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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

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(3) For the purposes of this section an amount is attributable if it may be attributed to expenditure on new shipping in accordance with section 140.

Requirement to notify where no entitlement to defer amounts

145

(1) This section applies if—

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

(b) circumstances arise that require the shipowner to be treated as if he was not entitled to defer all or part of the amount.

(2) The shipowner must give notice of the fact to an officer of Revenue and Customs, specifying the circumstances.

(3) The notice must be given no later than 3 months after the end of the chargeable period in which the circumstances first arise.

(4) An assessment to tax chargeable as a result of the circumstances may be made at any time in the period which—

(a) begins when those circumstances arise, and

(b) ends 12 months after the shipowner gives notice of them to an officer of Revenue and Customs.

(5) Subsection (4) applies in spite of any limitation on the time for making assessments.

Expenditure on new shipping

Basic meaning of expenditure on new shipping

146

(1) For the purposes of the deferment rules, expenditure on the provision of a ship is expenditure on new shipping if the conditions in subsection (3) are met.

(2) Subsection (1) is subject to sections 147 to 150.

(3) The conditions are that—

(a) the expenditure is qualifying expenditure incurred by a person wholly and exclusively for the purposes of a qualifying activity carried on by him,

(b) when the expenditure is incurred, it appears that the ship will—

(i) be brought into use for the purposes of the qualifying activity as a qualifying ship, and

(ii) continue to be a qualifying ship for at least 3 years after that, and

Exclusions: ship previously owned

147

(1) Expenditure on the provision of a ship is not expenditure on new shipping if the person who incurred the expenditure—

(a) has already owned the ship in the period of 6 years ending with the time when he first owns it as a result of incurring the expenditure, or

(b) was connected at a material time with a person who owned the ship at any time during that period.

(2) For this purpose a material time is—

(a) the time when the expenditure was incurred, or

(b) any earlier time in the 6 year period beginning with the relevant disposal event.

Exclusions: object to secure deferment

148

Expenditure on the provision of a ship is not expenditure on new shipping if the object, or one of the main objects, of—

(a) the transaction by which the ship was provided for the purposes of a qualifying activity carried on by the person who incurred the expenditure,

(b) any series of transactions of which that transaction was one, or

was to secure the deferment of a balancing charge under section 135.

Exclusions: later events

149

(1) Expenditure on the provision of a ship is not, and is treated as never having been, expenditure on new shipping if—

(a) at a time during the period mentioned in subsection (2), the ship is not a qualifying ship,

(b) the expenditure is allocated to a pool as a result of an election under section 129 (election to use appropriate non-ship pool), or

(2) The period referred to in subsection (1)(a) is—

(a) the period of 3 years beginning with the time when the ship is first brought into use for the purposes of a qualifying activity carried on—

(i) by the person (“A”) who incurred the expenditure, or

(ii) if earlier, by a person connected with A, or

(b) if shorter, the period beginning with that time and ending when neither A nor a person connected with A owns the ship.

Exclusions where expenditure not incurred by shipowner

150

(1) Expenditure on the provision of a ship is not, and is treated as never having been, expenditure on new shipping if—

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

(b) subsection (2) or (4) applies.

(2) This subsection applies (subject to subsection (3)) if—

(a) the ship ceases to be owned by the company before it has been brought into use for the purposes of a qualifying activity carried on by the company, or

(b) a disposal event occurs in respect of the ship within 3 years of its first being brought into use for the purposes of a qualifying activity carried on by the company.

(3) But subsection (2) does not apply if the event which would otherwise result in that subsection applying is, or is the result of, the total loss of the ship or irreparable damage to it.

(4) This subsection applies if—

(a) after the expenditure is incurred, there is a time when the company and the shipowner are not members of the same group, and

(b) if the ship is brought into use for the purposes of a qualifying activity carried on by the company, that time is within 3 years of the ship first being so brought into use.

(5) A time falling after the total loss of the ship or irreparable damage to it is to be disregarded for the purposes of subsection (4).

