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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

(4) But if, under any arrangement, a particular service or part of a service is provided by more than one person who is connected with R (so that without this subsection there would be more than one amount for D in relation to that service or part), D is the lowest of those amounts.

165C

(1) This section applies to so much of R's expenditure under the arrangement as relates to the supply by S of a service if—

(a) the service is a planning or project management service, and

(b) the cost plus method is an appropriate method of applying the arm's length principle to the provision of it.

(2) D is the sum of—

(a) the cost to S of providing the service or, if R's expenditure under the arrangement relates to only part of the service, that part, and

(b) the appropriate percentage of that amount.

(3) The appropriate percentage is the smaller of—

(a) the appropriate mark up determined in accordance with the cost plus method, and

(b) 10%.

(4) Any expression which is used in this section and in the transfer pricing guidelines has the meaning given in those guidelines.

“The transfer pricing guidelines” has the meaning given by section 164(4) of TIOPA 2010.

165D

(1) This section applies where—

(a) S decommissions the plant or machinery,

(b) there are, in addition to R, one or more other participators in the relevant field, and

(c) the expenditure incurred in respect of the decommissioning is apportioned between the participators (including R) in accordance with their shares in the oil won from the relevant field or their shares in the equity of that field.

(2) D is the part of the expenditure referred to in subsection (1)(c) which is incurred by R.

(3) Where—

(a) plant or machinery is or has been used in connection with the winning of oil from more than one relevant field, and

(b) the expenditure incurred in respect of the decommissioning is apportioned between those fields in accordance with the contribution from each field to the total of the oil won using that plant or machinery,

subsections (1) and (2) apply to each such field as if subsection (1)(c) referred to the expenditure apportioned to that field.

(4) But subsections (2) and (3) do not apply (and section 165B(2) applies instead) if—

(a) the amount of consideration, or the method of determining the amount of consideration, to be received by S under the arrangement or arrangements, or

(b) the apportionment of the liability for that consideration (whether between the participators as mentioned in subsection (1)(c) or between the fields as mentioned in subsection (3)(b)),

has been agreed as, or as part of, an avoidance scheme.

(5) A scheme is an “avoidance scheme” if the main purpose, or one of the main purposes, of a party in entering into the scheme is to enable a person to obtain a tax advantage under this Part that would not otherwise be obtained.

(6) The reference in subsection (5) to obtaining a tax advantage that would not otherwise be obtained includes obtaining an allowance that is in any way more favourable to a person than the one that would otherwise be obtained.

(7) In this section—

“licensee”, “oil” and “oil field” have the same meaning as in Part 1 of OTA 1975,

“other participator” means a person, not connected with R, who is a licensee in respect of any licensed area wholly or partly included in the oil field in question, and

“relevant field” means an oil field—in which plant or machinery is located, orin connection with which the plant or machinery is being or has been used for the purposes of a ring fence trade.

165E

(1) Allowances under this Part are restricted under subsection (5) if—

(a) a person (“R”) who is carrying on, or has ceased to carry on, a ring fence trade enters into a transaction with another person (“S”),

(b) S receives from R consideration for services provided in pursuance of the transaction,

(d) the transaction either has an avoidance purpose, or is part of, or occurs as a result of, a scheme or arrangement that has an avoidance purpose.

(2) Subsection (1)(d) may be satisfied—

(a) whether the scheme or arrangement was made before or after the transaction was entered into, and

(b) whether or not the scheme or arrangement is legally enforceable.

(3) A transaction, scheme or arrangement has an “avoidance purpose” if the main purpose, or one of the main purposes, of a party in—

(a) entering into the transaction, scheme or arrangement, or

(b) agreeing an amount of consideration, or a method of determining an amount of consideration, to be paid in pursuance of the transaction, scheme or arrangement,

is to enable a person to obtain a tax advantage under this Part that would not otherwise be obtained.

(4) The reference in subsection (3) to obtaining a tax advantage that would not otherwise be obtained includes obtaining an allowance that is in any way more favourable to a person than the one that would otherwise be obtained.

(5) All or part of R's expenditure under the transaction is to be left out of account in determining R's available qualifying expenditure.

(6) The amount of expenditure to be left out of account is—

(a) such amount as would or would in effect cancel out the tax advantage mentioned in subsection (3) (whether that advantage is obtained by R or another person and whether it relates to the transaction or something else), or

(b) if the amount found under paragraph (a) exceeds the whole of R's expenditure under the transaction, the whole of that expenditure.

Limiting conditions

212LA

(1) The qualifying change meets one of the limiting conditions if condition A, B, C or D is met.

(2) Condition A is that the amount of the relevant excess of allowances is £50 million or more.

(3) Condition B is that the amount of the relevant excess of allowances—

(a) is £2 million or more but less than £50 million, and

(b) is not insignificant as a proportion of the total amount or value of the benefits derived by any relevant person by virtue of the qualifying change or change arrangements.

(4) “Relevant person” means a person who, at the end of the relevant day, is—

(a) a principal company of C,

(b) a person carrying on the relevant activity in partnership, or

(5) Condition C is that—

(a) the amount of the relevant excess of allowances is less than £2 million, and

(b) the qualifying change has an unallowable purpose.

See section 212M for the meaning of “unallowable purpose”.

(6) Condition D is that the main purpose, or one of the main purposes, of any arrangements is to procure that condition A or B or paragraph (a) of condition C is not met.

(7) In this section—

the amount of the relevant excess of allowances is the difference between RTWDV and BSV (see sections 212K and 212L);

“change arrangements” and “arrangements” have the same meaning as in section 212M.

Successions by beneficiaries

Meaning of “freehold interest”, “lease”, etc.

Transfer or division of UK business

First-year allowances

416ZA

(1) If—

(a) a person who is carrying on, or has ceased to carry on, a ring fence trade incurs expenditure on the restoration of a relevant site,

(b) that part of the restoration work to which the expenditure relates has been carried out, and

(c) the expenditure has not been deducted in calculating for tax purposes the profits of any trade carried on by the person,

the net cost of the restoration is qualifying expenditure for the relevant period in which that part of the work to which the expenditure relates was carried out.

(2) “Relevant period” means—

(a) in the case of restoration work carried out while the person is carrying on the trade, a chargeable period, and

(b) in the case of restoration work carried out after the person has ceased to carry on the trade, a notional accounting period.

For the meaning of “notional accounting period”, see section 416ZB.

(3) The qualifying expenditure for a notional accounting period is treated as incurred on the last day of trading.

(4) If the amount of expenditure incurred on any part of the restoration work carried out in a relevant period is disproportionate to that part of the restoration work, only so much of the net cost of the restoration as is proportionate to that part of the restoration work (the “allowable expenditure for the period”) is to be treated as qualifying expenditure for that period.

(5) But subsection (4) does not prevent that part of the expenditure that is not allowable expenditure for the period from being treated as qualifying expenditure for a subsequent relevant period.

(6) If any expenditure incurred by a person is qualifying expenditure under this section—

(a) the whole of the expenditure on the restoration (not just the net cost) is not deductible in calculating the person's income for any tax purposes, and

(b) none of the amounts subtracted to produce the net cost is to be treated as the person's income for any tax purposes.

(7) “Restoration” includes—

(a) landscaping,

(b) in relation to land in the United Kingdom, the carrying out of any works required as a condition of granting planning permission for development relating to the winning of oil from an oil field,

(i) an approved abandonment programme,

(ii) a condition to which the approval of an abandonment programme is subject, or

(iii) a requirement imposed by the Secretary of State, or an agreement made with the Secretary of State, in relation to a relevant site, and

(d) in relation to land in a foreign sector of the continental shelf, the carrying out of any works required in order to comply with anything corresponding to a matter within paragraph (c)(i), (ii) or (iii) under the law of a territory outside the United Kingdom.

But it does not include decommissioning any plant or machinery (within the meaning of section 163).

(8) A “relevant site” means—

(a) the site of a source to the working of which the ring fence trade relates (or related), or

(b) land used in connection with working such a source.

