.

(1B) Condition B is that—

(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,

(b) a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and

(2) For the purposes of section 111(2) and (3)—

E is the amount of the expenditure in respect of which an allowance within subsection (1)(c) has been made,

F is the amount of any first-year allowance within subsection (1)(c), and

N is the amount of any normal writing-down allowance or balancing allowance within subsection (1)(c).

(3) For the purposes of section 111(2) and (3), any consideration paid or received on a disposal of the plant or machinery between the connected persons is to be disregarded.

(4) If a balancing allowance or a balancing charge has been made in respect of any of the transactions, the amount representing F + N is to be adjusted in a just and reasonable manner.

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

Excess allowances: special provision for ships

113

(1) If the plant or machinery referred to in section 111 is a ship—

(a) no allowance is to be made in respect of the ship under section 131(3) (postponed allowances) for the first chargeable period of overseas use or any subsequent chargeable period,

(b) nothing in section 132(2) (disposal events and single ship pool) restricts the operation of section 111, and

(c) the amount of any first-year or writing-down allowance in respect of the ship which has been postponed under section 130 and not made is to be allocated to a long-life asset pool or an overseas leasing pool for the chargeable period following the first chargeable period of overseas use.

(2) “The first chargeable period of overseas use” means the chargeable period in which the plant or machinery is first used for overseas leasing which is not protected leasing.

Recovery of allowances given in cases where prohibition applies

Prohibited allowances: standard recovery mechanism

114

(1) If—

(a) a first-year allowance, a writing-down allowance or a balancing allowance has been made in respect of expenditure incurred in providing plant or machinery, and

(b) at any time in the designated period, an event occurs such that the expenditure is brought within section 110(2) (cases where allowances are prohibited),

the following provisions have effect in relation to the person owning the plant or machinery immediately before that event.

(2) For the chargeable period in which the event occurs, the owner is—

(a) liable to a balancing charge of an amount equal to A — R, and

(b) required to bring into account a disposal value of an amount equal to E - (A - R).

(3) For the purposes of subsection (2)—

A is the amount of any allowances within subsection (1)(a),

R is any amount previously recovered under section 111 or 112 (recovery of excess allowances), and

E is the amount of the expenditure referred to in subsection (1)(a).

(4) For the purpose of calculating A, the amount of the allowances made in respect of expenditure on an item of plant or machinery is to be determined as if that item were the only item of plant or machinery in relation to which Chapter 5 had effect.

Prohibited allowances: connected persons

115

(1) Section 114 applies with the modifications in subsection (2) in a case in which—

(a) an amount falls to be treated as a balancing charge under that section,

(b) the person on whom the balancing charge is to be imposed acquired the plant or machinery in question as a result of a transaction between connected persons (or a series of transactions each of which was between connected persons),

(c) the transaction was not effected (or, if more than one, none of the transactions was effected) on the occasion of a change in the persons carrying on the qualifying activity—

(i) which falls within Chapter 1 of Part 22 of CTA 2010 (transfers of trade without change of ownership), or

(ii) in relation to which Condition A or Condition B is met, and

(d) a first-year allowance, a writing-down allowance or a balancing allowance in respect of expenditure on the provision of that plant or machinery has been made to any of those persons.

(1A) Condition A is that—

(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and

(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.

(1B) Condition B is that—

(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,

(b) a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and

(2) For the purpose of calculating the balancing charge—

(a) A is the amount of any allowances within subsection (1)(d),

(b) any consideration paid or received on a disposal of the plant or machinery between the connected persons is to be disregarded, and

(c) if a balancing allowance or a balancing charge has been made in respect of any of the transactions, A is to be adjusted in a just and reasonable manner.

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

Application of Chapter in relation to joint lessees

Mitigation of regime

116

(1) This section applies if—

(a) plant or machinery is leased to two or more persons jointly,

(b) at least one of them is a person who—

(i) is not resident in the United Kingdom, and

(ii) does not use the plant or machinery exclusively for earning profits chargeable to tax, and

(2) Subsection (3) applies if, at any time when the plant or machinery is leased as described in subsection (1), the lessees use the plant or machinery for the purposes of a qualifying activity or activities but not for leasing.