(6) In this section “irreparable damage”, in relation to a ship, means damage that puts it in a condition in which it is impossible, or not commercially worthwhile, to undertake the repairs required for restoring it to its previous use.

Qualifying ships

Basic meaning of qualifying ship

151

(1) For the purposes of the deferment rules, a ship is a qualifying ship if it is—

(a) of a sea-going kind, and

(b) registered as a ship with a gross tonnage of 100 tons or more in a register of shipping established and maintained under the law of any country or territory.

(2) This is subject to sections 152 to 154.

Ships under 100 tons

152

(1) This section applies if the relevant disposal event is, or results from—

(a) the total loss of the old ship, or

(b) damage to the old ship that puts it in a condition in which it is impossible, or not commercially worthwhile, to undertake the repairs required for restoring it to its previous use.

(2) A registered ship may be a qualifying ship for the purposes of—

(a) section 136(b) (further conditions for deferment), or

(b) sections 146(3)(b) and 149(1)(a) (expenditure on new shipping),

even if it is not registered as a ship with a gross tonnage of 100 tons or more.

(3) In subsection (2) “registered ship” means a ship registered in a register of shipping established and maintained under the law of any country or territory.

Ships which are not qualifying ships

153

(1) A ship is not a qualifying ship if the primary use to which ships of the same kind as that ship are put—

(a) by the persons who own them, or

(b) by others to whom they are made available,

is use for sport or recreation.

(2) A ship is not a qualifying ship at any time when it is an offshore installation.

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

Further registration requirement

154

(1) If—

(a) a person (“A”) has incurred expenditure on the provision of a ship, and

(b) there is a time in the qualifying period, but more than 3 months after the beginning of that period, when the ship is not registered in a relevant register,

the ship is not a qualifying ship after that time.

(2) The qualifying period is—

(a) the period of 3 years beginning with the time when the ship is first brought into use for the purposes of a qualifying activity carried on—

(i) by A, or

(ii) if earlier, by a person connected with A, or

(b) if shorter, the period beginning with that time and ending when neither A nor a person connected with A owns the ship.

(3) In determining the qualifying period for the old ship, a qualifying activity carried on at any time by a person (“B”) is taken to be carried on at that time by a person connected with A if—

(a) it is subsequently carried on by A or a person connected with A, and

(b) the only changes in the persons carrying it on between the time that B does so and the time that A or a person connected with A does so are changes—

(i) which do not involve all of the persons carrying it on before the changes permanently ceasing to carry it on, or

(ii) in respect of which the qualifying activity is treated as continuing under section 948 of CTA 2010.

(4) In this section “relevant register” means a register of shipping established and maintained—

(a) under the laws of any part of the British Islands, or

(b) under the laws of any country or territory which, at a time in the qualifying period for the ship, is an EEA State or a colony.

(5) “EEA State” means a State which is a contracting party to the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 as adjusted by the Protocol signed at Brussels on 17th March 1993 (except that for the period before the Agreement came into force in relation to Liechtenstein it does not include the State of Liechtenstein).

Deferment of balancing charges: supplementary provisions

Change in the persons carrying on the qualifying activity

155

(1) This section applies if—

(a) a person is carrying on the qualifying activity previously carried on by the shipowner, and

(b) the only changes in the persons carrying on the qualifying activity since the shipowner carried it on are changes—

(i) which do not involve all of the persons carrying it on before the changes permanently ceasing to carry it on, or

(ii) in respect of which the qualifying activity is treated as continuing under section 948 of CTA 2010.

(2) For the purposes of the deferment rules—

(a) expenditure incurred by a person mentioned in subsection (1)(a) for the purposes of the qualifying activity is to be treated as incurred by the shipowner, and

(b) in relation to the giving of any notice, a reference to the shipowner is to be read as a reference to the person carrying on the qualifying activity when the notice is given or is required to be given.