(9) “The net cost of the restoration” means the expenditure incurred on the restoration less any amounts that—

(a) are received, or are to be received, by the person, and

(b) are attributable to the restoration of the relevant site.

(10) All such adjustments are to be made, by way of discharge or repayment of tax or otherwise, as are necessary to give effect to this section.

(11) In this section—

“abandonment programme”, “approval” and “approved” (in relation to an abandonment programme) have the same meaning as in Part 4 of the Petroleum Act 1998,

“foreign sector of the continental shelf” means an area within which rights are exercisable with respect to the sea bed and subsoil and their natural resources by a territory outside the United Kingdom,

“oil” and “oil field” have the same meaning as in Part 1 of OTA 1975,

“ring fence trade” has the same meaning as in Part 8 of CTA 2010 (see section 277 of that Act), and

“UK marine area” has the meaning given by section 42 of the Marine and Coastal Access Act 2009.

416ZB

(1) For the purposes of section 416ZA “notional accounting period”, in relation to a person (“the former trader”) who has ceased to carry on a ring fence trade, means each of the following periods—

(a) the period that—

(i) begins with the day following the last day on which the former trader carried on the ring fence trade, and

(ii) ends with the day on which the first termination event subsequently occurs, and

(b) each period that—

(i) begins with the day following the last day of a period determined under paragraph (a) or this paragraph, and

(ii) ends with the day on which the first termination event subsequently occurs.

(2) But there are to be no notional accounting periods after the end of the post-cessation period (see subsection (4)).

(3) “Termination event”, in relation to a notional accounting period, means each of the following—

(a) the end of the period of 12 months beginning with the first day of the notional accounting period,

(b) the occurrence of an accounting date of the former trader or, if there is a period for which the former trader does not make up accounts, the end of that period (but see subsections (6) and (7)), and

(4) “The post-cessation period” means the period that—

(a) begins with the day following the last day on which the former trader carried on the ring fence trade, and

(b) ends with the day on which the appropriate authority is satisfied that the restoration of the relevant site has been completed.

(5) In subsection (4) “the appropriate authority” means—

(a) in the case of restoration falling within section 416ZA(7)(c), the Secretary of State, and

(b) in any other case, such person or body as the Commissioners for Her Majesty's Revenue and Customs may specify.

(6) If the former trader—

(a) carries on more than one trade,

(b) makes up accounts of any of them to different dates, and

subsection (3)(b) applies with reference to the accounting date of such one of the trades as the former trader may determine.

(7) If the Commissioners for Her Majesty's Revenue and Customs are of the opinion, on reasonable grounds, that a date determined by the former trader for the purposes of subsection (6) is inappropriate, the Commissioners may by notice direct that the accounting date of such other of the trades referred to in that subsection as appears to the Commissioners to be appropriate is to be used instead.

(8) Expressions used in this section and in section 416ZA have the same meaning in this section as they do in that section.

416ZC

(1) Where—

(a) a person (“R”) who is carrying on, or has ceased to carry on, a ring fence trade enters into an arrangement,

(b) under the arrangement, a person (“S”) who is connected with R provides a service to R in connection with work on the restoration of a relevant site, and

(c) (in the absence of this section) all or part of the consideration for the service would be qualifying expenditure of R under section 416ZA,

the amount of the expenditure which is qualifying expenditure is restricted under section 416ZD(1).

(2) Subsection (1)(b) may be satisfied whether the service is provided to R directly or indirectly; and in particular it does not matter—

(a) whether R and S are parties to the same contract, or

(b) whether payments are made by R directly to S.

(3) Subsections (4) and (5) apply for the purposes of this section and sections 416ZD and 416ZE.

(4) “Relevant site” has the meaning given by section 416ZA(8).

(5) References to providing a service include—

(a) letting a ship on charter or any other asset on hire, and

(b) providing goods which are to be used up in the course of providing a service.

416ZD

(1) In determining how much of the consideration for the service is qualifying expenditure, there is to be left out of account the amount (if any) by which that consideration exceeds D.

(2) D is the cost to S of providing the service or, if the qualifying expenditure relates to only part of the service, that part.

(3) Subsection (2) is subject to—

(a) subsection (4), and

(b) section 416ZE,

which provide for D to be calculated differently in certain circumstances.

(4) The following provisions apply in relation to an amount restricted under subsection (1) as they apply in relation to an amount restricted under section 165B(1)—

(a) section 165C;

(b) section 165E, subject to the modifications in subsection (5).

(5) The modifications are that—

(a) the references to Part 2 are to be read as references to this Part,

(b) in subsection (1)(c), the reference to decommissioning expenditure is to be read as a reference to qualifying expenditure under section 416ZA, and

(c) in subsection (5), the reference to R's available qualifying expenditure is to be read as a reference to R's qualifying expenditure on the restoration of the site.

(6) But if, under the arrangement, a particular service or part of a service is provided by more than one person who is connected with R (so that without this subsection there would be more than one amount for D in relation to that service or part), D is the lowest of those amounts.

416ZE

(1) This section applies where—

(a) S carries out the restoration of a relevant site,

(b) there are, in addition to R, one or more other participators in the relevant field, and

(c) the expenditure incurred in carrying out the restoration is apportioned between the participators (including R) in accordance with their shares in the oil won from the relevant field or their shares in the equity of that field.

(2) D is the part of the expenditure referred to in subsection (1)(c) which is incurred by R.

(3) Where—

(a) a relevant site has been used in connection with the winning of oil from more than one relevant field, and

(b) the expenditure incurred in respect of the restoration is apportioned between those fields in accordance with the contribution from each field to the total of the oil won using that site,

subsections (1) and (2) apply to each such field as if subsection (1)(c) referred to the expenditure apportioned to that field.

(4) But subsections (2) and (3) do not apply (and section 416ZD(2) applies instead) if—

(a) the amount of consideration, or the method of determining the amount of consideration, to be received by S under the arrangement or arrangements, or

(b) the apportionment of the liability for that consideration (whether between the participators as mentioned in subsection (1)(c) or between the fields as mentioned in subsection (3)(b)),

has been agreed as, or as part of, an avoidance scheme.

(5) A scheme is an “avoidance scheme” if the main purpose, or one of the main purposes, of a party in entering into the scheme is to enable a person to obtain a tax advantage under this Part that would not otherwise be obtained.

(6) The reference in subsection (5) to obtaining a tax advantage that would not otherwise be obtained includes obtaining an allowance that is in any way more favourable to a person than the one that would otherwise be obtained.

(7) In relation to the restoration of a relevant site, “relevant field” means any of the following—

(a) the oil field in which the site is located;

(b) if the site is the site of a source to the working of which a ring fence trade relates (or related), an oil field from which oil is or has been won by means of working the source;

(c) if the site is land used in connection with working such a source, an oil field from which oil is or has been won by means of working the source.

(8) In this section—

“licensee”, “oil” and “oil field” have the same meaning as in Part 1 of OTA 1975, and

“other participator” means a person, not connected with R, who is a licensee in respect of any licensed area wholly or partly included in the oil field in question.

Section 151 (benefits under pilot schemes)

Equipment lessor has right to sever fixture that is not part of building

Special leasing of plant or machinery

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

Energy-saving components of plant or machinery

Prevention of double relief

Disposal events in respect of cushion gas

Expenditure on plant and machinery for use in designated assisted areas

Expenditure of small or medium-sized enterprises: companies

General decommissioning expenditure incurred before cessation of ring fence trade

General decommissioning expenditure after ceasing ring fence trade

360BA

(1) This section applies where—

(a) (ignoring this section) qualifying expenditure is incurred on works, services or other matters in a chargeable period, and

(b) those works, services or other matters are not completed or provided before the end of the period of 36 months beginning with the date the expenditure was incurred.

(2) To the extent that it relates to so much of those works, services or other matters as are not completed or provided before the end of that period, the expenditure is to be treated for the purposes of this Part as never having been incurred (unless and until subsection (6) applies).

(3) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (2).