(3) The expenditure on the provision of the plant or machinery is to be treated as not subject to sections 107, 109 and 110 if, and to the extent to which, it appears that the profits of the qualifying activity or activities will be chargeable to tax throughout—

(a) the designated period, or

(b) if shorter, the period of the lease.

(4) Subsection (5) applies if, under subsection (3), part of the expenditure is treated as not subject to section 107, 109 or 110.

(5) Whether or not the plant or machinery continues to be leased as described in subsection (1), Chapters 5 (allowances and charges) and 10 (long-life assets) and this Chapter have effect as if—

(a) the part of the expenditure that is not subject to section 107, 109 or 110 were expenditure on the provision of a separate item of plant or machinery, and

(b) the rest were expenditure which has been incurred on the provision of another item of plant or machinery (and which is subject to those sections).

(6) All such apportionments are to be made as are necessary as a result of subsection (5).

Recovery of allowances in case of joint lessees

117

(1) If—

(a) expenditure is incurred on the provision of plant or machinery which is leased as described in section 116(1),

(b) the whole or a part of the expenditure has qualified for a normal writing-down allowance under section 116(3),

(c) at any time in the designated period while the plant or machinery is so leased, no lessee uses the plant or machinery for the purposes of a qualifying activity or activities the profits of which are chargeable to tax, and

(d) section 114 (recovery of prohibited allowances) does not apply at that time and has not applied at any earlier time,

sections 111 and 112 (recovery of excess allowances) apply as if the plant or machinery or (as the case may be) the separate item of plant or machinery referred to in section 116(5)(a) had at that time begun to be used for overseas leasing which is not protected leasing.

(2) If—

(a) the whole or a part of any expenditure has qualified for—

(i) a normal writing-down allowance otherwise than as a result of section 116(3), or

(ii) a first-year allowance,

(b) subsequently, but during the designated period, the plant or machinery is leased as described in section 116(1),

(c) at any time in the designated period while the plant or machinery is so leased, no lessee uses the plant or machinery for the purposes of a qualifying activity or activities the profits of which are chargeable to tax, and

(d) section 114 (recovery of prohibited allowances) does not apply at that time and has not applied at any earlier time,

sections 111 and 112 (recovery of excess allowances) apply as if the plant or machinery (and not any separate item of plant or machinery referred to in section 116(5)(a)) had at that time begun to be used for overseas leasing which is not protected leasing.

(3) Subsections (4) and (5) apply if—

(a) expenditure is incurred on the provision of plant or machinery which is leased as described in section 116(1),

(b) the whole or a part of the expenditure has qualified for a normal writing-down allowance under section 116(3),

(c) at the end of the designated period, the plant or machinery is leased as described in section 116(1) but subsection (1) has not had effect, and

(d) it appears that the extent to which the plant or machinery has been used for the purposes of a qualifying activity or activities the profits of which are chargeable to tax is less than the extent of such use taken into account in determining the amount of the expenditure which qualified for a normal writing-down allowance.

(4) Sections 111 and 112 (recovery of excess allowances) apply as if—

(a) a part of the expenditure corresponding to the reduction in the extent of use referred to in subsection (3)(d) were expenditure on the provision of a separate item of plant or machinery, and

(b) the separate item of plant or machinery had been used, on the last day of the designated period, for overseas leasing which is not protected leasing.

(5) Any disposal value subsequently brought into account under this Part in respect of the plant or machinery must be apportioned by reference to the extent of its use (determined at the end of the designated period) for the purposes of a qualifying activity or activities the profits of which are chargeable to tax.

(6) If an apportionment is made under subsection (5), section 116(6) does not apply.

Duties to supply information

Certificate relating to protected leasing

118

(1) If—

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

(b) before the expenditure has qualified for a normal writing-down allowance, the plant or machinery is used for overseas leasing which is protected leasing,

a claim for a writing-down allowance which takes account of that expenditure must be accompanied by a certificate.

(2) The certificate must specify—

(a) the description of protected leasing,

(b) the person to whom the plant or machinery has been leased, and

(c) if the certificate is given by reference to a chargeable period, all the items of plant or machinery (if more than one) relevant to that period.

(3) Subsection (1) applies, for the purposes of claims to first-year allowances, as if the references to a normal writing-down allowance and to a writing-down allowance included a first-year allowance.