Connected persons

156

(1) For the purposes of the deferment rules a person (“B”) is connected with another person (“A”) at any time if, at that time—

(a) B is connected (in the sense given in section 575) with A,

(b) B is carrying on a qualifying activity previously carried on by A and the condition in subsection (2) is met, or

(c) B is connected (in the sense given in section 575) with a person who is carrying on a qualifying activity previously carried on by A and the condition in subsection (2) is met.

(2) The condition is that the only changes in the persons carrying on the qualifying activity since A carried it on are changes—

(a) which do not involve all of the persons carrying it on before the changes permanently ceasing to carry it on, or

(b) in respect of which the qualifying activity is treated as continuing under section 948 of CTA 2010.

(3) If expenditure is incurred by a person who is not the shipowner, the persons connected with him at any time include any person connected with the shipowner at that time as a result of subsection (1).

Further provisions

Adjustment of assessments etc.

157

(1) All such assessments and adjustments of assessments are to be made as are necessary to give effect to this Chapter.

(2) Subsection (1) does not apply for the purposes of section 145 (see instead section 145(4) and (5)).

Members of same group

158

For the purposes of this Chapter two companies are members of the same group at any time if they would be treated as members of the same group of companies at that time for the purposes of Part 5 of CTA 2010 (group relief).

Chapter 13 — Provisions affecting mining and oil industries

Expenditure connected with mineral extraction trades

Meaning of “mineral extraction trade” etc.

159

In this Chapter—

Expenditure treated as incurred for purposes of mineral extraction trade

160

(1) For the purposes of this Part, expenditure incurred by a person—

(a) on the provision of plant or machinery for mineral exploration and access, and

(b) in connection with a mineral extraction trade carried on by him,

is to be treated as incurred for the purposes of that trade.

(2) Subsection (1) does not apply to expenditure if—

(a) when it is incurred, the person is carrying on the trade but the trade is not at that time a mineral extraction trade, or

(b) when it is incurred, the person has not begun to carry on the trade and, when the person begins to carry on the trade, the trade is not a mineral extraction trade.

(3) Section 577(2) (references to commencement etc of a trade) does not apply to subsection (2).

Pre-trading expenditure on mineral exploration and access

161

(1) This section applies if a person—

(a) incurs pre-trading expenditure on the provision of plant or machinery for the purposes of mineral exploration and access, and

(b) owns the plant or machinery on the first day of trading.

But this is subject to subsection (5).

(2) The person is to be treated for the purposes of this Part as if he had—

(a) sold the plant or machinery immediately before the first day of trading, and

(b) on that first day incurred capital expenditure on the provision of the plant or machinery for the purposes of the trade.

(3) The amount of the capital expenditure that the person is to be treated as having incurred is an amount equal to—

(a) the pre-trading expenditure, or

(b) if there has been an actual sale and re-acquisition before the first day of trading, the amount last incurred on the provision of the plant or machinery.

(4) In this section—

(a) “pre-trading expenditure” means capital expenditure incurred before the day on which a person begins to carry on a trade that is a mineral extraction trade, but only if there is no prior time when the person carried on that trade and the trade was not a mineral extraction trade,

(b) “the first day of trading”, in relation to a person’s pre-trading expenditure, means the day on which that person begins to carry on the mineral extraction trade.

(4A) Section 577(2) (references to commencement etc of a trade) does not apply to subsection (4)(a).

(5) This section does not apply if the plant or machinery on which the pre-trading expenditure was incurred is sold, demolished, destroyed or abandoned before the first day of trading (but see section 402 (mineral extraction allowances: pre-trading expenditure on plant or machinery)).

Provisions relating to ring fence trades

Ring fence trade a separate qualifying activity

162

(1) If a person carries on a ring fence trade, it is a separate qualifying activity for the purposes of this Part.

(2) In this Chapter “ring fence trade” means activities which—

(a) fall within the definition of “oil-related activities” in section 16(2) of ITTOIA 2005 or section 274 of CTA 2010, and

(b) constitute a separate trade (whether as a result of section 16(1) of ITTOIA 2005 or section 16(1) of ITTOIA 2005 or section 279 of CTA 2010 or otherwise).