(4) If a person who has made a tax return becomes aware that, after making it, anything in it has become incorrect because of the operation of this section, the person must give notice to an officer of Revenue and Customs specifying how the return needs to be amended.

(5) The notice must be given within 3 months beginning with the day on which the person first became aware that anything in the return had become incorrect because of the operation of this section.

(6) If, at any time after the end of the period mentioned in subsection (1)(b), those works, services or other matters are completed or provided, the expenditure to which subsection (2) applies is to be treated for the purposes of this Part as incurred at that time.

Meaning of “qualifying business premises”

Transfer of insurance company business

431A

(1) Subsection (2) applies if—

(a) an election under section 18A of CTA 2009 has effect in relation to a company, and

(b) the company carries on any trade which consists of, or includes, the working of a source of mineral deposits.

(2) That trade so far as carried on through one or more permanent establishments outside the United Kingdom is treated for the purposes of this Part as a trade—

(a) separate from any other trade of the company, and

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

431B

(1) If—

(a) an election under section 18A of CTA 2009 has effect in relation to a company, and

(b) the operation of sections 431A and 421(1)(b)(ii) and (2) requires the company to bring the disposal value of an asset into account,

the disposal value is such an amount as gives rise to neither a balancing allowance nor a balancing charge.

(2) Subsection (1) does not apply if—

(a) the company's qualifying expenditure in respect of the asset exceeds £5 million,

(b) the company has claimed any capital allowance in respect of any of that expenditure, and

(c) the company has, at any time in a relevant accounting period, used the asset otherwise than for the purposes of a permanent establishment outside the United Kingdom.

(3) In subsection (2)(c) “relevant accounting period” means an accounting period ending before, but ending not more than 6 years before, “the relevant day” as defined by section 18F of CTA 2009.

431C

(1) Subsection (2) applies if—

(a) an election under section 18A of CTA 2009 has effect in relation to a company, and

(b) but for section 18A of CTA 2009 and section 431A(2)(b), an allowance under this Part (“the notional allowance”) could be claimed under section 3(1) in respect of assets provided for the purposes of a permanent establishment outside the United Kingdom through which business is or has been carried on by the company.

(2) The notional allowance (and any charge in connection with it which would have arisen if the allowance had been claimed) is to be made automatically and reflected in any calculation, for any relevant accounting period of the company, of the profits or losses attributable to business carried on by the company through such a permanent establishment.

(3) Subsection (4) applies if, at the time an election under section 18A of CTA 2009 takes effect in relation to a company, the company is, by reason of sections 431A and 421(1)(b)(ii) and (2), required to bring into account the disposal value of any asset provided for the purposes of a foreign permanent establishment through which business is or has been carried on by the company.

(4) For the purposes of subsections (1) and (2), the company is treated as having incurred at that time, for the purposes of the trade mentioned in section 431A(2), qualifying expenditure of an amount equal to that disposal value.

(5) In subsection (2) “relevant accounting period”, in relation to a company by which an election under section 18A of CTA 2009 is made, means an accounting period of the company to which the election applies (as to which see section 18F of that Act).

Section 195 (allowance of certain drilling expenditure)

Schedule 3 (taxation provisions)

Schedule 25 (Northern Ireland Airports Limited)

Schedule 3 (taxation provisions)

Schedule 22 (tonnage tax)

Equipment lease is part of affordable warmth programme

CHAPTER 1A — Trades attracting Northern Ireland rate of corporation tax

6A

In this Act—

“NIRE company” means a company that is a Northern Ireland company for the purposes of Part 8B of CTA 2010 by virtue of the SME (election) condition or the large company condition in section 357KA of that Act;

“SME (Northern Ireland employer) company” means a company that is a Northern Ireland company for the purposes of Part 8B of CTA 2010 by virtue of the SME (Northern Ireland employer) condition in section 357KA of that Act.

6B

(1) This section has effect for the purposes of this Act.

(2) “Northern Ireland firm” has the meaning given by section 357WA of CTA 2010.

(3) If section 357WC of CTA 2010 (Northern Ireland profits etc of firm determined under Chapter 6 of Part 8B of that Act) applies to a Northern Ireland firm for a chargeable period, the partnership is a “Northern Ireland Chapter 6 firm” for any purpose for which that section applies.

(4) If section 357WD of CTA 2010 (Northern Ireland profits etc of firm determined under Chapter 7 of Part 8B of that Act) applies to a Northern Ireland firm for a chargeable period, the partnership is a “Northern Ireland Chapter 7 firm” for any purpose for which that section applies.

6C

(1) In this Act “NI rate activity” means—

(a) a qualifying trade carried on by an SME (Northern Ireland employer) company, except to the extent that it is an excluded activity,

(b) a qualifying trade, other than an excluded financial trade, carried on by a NIRE company, to the extent that the trade—

(i) is carried on through a Northern Ireland regional establishment of the company, and

(ii) does not consist of an excluded activity,

(c) the back-office activities of an excluded financial trade carried on by an SME (Northern Ireland employer) company which has made an election for the purposes of section 357KB(2) of CTA 2010,

(d) the back-office activities of an excluded financial trade carried on by a NIRE company which has made an election for the purposes of section 357KB(2) of CTA 2010, to the extent that those activities are carried on through the Northern Ireland regional establishment of the company,

(e) a qualifying partnership trade carried on by a Northern Ireland Chapter 6 firm, except to the extent that it is an excluded activity,

(f) a qualifying partnership trade, other than an excluded financial trade, carried on by a Northern Ireland Chapter 7 firm, to the extent that the trade—

(i) is carried on through a Northern Ireland regional establishment of the partnership, and

(ii) does not consist of an excluded activity,

(g) the back-office activities of an excluded financial trade carried on by a Northern Ireland Chapter 6 firm which has made an election for the purposes of section 357WB(2) of CTA 2010, or

(h) the back-office activities of an excluded financial trade carried on by a Northern Ireland Chapter 7 firm which has made an election for the purposes of section 357WB(2) of CTA 2010, to the extent that those activities are carried on through the Northern Ireland regional establishment of the partnership.

(2) In subsection (1)—

“back-office activities” has the same meaning as in Part 8B of CTA 2010 (see section 357XI of that Act);

“excluded financial trade” means a trade that is an excluded trade for the purposes of Part 8B of CTA 2010 merely because it falls within one or more of the following provisions of that Act—section 357XB (lending and investment),section 357XC (investment management), orsection 357XE (re-insurance trade);

“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);

“qualifying partnership trade” has the same meaning as in Part 8B of CTA 2010 (see section 357WB of that Act);

“qualifying trade” has the same meaning as in Part 8B of CTA 2010 (see section 357KB of that Act).

6D

(1) For the purposes of this Act, the NI rate activity carried on by an SME (Northern Ireland employer) company or a NIRE company is to be treated as a separate trade, distinct from any other activities carried on by the company as part of the trade.

(2) For the purposes of the corporate partner calculation, the NI rate activity carried on by a Northern Ireland firm is to be treated as a separate trade, distinct from any other activities carried on by the firm as part of the trade.

(3) In this Act “the corporate partner calculation”, in relation to a trade carried on by a Northern Ireland firm, means the determination of the allowances and charges to which effect is to be given under this Act in determining under subsection (3) or (4) of section 1259 of CTA 2009 (calculation of firm's profits and losses) the amount of the profits of the trade chargeable to corporation tax.

6E

(1) This section applies if an SME (Northern Ireland employer) company or a NIRE company is entitled or liable to—

(a) an allowance or charge under Part 2 (plant and machinery allowances) where the qualifying activity is a trade,

(aa) an allowance under Part 2A (structures and buildings allowances),

(b) an allowance or charge under Part 3A (business premises renovation allowances),

(d) an allowance or charge under Part 6 (research and development), or

(e) an allowance under Part 9 (dredging allowances).

(2) For the purposes of the corporate partner calculation, this section also applies if a Northern Ireland firm is entitled or liable to an allowance or charge falling within any of subsection (1)(a) to (e).

(3) The allowance or charge is to be given effect in calculating the profits of the trade, by treating—

(a) the allowance as an expense of the trade, and

(b) the charge as a receipt of the trade.