(4) But nothing in subsection (3) prevents subsection (1) from continuing to apply if the use for protected leasing occurs after the expenditure has qualified for one allowance and before it qualifies for another.

Notice of change of use of plant or machinery

119

(1) If—

(a) any expenditure on plant or machinery has qualified for a first-year allowance or a normal writing-down allowance, and

(b) the plant or machinery is subsequently used at any time in the designated period for overseas leasing which is not protected leasing,

the person who then owns the plant or machinery must give notice of the fact to an officer of Revenue and Customs.

(2) The notice must specify—

(a) the person who is not resident in the United Kingdom to whom the plant or machinery has been leased, and

(b) if the notice is given by reference to a chargeable period, all the items of plant or machinery (if more than one) relevant to that period.

(3) The notice must be given—

(a) no later than 3 months after the end of the chargeable period in which the plant or machinery is first used for overseas leasing which is not protected leasing, or

(b) if at the end of the 3 months the person required to give the notice does not know and cannot reasonably be expected to know that the plant or machinery is being so used, within 30 days of coming to know of it.

Notice and joint lessees

120

(1) If expenditure is incurred on the provision of plant or machinery which is leased as described in section 116(1) (joint lessees: mitigation of regime), the lessor must give notice to an officer of Revenue and Customs.

(2) A notice under subsection (1) must specify—

(a) the names and addresses of the persons to whom the asset is jointly leased,

(b) the part of the expenditure properly attributable to each of them, and

(3) If circumstances occur such that section 117(1) or (2) (recovery of allowances) applies, the person who is then the lessor must give notice of the fact to an officer of Revenue and Customs.

(4) A notice under subsection (3) must specify—

(a) any of the joint lessees who is not resident in the United Kingdom to whom the plant or machinery has been leased, and

(b) if it is given by reference to a chargeable period, all the items of plant or machinery (if more than one) relevant to that period.

(5) A notice under this section must be given—

(a) no later than 3 months after the end of the chargeable period in which the plant or machinery is first leased as described in section 116(1) or (as the case may be) in which the circumstances referred to in subsection (3) occur, or

(b) if at the end of the 3 months the person required to give the notice does not know and cannot reasonably be expected to know that the plant or machinery is being so used, within 30 days of coming to know of it.

Qualifying purposes

Meaning of “short-term leasing”

121

(1) Leasing of plant or machinery is short-term leasing if—

(a) the number of consecutive days for which it is leased to the same person will normally be less than 30, and

(b) the total number of days for which it is leased to that person in any period of 12 months will normally be less than 90.

(2) Leasing of plant or machinery is also short-term leasing if—

(a) the number of consecutive days for which the plant or machinery is leased to the same person will not normally exceed 365, and

(b) the total length of the periods for which it is leased in any consecutive period of 4 years within the designated period to lessees in circumstances not falling within section 125(4) (other qualifying purposes: non-leasing use) will not exceed 2 years.

(3) If any plant or machinery is leased as a number of items which—

(a) form part of a group of items of the same or a similar description, and

(b) are not separately identifiable,

all items in the group may be treated as used for short-term leasing if substantially the whole of the items in the group are so used.

(4) For the purposes of subsections (1) and (2) persons who are connected with each other are to be treated as the same person.

Short-term leasing by buyer, lessee, etc.

122

(1) Plant or machinery is used for a qualifying purpose at any time when any of the persons listed in subsection (2) uses it for short-term leasing (as defined by section 121).

(2) The persons are—

(a) the person (“X”) who incurred expenditure on the provision of the plant or machinery;

(b) a person who is connected with X;

(c) a person who acquired the plant or machinery from X as a result of a disposal on the occasion of which, or two or more disposals on the occasion of each of which there was a change in the persons carrying on the qualifying activity in relation to which Condition A or B was met.

(d) a person to whom the plant or machinery is leased and who is resident in the United Kingdom;

(e) a person to whom the plant or machinery is leased, who is carrying on a qualifying activity in the United Kingdom and who uses the plant or machinery for the short-term leasing in the course of that activity.

(2A) Condition A is that—

(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and

(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.