Meaning of “abandonment expenditure”

163

(1) Expenditure is “general decommissioning expenditure” for the purposes of sections 164 and 165 if

(a) the conditions in subsections (3), (3A) and (4) are met, ...

(aa) the condition in subsection (3AB) is met, or

(b) the conditions in subsections (3B) and (4) are met.

(2) But paragraphs (a) and (b) of subsection (1) are subject to subsections (4ZA) to (4ZC).

(3) The expenditure must have been incurred on decommissioning plant or machinery—

(a) which has been brought into use wholly or partly for the purposes of a ring fence trade, and

(b) which—

(i) is, or forms part of, an offshore installation or a submarine pipeline, or

(ii) when last in use for the purposes of a ring fence trade, was, or formed part of, such an installation or pipeline.

(3A) The expenditure must have been incurred wholly or substantially ...—

(a) in complying with an approved abandonment programme,

(b) in complying with a condition to which the approval of an abandonment programme is subject, ...

(i) before the approval of an abandonment programme, and

(ii) in relation to the decommissioning of the plant or machinery, or

(d) otherwise in anticipation of a decommissioning measure.

(3AA) For the purposes of subsection (3A)(d), expenditure is incurred otherwise in anticipation of a decommissioning measure if it is incurred—

(a) in preserving plant or machinery, the reuse or demolition of which it is reasonable to anticipate will be authorised or required by an approved abandonment programme, a condition to which the approval of such a programme will be subject or a condition or agreement described in subsection (3A)(c), or

(b) in doing something else which it is reasonable to anticipate will be authorised or required by an approved abandonment programme, a condition to which the approval of such a programme will be subject or a condition or agreement described in subsection (3A)(c).

(3AB) The condition in this subsection is met if—

(a) the expenditure was incurred—

(i) in preparing an abandonment programme for approval, or

(ii) in preparing for the imposition of a condition by, or the making of an agreement with, the Secretary of State before the approval of an abandonment programme, and

(b) it is reasonable to anticipate that the approved abandonment programme, the condition imposed or the agreement made, as the case may be, will wholly or mainly relate to the decommissioning of plant or machinery to which subsection (3) applies.

(3B) The expenditure must have been incurred on decommissioning plant or machinery—

(a) which has been brought into use wholly or partly for the purposes of a ring fence trade, and

(b) which—

(i) is, or forms part of, a relevant onshore installation, or

(ii) when last in use for the purposes of a ring fence trade, was, or formed part of, such an installation.

(3C) In subsection (3B) “relevant onshore installation” means any building or structure which—

(a) falls within any of sub-paragraphs (ii) to (iv) of section 3(4)(c) of OTA 1975,

(b) is not an offshore installation, and

(i) the boundaries of the territorial sea of the United Kingdom, or

(ii) an area designated under section 1(7) of the Continental Shelf Act 1964.

(4) The plant or machinery must not be replaced.

(4ZA) An amount of general decommissioning expenditure determined in accordance with subsection (1)(a) or (b) is to be reduced under subsection (4ZB) if it appears that the decommissioned plant and machinery—

(a) was not brought into use wholly for qualifying purposes, or

(b) has, at any time since it was brought into use, not been used wholly for qualifying purposes.

(4ZB) The amount determined in accordance with subsection (1)(a) or (b) is to be reduced to an amount which is just and reasonable having regard to the relevant circumstances.

(4ZC) The relevant circumstances include, in particular, the extent to which the decommissioned plant and machinery has not been used for qualifying purposes.

(4A) In this section “ decommissioning ”, in relation to any plant or machinery, means—

(a) demolishing the plant or machinery,

(b) preserving the plant or machinery pending its reuse or demolition,

(d) arranging for the reuse of the plant or machinery.

(4B) In determining whether expenditure is incurred on preserving plant or machinery pending its reuse or demolition, it is immaterial whether the plant or machinery is reused, is demolished or is partly reused and partly demolished.