(4) If the allowance or charge relates to an NI rate activity, it is treated for the purposes of Part 8B of CTA 2010 (trading profits taxable at the Northern Ireland rate) as forming part of the Northern Ireland profits or Northern Ireland losses of the trade.

(5) If the allowance or charge relates to a main rate activity, it is treated for the purposes of Part 8B of CTA 2010 as forming part of the mainstream profits or mainstream losses of the trade.

(6) In this section—

(a) “the trade” means the trade carried on by the company or partnership (disregarding for this purpose section 6D), and

(b) “main rate activity” means so much of the trade as is not an NI rate activity.

Unrelieved qualifying expenditure

Expenditure on environmentally beneficial plant or machinery

Environmentally beneficial components of plant or machinery

Expenditure on plant and machinery for use in designated assisted areas

Expenditure of small or medium-sized enterprises: companies

51JA

(1) This section applies if—

(a) section 51B, 51C, 51D or 51E applies, and

(b) the relevant AIA qualifying expenditure for the purposes of the section in question includes expenditure incurred in a low-rate year in respect of an NI rate activity.

(2) For the purposes of this section expenditure is “incurred in a low-rate year” if it is incurred in a financial year for which the Northern Ireland rate is lower than the main rate.

(3) The maximum annual investment allowance that may be allocated under section 51B, 51C, 51D or 51E to AIA qualifying expenditure incurred in a low-rate year in respect of qualifying activities other than NI rate activities is determined by the formula—

$$A × T − NI T$where—A is the amount of the single annual investment allowance that would otherwise be available for allocation;T is so much of the relevant AIA qualifying expenditure for the purposes of the section in question as is incurred in a low-rate year; NI is so much of the relevant AIA qualifying expenditure for the purposes of the section in question as is expenditure incurred in a low-rate year in respect of an NI rate activity.$

The different kinds of pools

Amount of allowances and charges

Determination of entitlement or liability

Disposal events and disposal values

SME partnership entering NI corporation tax regime

Effect of changes in Northern Ireland status of SME company or SME partnership

66B

(1) This section applies if—

(a) in a chargeable period beginning after the commencement day (“the relevant period”) a company is an SME (Northern Ireland employer) company,

(b) the company was neither an SME (Northern Ireland employer) company nor a NIRE company in the previous chargeable period, and

(c) the company has not become an SME (Northern Ireland employer) company in the relevant period as a result of an election under section 357KB(2) of CTA 2010 (back-office activities of financial trades).

(2) The fact that assets which continue to be used in the relevant period for the purposes of the trade actually carried on by the company are as a result of section 15(2ZA) treated as ceasing to be used for the purposes of a main rate activity and beginning to be used for the purposes of an NI rate activity does not give rise to a disposal event within 61(1)(e) or (f).

(3) If during the relevant period the only qualifying activity carried on by the company is an NI rate activity, the amount of any unrelieved qualifying expenditure in any main pool or special rate pool falling to be carried forward to the relevant period is to be treated as relating to plant and machinery used for the purposes of the NI rate activity.

(4) If during the relevant period the company carries on both an NI rate activity and a main rate activity—

(a) the amount of any unrelieved qualifying expenditure in any main pool falling to be carried forward under section 59 to the relevant period is to be apportioned on a just and reasonable basis to become—

(i) a main pool that is to be treated as relating to plant and machinery used for the purposes of the NI rate activity, and

(ii) a main pool that is to be treated as relating to plant and machinery used for the purposes of the main rate activity, and

(b) the amount of any unrelieved qualifying expenditure in any special rate pool falling to be carried forward under section 59 to the relevant period is to be apportioned on a just and reasonable basis to become—

(i) a special rate pool that is to be treated as relating to plant and machinery used for the purposes of the NI rate activity, and

(ii) a special rate pool that is to be treated as relating to plant and machinery used for the purposes of the main rate activity.

(5) “Main rate activity” means the company's trade except so far as it is an NI rate activity.

(6) “The commencement day” has the meaning given by section 5(4) of the Corporation Tax (Northern Ireland) Act 2015.

SME company leaving NI corporation tax regime

66C

For the purposes of the corporate partner calculation, section 66B applies in relation to a partnership as if—

(a) references to a company were references to a partnership,

(b) references to an SME (Northern Ireland employer) company were references to a Northern Ireland Chapter 6 firm,

(d) the reference to section 357KB(2) of CTA 2010 were a reference to section 357WB(2) of that Act, and

(e) the reference to section 15(2ZA) were a reference to section 15(2ZB).

66D

(1) This section applies if—

(a) in a chargeable period beginning after the commencement day (“the relevant period”) a company is neither an SME (Northern Ireland employer) company nor a NIRE company,

(b) the company was an SME (Northern Ireland employer) company in the previous chargeable period, and

(2) The fact that assets which continue to be used in the relevant period for the purposes of the trade actually carried on are as a result of section 15(2ZA) treated as ceasing to be used for the purposes of an NI rate activity and beginning to be used for the purposes of the qualifying activity mentioned in subsection (1)(c) does not give rise to a disposal event within 61(1)(e) or (f).

(3) Any unrelieved qualifying expenditure which—

(a) relates to plant or machinery used for the purposes of an NI activity, and

(b) falls to be carried forward to the relevant period,

is to be treated as relating to the qualifying activity that the company carries on in the relevant period.

(4) “The commencement day” has the meaning given by section 5(4) of the Corporation Tax (Northern Ireland) Act 2015.

66E

For the purposes of the corporate partner calculation, section 66D applies in relation to a partnership as if—

(a) references to a company were references to a partnership,

(b) references to an SME (Northern Ireland employer) company were references to a Northern Ireland Chapter 6 firm,

(d) the reference to section 15(2ZA) were a reference to section 15(2ZB).

CHAPTER 16ZA — Asset provided or used only partly for NI rate activity

212ZA

(1) If in a chargeable period a company has incurred qualifying expenditure on the provision of plant or machinery—

(a) partly for the purposes of an NI rate activity, and

(b) partly for the purposes of a main rate activity,

then for the purposes of any annual investment allowance or first year allowance to which the company is entitled the expenditure is to be apportioned between the NI rate activity and the main rate activity on a basis which is just and reasonable having regard to the relevant circumstances.

(2) The relevant circumstances include, in particular, the extent to which it appears that the plant or machinery is likely to be used for purposes of the NI rate activity and the extent to which it appears that it is likely to be used for the main rate activity.

(3) If the allowance falls to be reduced under section 205 or 210, it is the reduced amount that is apportioned under subsection (1).

212ZB

(1) Qualifying expenditure to which this subsection applies, if allocated to a pool, must be allocated to a single asset pool.

(2) Subsection (1) applies to qualifying expenditure incurred by a company carrying on both an NI rate activity and a main rate activity where the expenditure is incurred—

(a) partly for the purposes of the NI rate activity, and

(b) partly for the purposes of the main rate activity.

(3) If a company is required to bring a disposal value into account in a pool for a chargeable period because the plant or machinery begins to be used for the purposes of an NI rate activity as well as for the purposes of a main rate activity, or begins to be used for the purposes of a main rate activity as well as for the purposes of an NI rate activity, an amount equal to that disposal value is allocated (as expenditure on the plant or machinery) to a single asset pool for that chargeable period.

(4) In the case of a single asset pool under subsection (1) or (3), there is no disposal event merely because the plant or machinery begins to be used to a greater extent for the purposes of the NI rate activity or for the purposes of the main rate activity.

212ZC

(1) This section applies if a company's expenditure is in a single asset pool under section 212ZB(1) or (3).

(2) The amount of—

(a) any writing-down allowance or balancing allowance to which the company is entitled, or

(b) any balancing charge to which the company is liable,

is to be apportioned between the NI rate activity and the main rate activity on a basis which is just and reasonable having regard to the relevant circumstances.