(2B) Condition B is that—

(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,

(b) a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and

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

Ships and aircraft

123

(1) A ship is used for a qualifying purpose at any time when it is let on charter in the course of a trade which consists of or includes operating ships by a person who is—

(a) resident in the United Kingdom or carries on the trade there, and

(b) responsible for navigating and managing the ship throughout the period of the charter and for defraying—

(i) all expenses in connection with the ship throughout that period, or

(ii) substantially all such expenses other than those directly incidental to a particular voyage or to the employment of the ship during that period.

(2) Subsection (1) applies, with the necessary modifications, in relation to aircraft as it applies in relation to ships.

(3) For the purposes of subsection (1)(b) a person is responsible for something if he—

(a) is responsible as principal, or

(b) appoints another person to be responsible in his place.

(4) Subsections (1) and (2) do not apply if the main object, or one of the main objects—

(a) of the letting of the ship or aircraft on charter,

(b) of a series of transactions of which the letting of the ship or aircraft on charter was one, or

was to obtain a writing-down allowance determined without regard to section 109 (writing-down allowances at 10%) in respect of expenditure incurred by any person on the provision of the ship or aircraft.

Transport containers

124

(1) A transport container is used for a qualifying purpose at any time when it is leased in the course of a trade which is carried on by a person who—

(a) is resident in the United Kingdom, or

(b) carries on the trade there,

and either of the conditions given below is met.

(2) The first condition is that—

(a) the person’s trade consists of or includes the operation of ships or aircraft, and

(b) the container is at other times used by that person in connection with the operation of the ships or aircraft.

(3) The second condition is that the container is leased under a succession of leases to different persons who are not, or most of whom are not, connected with each other.

Other qualifying purposes

125

(1) Plant or machinery is used for a qualifying purpose at any time when subsection (2) or (4) applies.

(2) This subsection applies if any of the persons listed in subsection (3) uses the plant or machinery for the purpose of a qualifying activity without leasing it.

(3) The persons are—

(a) the person (“X”) who incurred expenditure on the provision of the plant or machinery;

(b) a person who is connected with X;

(c) a person who acquired the plant or machinery from X as a result of a disposal on the occasion of which, or two or more disposals on the occasion of each of which there was a change in the persons carrying on the qualifying activity in relation to which Condition A or B was met.

(3A) Condition A is that—

(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and

(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.

(3B) Condition B is that—

(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,

(b) a company which was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and

(4) This subsection applies if—

(a) a lessee uses the plant or machinery for the purposes of a qualifying activity without leasing it, and

(b) if he had incurred expenditure on the provision of the plant or machinery at that time, the expenditure would have fallen to be included, in whole or in part, in his available qualifying expenditure for a chargeable period.

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

Minor definitions

126

(1) In this Chapter “normal writing-down allowance” means a writing-down allowance of an amount determined without regard to sections 102 and 109 (reduced rates).

(2) In this Chapter any reference, in relation to any person, to expenditure having qualified for a normal writing-down allowance is to—

(a) the expenditure, or part of it, having fallen to be included in that person’s available qualifying expenditure for any chargeable period, and

(b) that available qualifying expenditure being expenditure which is not subject to section 102 or 109.

(3) Any reference in this Chapter to a person’s expenditure having qualified for a first-year allowance is to such an allowance having fallen to be made in respect of the whole or any part of the expenditure.

Chapter 12 — Ships

Pooling and postponement of allowances

Single ship pool

127

(1) Qualifying expenditure incurred on the provision of a ship for the purposes of a qualifying activity, if allocated to a pool, must be allocated to a single asset pool (a “single ship pool”).

(2) Subsection (1) is subject to the exceptions given in section 128 and any election under section 129 to use the appropriate non-ship pool.

(3) In this Chapter “the appropriate non-ship pool”, in relation to a ship, means the pool to which the expenditure incurred on the provision of the ship would be allocated, or would have been allocated, apart from this Chapter.

Expenditure which is not to be allocated to single ship pool

128

(1) The expenditure is not to be allocated to a single ship pool if the ship is provided for leasing unless—

(a) the ship is not used for overseas leasing at any time in the designated period, or if it is, is used only for protected leasing, and

(b) it appears that the ship will be used for a qualifying purpose in the designated period and will not be used for any other purpose at any time in that period.

(2) The expenditure is not to be allocated to a single ship pool if the qualifying activity for the purposes of which the ship is provided is special leasing of plant or machinery.