(4C) In determining whether expenditure is incurred on preparing plant or machinery for reuse, or on arranging for the reuse of plant or machinery, it is immaterial whether the plant or machinery is in fact reused.

(4D) In this section a reference to use for qualifying purposes is a reference to—

(a) use for the purposes of any ring fence trade of any person, or

(b) other use in—

(i) the United Kingdom,

(ii) the territorial sea of the United Kingdom, or

(iii) an area designated under section 1(7) of the Continental Shelf Act 1964,

except use wholly or partly in connection with an oil field (within the meaning given by section 12(2) of the Oil Taxation Act 1975).

(5) In this section—

(a) “oil” and “oil field” have the same meaning as in Part I of OTA 1975, and

(b) “abandonment programme”, “approval” and “approved” (in relation to an abandonment programme), ... “offshore installation” and “submarine pipeline” have the same meaning as in Part IV of the Petroleum Act 1998 (c. 17).

Abandonment expenditure incurred before cessation of ring fence trade

164

(1) A person (“R”) carrying on a ring fence trade may elect to have a special allowance made to R for a chargeable period (the “relevant chargeable period”) if conditions A and B are met.

(1A) Condition A is that one or more of these paragraphs applies—

(a) R incurs general decommissioning expenditure in the relevant chargeable period in respect of decommissioning carried out in that period;

(b) R incurs general decommissioning expenditure in the relevant chargeable period in respect of decommissioning carried out in a previous chargeable period;

(c) R incurred general decommissioning expenditure in a previous chargeable period in respect of decommissioning that has not been carried out until the relevant chargeable period.

(1B) Condition B is that the plant or machinery concerned has been brought into use for the purposes of the ring fence trade.

(1C) If the plant or machinery concerned is incidentally-acquired redundant plant or machinery (see subsection (1D)), it is to be regarded for the purposes of this section as having been brought into use for the purposes of the ring fence trade.

(1D) Plant or machinery is “incidentally-acquired redundant plant or machinery” if—

(a) it has not been brought into use for the purposes of the ring fence trade,

(b) it forms part of a relevant installation (see subsection (1E)) which has been brought into use for the purposes of the ring fence trade,

(c) at the time R acquired an interest in the relevant installation, the plant or machinery was not being used for any purposes, and

(d) the acquisition of the interest in the plant or machinery was merely incidental to the acquisition of the interest in the relevant installation.

(1E) For the purposes of subsection (1D)—

“relevant installation” means—an offshore installation,a submarine pipeline, ora relevant onshore installation;

“offshore installation” and “submarine pipeline” have the same meaning as in Part 4 of the Petroleum Act 1998;

“relevant onshore installation” has the meaning given by section 163(3C).

(2) The election—

(a) must be made by notice to an officer of Revenue and Customs no later than 2 years after the end of the relevant chargeable period, and

(b) is irrevocable.

(3) The election must specify—

(a) the general decommissioning expenditure to which it relates, ...

(aa) the chargeable period in which the expenditure was incurred,

(ab) the decommissioning to which the expenditure relates,

(ac) the chargeable period in which the decommissioning was carried out, and

(b) where the plant or machinery concerned has been or is to be demolished, any amounts received for its remains.

(4) If a person makes an election under this section—

(a) he is entitled to a special allowance ... for the relevant chargeable period, and

(b) neither of sections 26(3) and 161C(2)(net cost of demolition where plant or machinery not replaced, or cost of preparing for reuse, added to existing pool) applies.

(5) The amount of the special allowance for the relevant chargeable period is equal to the amount of the general decommissioning expenditure to which the election relates.

(5A) But subsection (5) is subject to subsections (5B) and (6) and sections 165A to 165E.

(5B) If an amount of general decommissioning expenditure to which the election relates is disproportionate to the relevant decommissioning carried out in the specified decommissioning period then, for the purposes of this section, the election is to be taken to specify only the allowable expenditure.