(3) The relevant circumstances include, in particular, the extent to which it appears that the plant or machinery was used in the chargeable period in question for the purposes of the NI rate activity and the extent to which it was used in the chargeable period in question for the purposes of the main rate activity.

212ZD

(1) This section applies if—

(a) expenditure is allocated to a single asset pool under this Chapter,

(b) there is such a change of circumstances as would make it appropriate for any apportionment falling to be made under section 212ZC—

(i) for the chargeable period in which the change takes place (“the relevant chargeable period”), or

(ii) for any subsequent chargeable period,

to be substantially different from the apportionment that would have been appropriate apart from the change,

(c) no disposal value in respect of the plant and machinery would, apart from this section, fall to be brought into account for the relevant chargeable period, and

(d) the market value of the plant and machinery at the end of the relevant chargeable period exceeds the available qualifying expenditure by more than £1 million.

(2) If this section applies—

(a) a disposal value is required to be brought into account in the single asset pool for the relevant chargeable period, and

(b) section 212ZA applies as if, at the beginning of the following chargeable period, expenditure has been incurred on the provision of the plant or machinery of an amount equal to the disposal value brought into account as a result of paragraph (a).

212ZE

For the purposes of the corporate partner calculation, this Chapter applies in relation to partnerships as if—

(a) references to a company were references to a partnership,

(b) references to an SME (Northern Ireland employer) company were references to a Northern Ireland Chapter 6 firm,

(d) the reference in section 212ZA(1) to an annual investment allowance were omitted.

212ZF

In this Chapter “main rate activity” means an activity other than an an NI rate activity.

Expenditure not treated as qualifying expenditure if delay in carrying out works etc

Entitlement to writing-down allowances

Agricultural buildings allowances

439A

(1) Subsection (2) 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

(2) 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.

(3) Subsection (4) 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

(4) The expenditure is to be treated as incurred on the first day of the first chargeable period in which the partnership is a Northern Ireland Chapter 7 firm.

(5) 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).

Consequential amendments

Schedule 1 (certification of films as British films)

Section 42 (relief for production or acquisition expenditure)

218ZB

(1) If—

(a) this section applies as a result of section 215,

(b) a payment is payable to any person under the transaction, scheme or arrangement mentioned in that section,

(c) some or all of the payment would not (apart from this section) be taken into account in determining the disposal value of the plant or machinery under the relevant transaction, and

(d) as a result of the matters mentioned in paragraphs (b) and (c) S would otherwise obtain a tax advantage as mentioned in section 215(3) and (4),

the disposal value of the plant or machinery under the relevant transaction is to be adjusted in a just and reasonable manner so as to include an amount representing so much of the payment as would or would in effect cancel out the tax advantage.

(2) In subsection (1) “payment” includes the provision of any benefit, the assumption of any liability and any other transfer of money or money's worth, and “payable” is to be construed accordingly.

1A

(1) This section applies in relation to a chargeable period for which the profits of a trade, profession, vocation or property business (“the relevant activity”) carried on by a person are calculated on the cash basis.

(2) The person is not entitled to any allowance or liable to any charge under this Act except as provided by subsections (4) and (7).

(3) No disposal value is to be brought into account except as provided by subsections (5) and (8).

(4) If, apart from subsection (2), the person would be entitled to an allowance in respect of expenditure incurred on the provision of a car or liable to a charge in connection with such an allowance, the person is so entitled or (as the case may be) so liable.

(5) If, apart from subsection (3), a disposal value would be brought into account in respect of a car, the disposal value is brought into account in respect of the car.

(6) Subsections (7) and (8) apply if—

(a) a person carrying on a relevant activity incurs qualifying expenditure relating to an asset at a time when the profits of that activity are not calculated on the cash basis,

(b) after incurring the expenditure, the person enters the cash basis for a tax year, and

(c) no deduction would be allowed in respect of the expenditure in calculating the profits of the relevant activity on the cash basis for that tax year, on the assumption that the expenditure was paid in that tax year.

(7) If, apart from subsection (2), the person would be liable to a charge in connection with allowances in respect of the qualifying expenditure mentioned in subsection (6), the person is so liable.

(8) If, apart from subsection (3), a disposal value would be brought into account in respect of the asset mentioned in subsection (6), the disposal value is brought into account in respect of the asset.

(9) For the purposes of this section a person carrying on a trade, profession or vocation “enters the cash basis” for a tax year if—

(a) the cash basis applies in relation to the trade, profession or vocation for the tax year, and

(b) the cash basis did not apply in relation to the trade, profession or vocation for the previous tax year.

(10) For the purposes of this section a person carrying on a property business “enters the cash basis” for a tax year if the profits of the business are calculated—

(a) on the cash basis for the tax year (see section 271D of ITTOIA 2005), and

(b) in accordance with GAAP (see section 271B of that Act) for the previous tax year.

(11) In this section—

(za) references to a trade, profession or vocation in relation to which the cash basis applies are to a trade, profession or vocation the profits of which are required by virtue of section 24A (1) of ITTOIA 2005 to be calculated on the cash basis,

(a) references to calculating the profits of a trade, profession or vocation on the cash basis are to doing so in accordance with section 24A of ITTOIA 2005, and

(b) references to calculating the profits of a property business on the cash basis are to be construed in accordance with section 271D of that Act (calculation of profits of property businesses on the cash basis).

(12) In this section—

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

“disposal value” means—a disposal value for the purposes of Part 2, 4A, 5, 6, 7, 8 or 10, orproceeds from a balancing event for the purposes of Part 3 or 3A;

“qualifying expenditure” means qualifying expenditure within the meaning of any Part of this Act.

45EA

(1) Expenditure is first-year qualifying expenditure if—

(a) it is incurred in the relevant period,

(b) it is expenditure on plant or machinery for an electric vehicle charging point where the plant or machinery is unused and not second-hand, and

(2) For the purposes of this section expenditure on plant or machinery for an electric vehicle charging point is expenditure on plant or machinery installed solely for the purpose of charging electric vehicles.

(3) The “relevant period” is the period beginning with 23 November 2016 and ending with—

(a) in the case of expenditure incurred by a person within the charge to corporation tax, 31 March 2027, and

(b) in the case of expenditure incurred by a person within the charge to income tax, 5 April 2027.

(4) The Treasury may by regulations amend subsection (3) so as to extend the relevant period.

(5) In this section—

“electric vehicle” means a road vehicle that can be propelled by electrical power (whether or not it can also be propelled by another kind of power);

“electric vehicle charging point” means a facility for charging an electric vehicle.

Co-ownership ... contractual schemes

262AA

(1) This section applies where the participants in a co-ownership ... contractual scheme together carry on a qualifying activity.

(2) Each participant in the scheme is for the purposes of this Part to be regarded as carrying on the qualifying activity.

(3) Subsection (2) applies in relation to a participant only to the extent that the profits or gains arising to the participant from the qualifying activity are, or (if there were any) would be, chargeable to tax.

(4) But in determining for the purposes of subsection (1) whether or to what extent the participants in a co-ownership ... contractual scheme together carry on a qualifying activity, assume that profits or gains arising to all participants from the qualifying activity are, or (if there were any) would be, chargeable to tax.

262AB

(1) The operator of a co-ownership ... contractual scheme may make an election under this section.

(2) The election must specify an accounting period of the scheme as the first accounting period in relation to which the election has effect.

(3) That first accounting period must not—

(a) be longer than 12 months, or

(b) begin before 1 April 2017 in the case of a co-ownership contractual scheme which is a co-ownership authorised contractual scheme, or the date on which the Co-ownership Contractual Schemes (Tax) Regulations 2025 come into force in the case of a co-ownership contractual scheme which is a Reserved Investor Fund (Contractual Scheme).

(4) The election has effect for that first accounting period and all subsequent accounting periods of the scheme.

(5) The election is irrevocable (subject to section 262AEA in the case of a co-ownership authorised contractual scheme).

(5A) An election under this section in respect of a Reserved Investor Fund (Contractual Scheme) continues unaffected for so long as the scheme is—

(a) a Reserved Investor Fund (Contractual Scheme),

(b) a co-ownership authorised contractual scheme, or

and the application of this Chapter in respect of the scheme is not affected by any change in the nature of the scheme so long as it remains of a type set out in paragraphs (a) to (c).