(3) In subsection (1) “leasing”, “overseas leasing”, “protected leasing”, “qualifying purpose” and “designated period” have the same meaning as in Chapter 11 (overseas leasing).

Election to use the appropriate non-ship pool

129

(1) A person who has incurred qualifying expenditure on the provision of a ship may, by an election made for a chargeable period, allocate to the appropriate non-ship pool—

(a) all or a part of any qualifying expenditure that would otherwise be allocated to a single ship pool, or

(b) all or a part of the available qualifying expenditure in a single ship pool.

(2) An election under this section must be made by notice given to an officer of Revenue and Customs—

(a) for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;

(b) for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.

(3) “The relevant chargeable period” means the chargeable period for which the election is made.

Notice postponing first-year or writing-down allowance

130

(1) A person who is entitled to a first-year allowance for a chargeable period in respect of qualifying expenditure on the provision of a ship may, by notice, postpone all or part of the allowance.

(2) A person who is entitled to a writing-down allowance for a chargeable period in respect of qualifying expenditure allocated to a single ship pool may, by notice, postpone all or part of the allowance.

(3) A notice under this section must specify the amount postponed.

(4) A notice under this section must be given to an officer of Revenue and Customs—

(a) for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;

(b) for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.

(5) “The relevant chargeable period” means the chargeable period for which the person is entitled to the allowance.

(6) If a person entitled to a first-year allowance in respect of qualifying expenditure on the provision of a ship claims the allowance in respect of part of the expenditure, subsection (1) applies to the allowance claimed.

(7) If a person entitled to a writing-down allowance in respect of qualifying expenditure allocated to a single ship pool requires the allowance to be reduced to a specified amount, subsection (2) applies to the allowance as so reduced.

Effect of postponement

131

(1) If a person gives notice in respect of a chargeable period under section 130—

(a) the allowance is withheld or withdrawn to the extent that it is postponed, but

(b) sections 57 to 59 (calculation of available qualifying expenditure) apply as if the allowance had been made to the person without any postponement.

(2) On making a claim, the person is entitled to have all or part of a postponed first-year allowance made to him as a first-year allowance for one or more subsequent chargeable periods in which he is carrying on the qualifying activity.

(3) On making a claim, the person is entitled to have all or part of a postponed writing-down allowance made to him as a writing-down allowance for one or more subsequent chargeable periods in which he is carrying on the qualifying activity.

(4) The total amount of any first-year allowances made under subsection (2) or writing-down allowances made under subsection (3) must not exceed the amount of the postponed allowance in question.

(5) A writing-down allowance made under subsection (3) is ignored for the purposes of section 59 (unrelieved qualifying expenditure).

(6) The fact that a postponed writing-down allowance is claimed for a chargeable period does not affect entitlement to, or the amount of, any other writing-down allowance to which the person is otherwise entitled for that chargeable period.

(7) A postponed allowance is not, merely because of the postponement, included in the reference in section 101(3) of CTA 2010 (group relief: meaning of “capital allowance excess”) to an allowance or amount brought forward from an earlier period.

Disposal events and single ship pool

132

(1) A person is required to bring a disposal value into account in a single ship pool if the ship—

(a) is provided for leasing, and

(b) begins to be used otherwise than for a qualifying purpose within the first 4 years of the designated period.

(2) If any disposal event (including one under subsection (1)) occurs in relation to a single ship pool—

(a) the available qualifying expenditure in the single ship pool is allocated, for the chargeable period in which the event occurs, to the appropriate non-ship pool,

(b) the disposal value must be brought into account as a disposal value for that chargeable period in the appropriate non-ship pool, and

(3) Subsections (1) and (2) apply even if, as a result of an election under section 129, some of the qualifying expenditure on the provision of the ship has been allocated to the appropriate non-ship pool.

(4) In subsection (1) “leasing”, “qualifying purpose” and “designated period” have the same meaning as in Chapter 11 (overseas leasing).

Ship not used

133

(1) This section applies if—

(a) a person has incurred qualifying expenditure on the provision of a ship for the purposes of a qualifying activity, and

(b) the ship ceases to be owned by the person without having been brought into use for the purposes of the qualifying activity.

(2) Any writing-down allowances that have previously been made in respect of qualifying expenditure in the single ship pool (or which have been postponed) must be withdrawn.