(5C) The application of subsection (5B) to an amount of general decommissioning expenditure does not prevent a person from making an election under this section for a subsequent chargeable period specifying the non-allowable expenditure.

(5D) In subsections (5B) and (5C)—

“allowable expenditure”, in relation to general decommissioning expenditure, means the amount of the expenditure that is proportionate to the relevant decommissioning carried out in the specified decommissioning period;

“non-allowable expenditure”, in relation to general decommissioning expenditure, means so much of that expenditure as is not allowable expenditure;

“relevant decommissioning”, in relation to general decommissioning expenditure, means the decommissioning to which the expenditure relates;

“specified decommissioning period”, in relation to relevant decommissioning, means the chargeable period specified in the election as the period in which the decommissioning was carried out;

“specified expenditure period”, in relation to general decommissioning expenditure, means the chargeable period specified in the election as the period in which the expenditure was incurred.

(6) If plant or machinery is demolished, the total of any special allowances in respect of expenditure on decommissioning the plant or machinery is reduced by any amount received for the remains of the plant or machinery.

Here “ decommissioning ” has the meaning given by section 163(4A).

(7) Effect is given to subsection (6) by setting the amount (until wholly utilised)—

first, against any special allowance for the chargeable period in which the amount is received (as previously reduced in giving effect to subsection (6));

second, against special allowances for earlier chargeable periods (as so reduced and taking later such periods before earlier ones); and

third, against special allowances for later chargeable periods (as so reduced and taking earlier such periods before later ones).

Abandonment expenditure within 3 years of ceasing ring fence trade

165

(1) This section applies if—

(a) a person (“the former trader”) has ceased to carry on a ring fence trade,

(b) the decommissioning condition is met in relation to a notional accounting period, and

(c) the general decommissioning expenditure is not otherwise deductible in calculating the income of the former trader for any tax purpose.

(1A) The decommissioning condition is met in relation to a notional accounting period (the “relevant period”) if one or more of these paragraphs applies—

(a) the former trader incurs general decommissioning expenditure in the relevant period in respect of decommissioning carried out in that period,

(b) the former trader incurs general decommissioning expenditure in the relevant period in respect of decommissioning carried out in—

(i) a previous notional accounting period, or

(ii) a chargeable period falling before the first notional accounting period, and

(i) a previous notional accounting period, or

(ii) a chargeable period falling before the first notional accounting period,

in respect of decommissioning that has not been carried out until the relevant period.

(1B) “Notional accounting period” 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;

but there are to be no notional accounting periods after the end of the post-cessation period.

(1C) “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 (6A) and (6B)), and

(2) “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 condition A and condition B are both met (or, if they are met on different days, the later of those days).

(2A) Condition A is met if each approved abandonment programme that relates wholly or partly to relevant plant and machinery has ceased to have effect.

(2B) Condition B is met if the Secretary of State is satisfied that no other abandonment programmes that relate wholly or partly to relevant plant and machinery will be approved.

(2C) For the purposes of condition A, an approved abandonment programme ceases to have effect if and when—

(a) the programme has been carried out to the satisfaction of the Secretary of State, or

(b) approval of the programme has been withdrawn.

(3) If this section applies in relation to a notional accounting period—

(a) an amount equal to the relevant decommissioning cost for that period, or the aggregate of all the relevant decommissioning costs for that period, is allocated to the appropriate pool for the chargeable period in which the former trader ceased to carry on the ring fence trade, and

(b) where any of the general decommissioning expenditure was incurred on the demolition of plant or machinery,any amount received within the post-cessation period for the remains of the plant or machinery does not constitute income of the former trader for any tax purpose.

(3A) Subsection (3) is subject to sections 165A to 165E.

(4) In subsection (3)—

“the appropriate pool” means the pool to which the expenditure on the demolished plant or machinery has been allocated, and

“relevant decommissioning cost”, for a notional accounting period, means the amount by which general decommissioning expenditure falling within paragraph (a), (b) or (c) of subsection (1A) in relation to that period exceeds any amounts received before or during that period for the remains of any plant or machinery on whose demolition any of the general decommissioning expenditure was incurred.