(6) The election is made by notice to an officer of Revenue and Customs.

(7) See sections 262AC to 262AE and sections 270ID and 270IE for provision about the effect of an election.

262AC

(1) This section applies where an election under section 262AB has effect for an accounting period of a co-ownership ... contractual scheme (“the relevant period”).

(2) The operator of the scheme is to calculate the allowances that would be available to the scheme under this Part in relation to the relevant period on the basis of the assumptions in subsection (3).

(3) The assumptions are—

(a) the scheme is a person;

(b) the relevant period is a chargeable period for the purposes of this Act;

(d) property which was subject to the scheme at the beginning of the first accounting period for which the election has effect—

(i) ceased to be owned by the participants at that time, and

(ii) was acquired by the scheme at that time;

(e) the disposal value to be brought into account in relation to the cessation of ownership and the acquisition referred to in paragraph (d) is the tax written-down value;

(f) any property which became subject to the scheme at a time during an accounting period for which the election has effect was acquired by the scheme at that time;

(g) property which ceased to be subject to the scheme at any such time ceased to be owned by the scheme at that time;

(h) the disposal value to be brought into account in relation to the cessation of ownership referred to in paragraph (g) is the tax written-down value;

(i) the scheme is not entitled to a first-year allowance or an annual investment allowance in respect of any expenditure.

(4) The operator of the co-ownership ... contractual scheme must allocate to each participant in the scheme a proportion (which may be zero) of the allowances calculated under this section.

(5) The allocation is to be on the basis of what is just and reasonable.

(6) In determining what is just and reasonable—

(a) regard is to be had in particular to the relative size of each participant's holding of units in the scheme;

(b) no regard is to be had to—

(i) whether or to what extent a participant is liable to income tax or corporation tax, or

(ii) any other circumstances relating to a participant's liability to tax.

(7) If the participants in the scheme together carry on more than one qualifying activity, the calculation and allocation under this section are to be made separately for each activity.

(8) The proportion of an allowance allocated by the operator to a participant under this section for a qualifying activity is the total amount of the allowance available to the participant under this Part in relation to the relevant period by virtue of carrying on that activity as a participant in the scheme.

(9) In this section “tax written-down value”, in relation to any cessation of ownership or acquisition, means such amount as would give rise to neither a balancing allowance nor a balancing charge.

(10) For the purposes of subsection (9) assume that expenditure to which the disposal value relates is in its own pool.

(11) For the purposes of subsections (3)(c) and (9), assume that profits or gains arising to all participants from the qualifying activity are, or (if there were any) would be, chargeable to tax.

262AD

(1) This section has effect where an election under section 262AB is made by the operator of a co-ownership ... contractual scheme.

(2) For the purposes of sections 61(1) and 196(1) (disposal events and values)—

(a) a participant in the scheme is to be regarded as ceasing to own the participant's interest in the property subject to the scheme at the beginning of the first accounting period of the scheme for which the election has effect, and

(b) the disposal value to be brought into account in relation to that cessation of ownership is the tax written-down value.

(3) In subsection (2)(b) “tax written-down value” means such amount as would give rise to neither a balancing allowance nor a balancing charge.

(4) For the purposes of subsection (3) assume that—

(a) expenditure to which the disposal value relates is in its own pool;

(b) profits or gains arising to all participants from the qualifying activity are, or (if there were any) would be, chargeable to tax.

262AE

(1) This section has effect where—

(a) an election under section 262AB is made by the operator of a co-ownership ... contractual scheme,

(b) property consisting of a fixture ceased to be subject to the scheme at any time in an accounting period for which the election has effect,

(c) in a calculation made by the operator of the scheme under section 262AC(2) the assumption in section 262AC(3)(g) was made in relation to that fixture, and

(d) a person (“the current owner”) is treated as the owner of the fixture as a result of incurring capital expenditure on its provision (“the new expenditure”).

(2) In determining the current owner's qualifying expenditure—

(a) if the disposal value statement requirement is not satisfied, the new expenditure is to be treated as nil, and

(b) in any other case, any amount of the new expenditure which exceeds the assumed disposal value is to be left out of account (or, if such an amount has already been taken into account, is to be treated as an amount that should never have been taken into account).

(3) The disposal value statement requirement is that—

(a) the operator of the scheme has, no later than 2 years after the date when the fixture ceased to be property subject to the scheme, made a written statement of the assumed disposal value, and

(b) the current owner has obtained that statement or a copy of it (directly or indirectly) from the operator of the scheme.

(4) Sections 185 (fixture on which a plant and machinery allowance has been claimed) and 187A (effect of changes in ownership of fixture) do not apply in relation to the new expenditure.

(5) In this section “assumed disposal value” means the disposal value that, in making the calculation referred to in subsection (1)(c), was assumed to be brought into account pursuant to section 262AC(3)(h).

262AF

In sections 262AA to 262AE and this section—

“co-ownership authorised contractual scheme” means a co-ownership scheme which is authorised for the purposes of the Financial Services and Markets Act 2000 by an authorisation order in force under section 261D(1) of that Act;

“co-ownership contractual scheme” means—a co-ownership authorised contractual scheme, ora Reserved Investor Fund (Contractual Scheme);

“co-ownership scheme” has the same meaning as in Part 17 of that Act (see section 235A(2) of that Act);

“operator” and “units”, in relation to a co-ownership ...contractual scheme, have the meanings given by section 237(2) of that Act;

“participant”, in relation to such a scheme, is to be read in accordance with section 235 of that Act.

“Reserved Investor Fund (Contractual Scheme)” has the meaning given by section 20 of F(No.2)A 2024;

“unauthorised co-ownership contractual scheme” means a co-ownership scheme which is not a co-ownership contractual scheme.

419A

(1) If a person carrying on a mineral extraction trade enters the cash basis for a tax year, for the purpose of determining the person's unrelieved qualifying expenditure for the chargeable period ending in the tax year (or, if there is more than one such period, the latest of them) and subsequent chargeable periods (see section 419), only the non-cash basis deductible portion of qualifying expenditure incurred before the chargeable period ending in the tax year (or, if there is more than one such period, the latest of them) is to be taken into account.

(2) The “non-cash basis deductible portion” of qualifying expenditure means the amount of qualifying expenditure for which no deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the tax year for which the person enters the cash basis.

(3) Subsections (9) 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.

431D

(1) This section applies if—

(a) a person carrying on a mineral extraction trade leaves the cash basis in a chargeable period,

(b) the person has incurred expenditure at a time when the cash basis applies in relation to the trade,

(c) some or all of the expenditure was brought into account in calculating the profits of the trade on the cash basis, and

(d) the expenditure would have been qualifying expenditure if the cash basis had not applied at the time the expenditure was incurred.

(2) In this section—

(a) the “relieved portion” of the expenditure is the higher of the following—

(i) the amount of that expenditure for which a deduction was allowed in calculating the profits of the trade, or

(ii) the amount of that expenditure for which a deduction would have been so allowed if the expenditure had been incurred wholly and exclusively for the purposes of the trade;

(b) the “unrelieved portion” of the expenditure is any remaining amount of the expenditure.

(3) An amount of the expenditure equal to the amount (if any) by which the unrelieved portion of the expenditure exceeds the relieved portion of the expenditure is to be regarded as qualifying expenditure incurred by the person in the chargeable period.

(4) For the purposes of this section a person carrying on a trade leaves the cash basis in a chargeable period if—

(a) immediately before the beginning of the chargeable period the cash basis applied in relation to the trade, and

(b) the cash basis does not apply in relation to the trade for the chargeable period.

(4A) Subsection (11)(za) of section 1A (capital allowances and charges: cash basis) applies for the purposes of this section as it applies for the purposes of that section.

461A

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

(2) 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 on the cash basis on the assumption that the expenditure was paid in the tax year for which the person enters the cash basis.