(3) The amount of any writing-down allowances withdrawn under subsection (2) is allocated, for the chargeable period in which the person ceases to own the ship, to the appropriate non-ship pool.

(4) Any adjustments required by this section are in addition to any adjustments required under section 132 (disposal events and single ship pool).

Deferment of balancing charges

Deferment of balancing charges: introduction

134

(1) Sections 135 to 156 enable a balancing charge that arises when there is a disposal event in respect of a ship to be deferred and attributed to qualifying expenditure on another ship.

(2) In this Chapter “the deferment rules” means sections 135 to 156.

Claim for deferment

135

(1) A person (“the shipowner”) who is liable to a balancing charge for a chargeable period may claim deferment of all or part of the charge if—

(a) in the chargeable period there is a disposal event (“the relevant disposal event”) in respect of a ship (“the old ship”),

(b) the old ship—

(i) was provided for the purposes of a qualifying activity carried on by the shipowner, and

(ii) was owned by the shipowner at some time in the chargeable period, and

(2) The amount which may be deferred is subject to the limit in section 138.

(3) For income tax purposes, a claim for deferment must be made on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends.

(4) “The relevant chargeable period” means the chargeable period for which the shipowner is liable to the balancing charge.

(5) For corporation tax purposes, Part IX of Schedule 18 to FA 1998 applies in relation to the making of a claim for deferment as it applies in relation to the making of a claim for an allowance.

Further conditions for deferment

136

The conditions referred to in section 135(1)(c) are that—

(a) the relevant disposal event is of a kind mentioned in section 61(1)(a) to (d) (cessation of ownership, loss, abandonment, destruction etc. of ship),

(b) the old ship was a qualifying ship immediately before the relevant disposal event,

(c) the shipowner has not incurred a loss in respect of the qualifying activity for the chargeable period for which he is liable to the balancing charge, and

(d) no amount in respect of the old ship has been allocated to—

(i) the overseas leasing pool,

(ii) a single asset pool under section 206 (plant or machinery provided or used partly for purposes other than those of the qualifying activity),

(iii) a single asset pool under section 211 (payment of partial depreciation subsidy), or

(iv) a pool for a qualifying activity consisting of special leasing.

Effect of deferment

137

A claim for deferment is given effect by allocating the amount deferred, for the chargeable period in respect of which the claim is made, to the appropriate non-ship pool.

Limit on amount deferred

138

(1) The amount deferred must not exceed the smallest of the following amounts—

(a) the amount of any balancing charge which, if the claim for deferment had not been made, would have been made for the chargeable period for which deferment is claimed in the appropriate non-ship pool;

(b) the amount given by section 139 (amount taken into account in respect of the old ship);

(i) by the shipowner or, if the shipowner is a company, by another company which is a member of the same group at the time when the expenditure is incurred, and

(ii) within the period of 6 years beginning with the relevant disposal event;

(d) the amount of the shipowner’s profits or income from the qualifying activity for the chargeable period for which deferment is claimed.

(2) In determining profits or income for the purposes of subsection (1)(d)—

(a) any other amounts deferred under section 135 are to be taken into account, and

(b) any amounts brought forward under section 83 of ITA 2007 or section 45, 45A or 45B of CTA 2010 (losses) are to be disregarded.

Amount taken into account in respect of old ship

139

(1) The amount taken into account in respect of the old ship for the purposes of section 138(1)(b) is—

(a) amount A, if no election has been made under section 129 (election to use appropriate non-ship pool) in respect of any of the qualifying expenditure incurred on the provision of the ship, or

(b) amount B, in any other case.

(2) Amount A is the amount which falls to be brought into account as a disposal value in the appropriate non-ship pool under section 132(2)(b) as a result of the relevant disposal event, less the available qualifying expenditure allocated to the appropriate non-ship pool under section 132(2)(a).

(3) Amount B is—

$$DV-(QE-WDA-FYA)$where—DV is the amount of the disposal value required to be brought into account in respect of the old ship,QE is all the qualifying expenditure incurred in respect of the old ship,WDA is the maximum amount of any writing-down allowances which (on the assumptions in subsection (4)) could have been made in respect of that qualifying expenditure for chargeable periods up to (but not including) the one in respect of which the claim for deferment is made, andFYA is the total of any first-year allowances actually made or postponed in respect of the old ship.$

(4) The assumptions are that—

(a) all the qualifying expenditure in respect of the old ship is (and has always been) allocated to the appropriate non-ship pool, and

(b) no other qualifying expenditure has been allocated to that pool.