(3) Any cash basis deductible amount is to be determined on such basis as is just and reasonable in all the circumstances.

(4) Subsections (9) 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.

462A

(1) This section applies if—

(a) a person carrying on a trade leaves the cash basis in a chargeable period,

(b) the person has incurred expenditure at a time when the cash basis applies in relation to the trade,

(c) some or all of the expenditure was brought into account in calculating the profits of the trade on the cash basis, and

(d) the expenditure would have been qualifying expenditure if the cash basis had not applied at the time the expenditure was incurred.

(2) In this section the “relieved portion” of the expenditure is the higher of the following—

(a) the amount of that expenditure for which a deduction was allowed in calculating the profits of the trade, or

(b) the amount of that expenditure for which a deduction would have been so allowed if the expenditure had been incurred wholly and exclusively for the purposes of the trade.

(3) For the purposes of determining the person's available qualifying expenditure in the pool for the trade for the chargeable period (see section 456)—

(a) the whole of the expenditure must be allocated to the pool for the trade in that chargeable period, and

(b) the available qualifying expenditure in that pool is reduced by the relieved portion of that expenditure.

(4) For the purposes of determining any disposal values (see section 462), the expenditure incurred by the person is to be regarded as qualifying expenditure.

(4A) Subsection (11)(za) of section 1A (capital allowances and charges: cash basis) applies for the purposes of this section as it applies for the purposes of that section.

(5) For the purposes of this section a person carrying on a trade leaves the cash basis in a chargeable period if—

(a) immediately before the beginning of the chargeable period the cash basis applied in relation to the trade, and

(b) the cash basis does not apply in relation to the trade for the chargeable period.

475A

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

(2) 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 on the cash basis on the assumption that the expenditure was paid in the tax year for which the person enters the cash basis.

(3) Any cash basis deductible amount is to be determined on such basis as is just and reasonable in all the circumstances.

(4) Subsections (9) 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.

477A

(1) This section applies if—

(a) a person carrying on a trade leaves the cash basis in a chargeable period,

(b) the person has incurred expenditure at a time when the cash basis applies in relation to the trade,

(c) some or all of the expenditure was brought into account in calculating the profits of the trade on the cash basis, and

(d) the expenditure would have been qualifying trade expenditure if the cash basis had not applied at the time the expenditure was incurred.

(2) In this section the “relieved portion” of the expenditure is the amount of that expenditure for which a deduction was allowed in calculating the profits of the trade.

(3) For the purposes of determining the person's available qualifying expenditure in the pool for the trade for the chargeable period (see section 470)—

(a) the whole of the expenditure must be allocated to the pool for the trade in that chargeable period, and

(b) the available qualifying expenditure in that pool is reduced by the relieved portion of that expenditure.

(4) For the purposes of determining any disposal receipts (see section 476), the expenditure incurred by the person is to be regarded as qualifying trade expenditure.

(5) For the purposes of this section a person carrying on a trade leaves the cash basis in a chargeable period if—

(a) immediately before the beginning of the chargeable period the cash basis applied in relation to the trade, and

(b) the cash basis does not apply in relation to the trade for the chargeable period.

(5A) Subsection (11)(za) of section 1A (capital allowances and charges: cash basis) applies for the purposes of this section as it applies for the purposes of that section.

Expenditure on plant and machinery for use wholly in a ring fence trade

Plant or machinery used for less than five years in a ring fence trade

Cases where allowances are prohibited

Exclusion of plant or machinery partly for use outside designated assisted areas

Expenditure of small or medium-sized enterprises: businesses

Prevention of double relief

Unrelieved qualifying expenditure

Leased assets: arrangements reducing disposal value of asset

Meaning of “decommissioning expenditure”

Exceptions to section 161C(2)

Meaning of “general decommissioning expenditure”

Schedule 12 (building societies: change of status)

Use for qualifying activity of plant or machinery which is a gift

Certification of environmentally beneficial plant and machinery

Prevention of double relief

Special provision for short chargeable periods

Disposal value on cessation of notional ownership

Pre-trading expenditure on mineral exploration and access

Application of Chapter to part of expenditure

Disposal events in respect of cushion gas

Meaning of “offshore infrastructure”

Pre-trading expenditure on mineral exploration and access

Meaning of “offshore infrastructure”

Meaning of “decommissioning expenditure”

Exceptions to section 161C(2)

Meaning of “general decommissioning expenditure”

General decommissioning expenditure incurred before cessation of ring fence trade

Equipment lessors

Purchaser of land discharging obligations of equipment lessee

Purchaser of land discharging obligations of client under energy services agreement

Fixture on which an industrial buildings allowance has been made

Effect of changes in ownership of a fixture

Reduction of annual investment allowance and first-year allowances

Apportionment of proceeds of disposal of relevant plant and machinery

Sections 228A to 228G: supplementary

Plant or machinery subject to further operating lease

Mines, transport undertakings etc.

Meaning of “car” and “motor cycle”

Meaning of “qualifying expenditure”

Section 41 (relief for preliminary expenditure)

Equipment lessor has right to sever fixture that is not part of building

262AEA

(1) This section applies if—

(a) an election under section 262AB has been made in relation to a co-ownership authorised contractual scheme before the relevant date (within the meaning of section 270ID(8)), and

(b) an allowance under Part 2A (structures and buildings allowances) is available by reference to a building or structure which is subject to the scheme.

(2) The operator of the scheme may, by notice to an officer of Revenue and Customs, withdraw the election.

(3) The notice of withdrawal may not be given more than 12 months after the end of the accounting period in which the building or structure mentioned in subsection (1)(b) is first brought into qualifying use for the purposes of that Part.

(4) The election ceases to have effect for the accounting period in which the notice of withdrawal is given and all subsequent accounting periods of the scheme.

(5) If an election is withdrawn under this section—

(a) the property which was subject to the scheme at the beginning of the accounting period in which the notice of withdrawal is given is treated for the purposes of this Part—

(i) as ceasing to be owned by the scheme at that time, and

(ii) as being acquired by the participants at that time in such proportions as are just and reasonable, and

(b) the disposal value to be brought into account in relation to the cessation of ownership is the tax written-down value.

(6) Subsections (6) and (9) to (11) of section 262AC apply for the purposes of this section as they apply for the purposes of that section.

PART 2A — STRUCTURES AND BUILDINGS ALLOWANCES

CHAPTER 1 — INTRODUCTION

270AA

(1) This Part applies if—

(a) the construction of a building or structure begins on or after 29 October 2018,

(b) qualifying expenditure is incurred, on or after that date, on its construction or acquisition, and

(2) A person is entitled to an allowance, in relation to a qualifying activity, for a chargeable period if—

(a) in respect of any day during that chargeable period—

(i) the person has the relevant interest in the building or structure in relation to the qualifying expenditure, and

(ii) the building or structure is in non-residential use; and

(b) the beginning of that day falls—

(i) on or after the later of the day on which the building or structure is first brought into qualifying use by the person and the day on which the qualifying expenditure is incurred (in either case, whether the day is in the same or an earlier chargeable period), and

(ii) within the period of the length specified in subsection (2A), beginning with the later of the day on which the building or structure is first brought into non-residential use and the day on which the qualifying expenditure is incurred.

(2A) The length of the period referred to in subsection (2)(b)(ii) is—

(a) in the case of special tax site qualifying expenditure, 10 years, and

(b) in the case of other qualifying expenditure, 33 1/3 years.

(3) A building or structure which—

(a) is not in use, but

(b) was, immediately before it fell into disuse, in non-residential use,

is treated, for the purposes of subsection (2)(a)(ii), as continuing to be in non-residential use.

(4) A person ceases to be entitled to an allowance under this section if the building or structure is demolished.

(5) The basic rule is that the allowance, in relation to a qualifying activity, for a chargeable period of one year is —

(a) in the case of special tax site qualifying expenditure, 10% of the expenditure, and

(b) in the case of other qualifying expenditure, 3% of the expenditure.