(5) If an election is made under section 129 (election to use appropriate non-ship pool) after the determination under this section of the amount taken into account in respect of the old ship, the amount is, and is treated as always having been, amount B and not amount A.

Attribution of deferred amounts

Notice attributing deferred amounts to new expenditure

140

(1) The shipowner may, by notice to an officer of Revenue and Customs, attribute all or part of an amount deferred under section 135 to expenditure on new shipping.

(2) An amount attributed under this section is attributed to an equal amount of the expenditure on new shipping.

(3) Subsection (1) is subject to subsections (4) and (5) and section 141 (deferred amounts attributed to earlier expenditure first).

(4) Subsection (1) applies only if the expenditure on new shipping is incurred—

(a) by the shipowner or, if the shipowner is a company, by another company which is a member of the same group at the time when the expenditure is incurred, and

(b) within the period of 6 years beginning with the relevant disposal event.

(5) An amount may be attributed to expenditure on new shipping only to the extent that amounts have not already been attributed to it under this section.

(6) A notice given in respect of expenditure incurred by another company does not have effect unless the other company joins the shipowner in giving it.

Deferred amounts attributed to earlier expenditure first

141

(1) No part of an amount deferred under section 135 is to be attributed to the whole or a part of any expenditure on new shipping (“the current expenditure”) if there is other expenditure (“the earlier expenditure”) which—

(a) was incurred before the current expenditure but at the same time as or after the relevant disposal event,

(b) was incurred by the shipowner or, if the shipowner is a company, by another company which was a member of the same group at the time the earlier expenditure was incurred, and

(c) is expenditure on new shipping, or would be treated as such but for an election under section 129 (election to use appropriate non-ship pool),

unless the condition in subsection (2) is met in relation to the earlier expenditure.

(2) The condition is that—

(a) amounts have been attributed to all the earlier expenditure under section 140, and

(b) the attributions have been made in the case of the amount deferred and any other amounts deferred under section 135 as a result of disposal events occurring at the same time as or before the relevant disposal event.

Variation of attribution

142

(1) The shipowner may, by notice, vary an attribution under section 140 (notice attributing deferred amounts to new expenditure).

(2) The notice must be given to an officer of Revenue and Customs on or before the time limit for the shipowner to make a claim for deferment in respect of the relevant chargeable period.

(3) For the time limit for making a claim for deferment, see section 135(3) to (5).

(4) For the purposes of subsection (2), it is to be assumed that—

(a) the shipowner is liable to a balancing charge for the relevant chargeable period, and

(b) a claim for deferment of that balancing charge can be made for the relevant chargeable period.

(5) “The relevant chargeable period” means the earliest chargeable period in which expenditure to which the variation relates is incurred.

(6) If the person to whose expenditure the notice relates is not the shipowner, a notice under subsection (1) does not have effect unless the person joins the shipowner in giving it.

Effect of attribution

143

(1) This section applies if a notice is given under section 140 attributing an amount to expenditure on new shipping.

(2) The amount must be brought into account as a disposal value—

(a) for the chargeable period in which the expenditure is incurred, and

(b) in the single ship pool to which the expenditure is allocated.

Amounts which cease to be attributable

144

(1) This section applies if—

(a) an amount has been deferred under section 135, and

(b) circumstances arise in which any part of the amount ceases (otherwise than by being attributed) to be attributable.

(2) The shipowner is assumed not to have been entitled to defer so much of the amount as ceases to be attributable.

Reading this document does not replace reading the official text published on legislation.gov.uk. Contains public sector information licensed under the Open Government Licence v3.0. We assume no responsibility for any inaccuracies arising from the conversion of the original CLML XML to this format.

This text is published under legislation.gov.uk's own terms of reuse, not a Legalize or public-domain licence. legislation.gov.uk
Open Government Licence v3.0 (attribution required)
© Crown and database right. Derived from content available under the Open Government Licence v3.0 from legislation.gov.uk.