(6) In this section—

“special tax site qualifying expenditure” has the meaning given by section 270BNA;

“qualifying activity” has the meaning given by section 270CA;

“qualifying expenditure” has the meaning given by section 270BA;

“qualifying use” has the meaning given by section 270CE;

“relevant interest” is to be construed in accordance with Chapter 4;

“residential use” and “non-residential use” have the meaning given by section 270CF.

(7) This section is subject to the following provisions of this Part.

270AB

For the purposes of section 270AA(1)(a), the construction of a building or structure is treated as beginning before 29 October 2018 if any contract for works to be carried out in the course of the construction of that particular building or structure (whether or not the contract also relates to the construction of other buildings or structures) is entered into before that date.

CHAPTER 2 — QUALIFYING EXPENDITURE

Meaning of “qualifying expenditure”

270BA

In this Part “qualifying expenditure” means expenditure which—

(a) is qualifying capital expenditure under any of sections 270BB to 270BE (expenditure on construction or purchase), and

(b) is not excluded expenditure under—

(i) section 270BG (acquisition or alteration of land),

(ii) section 270BH (market value rule), or

(iii) section 270BI (provision of plant or machinery).

Qualifying expenditure incurred on construction

270BB

(1) If—

(a) capital expenditure is incurred on the construction of a building or structure, and

(b) the relevant interest in the building or structure has not been sold or, if it has been sold, it has been sold only after the building or structure has been brought into non-residential use,

the capital expenditure is qualifying capital expenditure.

(2) Subsection (3) applies where capital expenditure as mentioned in subsection (1)(a) is incurred in relation to a building or structure—

(a) after it has been brought into non-residential use, and

(b) on different days (whether or not in the same chargeable period).

(3) The expenditure may be treated for the purposes of this Part as being incurred—

(a) on the latest day on which qualifying capital expenditure on the construction is incurred,

(b) on the first day of the chargeable period following the period in which the day mentioned in paragraph (a) falls, or

(c) on the first day of the chargeable period following the period in which the day on which the expenditure is incurred falls.

Qualifying expenditure incurred on purchase

270BC

(1) This section applies if—

(a) capital expenditure is incurred on the construction of a building or structure,

(b) the relevant interest in the building or structure is sold before the building or structure is first used,

(d) section 270BD (sale by a developer: unused buildings or structures) does not apply.

(2) The lesser of—

(a) the capital sum paid by the purchaser for the relevant interest, and

(b) the capital expenditure incurred on the construction,

is qualifying capital expenditure.

(3) Where this section applies, the qualifying expenditure is to be treated as incurred by the purchaser when the capital sum is paid.

(4) If the relevant interest is sold more than once before the building or structure is first used, subsection (2) has effect only in relation to the last of those sales.

270BD

(1) This section applies if—

(a) expenditure is incurred by a developer on the construction of a building or structure, and

(b) the relevant interest in the building or structure is sold by the developer in the course of the development trade before the building or structure is first used.

(2) If—

(a) the sale of the relevant interest by the developer was the only sale of that interest before the building or structure is first used, and

(b) a capital sum is paid by the purchaser for the relevant interest,

the capital sum is qualifying capital expenditure.

(3) If—

(a) the sale by the developer was not the only sale before the building or structure is first used, and

(b) a capital sum is paid by the purchaser for the relevant interest on the last sale before the building or structure is first used,

the lesser of that capital sum and the sum paid for the relevant interest on its sale by the developer is qualifying capital expenditure.

(4) Where this section applies, the qualifying expenditure is to be treated as incurred by the purchaser when the capital sum referred to in subsection (2)(b) or (3)(b) is paid.

270BE

(1) This section applies if—

(a) expenditure is incurred by a developer on the construction of a building or structure, and

(b) the relevant interest is sold by the developer in the course of the development trade after the building or structure has been used.

(2) This Part has effect in relation to the person to whom the relevant interest is sold (and any person who subsequently acquires the relevant interest) as if the expenditure on the construction of the building or structure had been qualifying capital expenditure.

270BF

For the purposes of sections 270BD, 270BE and 270BJ—

(a) a developer is a person who carries on a trade which consists in whole or part in the construction of buildings or structures with a view to their sale, and

(b) an interest in a building or structure is sold by the developer in the course of the development trade if the developer sells it in the course of the trade or (as the case may be) that part of the trade that consists in the construction of buildings or structures with a view to their sale.

Excluded expenditure

270BG

(1) Expenditure incurred—

(a) on the acquisition of land or rights in or over land, or

(b) on altering land,

is “excluded expenditure” for the purposes of this Part.

(2) Expenditure incurred on, or in connection with, seeking planning permission (including fees and related costs) is “excluded expenditure” for the purposes of this Part.

(3) In subsection (1), the reference to expenditure incurred on an acquisition includes a reference to—

(a) fees,

(b) stamp duty land tax, land and buildings transaction tax or land transaction tax, and

(4) For the purposes of subsection (1), “altering land” means—

(a) land reclamation,

(b) land remediation, and

(5) In this section “land remediation” means—

(a) in relation to land which is in a contaminated state—

(i) activities in respect of which conditions A to C in section 1146 of CTA 2009 (contaminated land remediation) are met, and

(ii) relevant preparatory activity as defined in subsection (4) of that section;

(b) in relation to land which is in a derelict state—

(i) activities in respect of which conditions A and B in section 1146A of CTA 2009 (derelict land remediation) are met, and

(ii) relevant preparatory activity as defined in subsection (5) of that section.

(6) In subsection (5), references to land in a contaminated or derelict state have the same meaning as they have for the purposes of Part 14 of CTA 2009 (remediation of contaminated or derelict land).

(7) Subsection (1)(b) is subject to section 270BK (preparation of sites).

(8) In this section, except in subsections (4)(b), (5) and (6), “land” does not include buildings or structures.

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Capital Allowances Act 2001

165C

165D

165E

Limiting conditions

212LA

Successions by beneficiaries

Meaning of “freehold interest”, “lease”, etc.

Transfer or division of UK business

First-year allowances

416ZA

416ZB

416ZC

416ZD

416ZE

Section 151 (benefits under pilot schemes)

Equipment lessor has right to sever fixture that is not part of building

Special leasing of plant or machinery

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

Energy-saving components of plant or machinery

Prevention of double relief

Disposal events in respect of cushion gas

Expenditure on plant and machinery for use in designated assisted areas

Expenditure of small or medium-sized enterprises: companies

General decommissioning expenditure incurred before cessation of ring fence trade

General decommissioning expenditure after ceasing ring fence trade

360BA

Meaning of “qualifying business premises”

Transfer of insurance company business

431A

431B

431C

Section 195 (allowance of certain drilling expenditure)

Schedule 3 (taxation provisions)

Schedule 25 (Northern Ireland Airports Limited)

Schedule 3 (taxation provisions)

Schedule 22 (tonnage tax)

Equipment lease is part of affordable warmth programme

CHAPTER 1A — Trades attracting Northern Ireland rate of corporation tax

6A

6B

6C

6D

6E

Unrelieved qualifying expenditure

Expenditure on environmentally beneficial plant or machinery

Environmentally beneficial components of plant or machinery

Expenditure on plant and machinery for use in designated assisted areas

Expenditure of small or medium-sized enterprises: companies

51JA

The different kinds of pools

Amount of allowances and charges

Determination of entitlement or liability

Disposal events and disposal values

Expenditure related to reuse etc. qualifies for writing-down allowances

SME partnership entering NI corporation tax regime

Effect of changes in Northern Ireland status of SME company or SME partnership

66B

SME company leaving NI corporation tax regime

66C

66D

66E

CHAPTER 16ZA — Asset provided or used only partly for NI rate activity

212ZA

212ZB

212ZC

212ZD

212ZE

212ZF

Expenditure not treated as qualifying expenditure if delay in carrying out works etc

Entitlement to writing-down allowances

Agricultural buildings allowances

439A

Consequential amendments

Schedule 1 (certification of films as British films)

Section 78 (sharing of transmission facilities)

Section 42 (relief for production or acquisition expenditure)

218ZB

1A

45EA