(4A) General decommissioning expenditure is to be disregarded for the purposes of this section if the expenditure is incurred in decommissioning plant and machinery at a time—

(a) after an abandonment programme relating wholly or partly to the plant and machinery has had its approval withdrawn, and

(b) when no other abandonment programme relating wholly or partly to the plant and machinery is approved.

(4B) If an amount of general decommissioning expenditure is disproportionate to the relevant decommissioning carried out in the decommissioning period then, for the purposes of this section, only the allowable expenditure is to be taken to have been incurred in the expenditure period.

(4C) The application of subsection (4B) to an amount of general decommissioning expenditure does not prevent the non-allowable expenditure from being taken into account under this section in relation to a subsequent notional accounting period.

(4D) In subsections (4B) and (4C)—

“allowable expenditure”, in relation to general decommissioning expenditure, means the amount of the expenditure that is proportionate to the relevant decommissioning carried out in the decommissioning period;

“decommissioning period”, in relation to relevant decommissioning, means the notional accounting period or chargeable period in which the decommissioning was carried out;

“expenditure period”, in relation to general decommissioning expenditure, means the notional accounting period or chargeable period in which the expenditure was incurred;

“non-allowable expenditure”, in relation to general decommissioning expenditure, means so much of that expenditure as is not allowable expenditure;

“relevant decommissioning”, in relation to general decommissioning expenditure, means the decommissioning to which the expenditure relates.

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

(6) For the purposes of this section, it does not matter if approval of an abandonment programme that relates to relevant plant and machinery (including approval of the first such programme) is given before or after the start of the post-cessation period.

(6A) If the former trader—

(a) carries on more than one trade,

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

subsection (1C)(b) applies with reference to the accounting date of such one of the trades as the former trader may determine.

(6B) 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 (6A) 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.

(7) In this section—

“abandonment programme” means an abandonment programme under Part 4 of the Petroleum Act 1998;

“approved”, in relation to an abandonment programme, means approved or revised under Part 4 of the Petroleum Act 1998 (and “approval” is to be construed accordingly);

“relevant plant and machinery” means plant and machinery—which has been brought into use for the purposes of the ring fence trade that has ceased, andwhich, when last in use for the purposes of that ring fence trade, was, or formed part of, an offshore installation or submarine pipeline;and for this purpose “offshore installation” and “submarine pipeline” have the same meaning as in Part 4 of the Petroleum Act 1998;

“withdrawn”, in relation to approval of an abandonment programme, means withdrawn under Part 4 of the Petroleum Act 1998.

Transfers of interests in oil fields: anti-avoidance

166

(1) This section applies if—

(a) there is, for the purposes of Schedule 17 to FA 1980, a transfer by a participator in an oil field of the whole or part of his interest in the field, and

(b) as part of the transfer, the old participator disposes of, and the new participator acquires—

(i) plant or machinery used, or expected to be used, in connection with the field, or

(ii) a share in such plant or machinery.

(2) The amount, if any, by which the new participator’s expenditure exceeds the old participator’s disposal value is to be left out of account in determining the new participator’s available qualifying expenditure.

(3) In subsection (2)—

(a) “the new participator’s expenditure” means the expenditure incurred by the new participator on the acquisition of the plant or machinery, and

(b) “the old participator’s disposal value” means the disposal value to be brought into account by the old participator as a result of the disposal of the plant or machinery to the new participator.

(4) In this section—

(a) “oil field” and “participator” have the same meaning as in Part I of OTA 1975,

(b) “the old participator” means the participator whose interest in the oil field is wholly or partly transferred, and

(5) Nothing in this section affects the operation of Chapter 17 (anti-avoidance).

167

(1) Sections 168 to 170 apply if—

(a) a person (“the contractor”) is entitled to an interest in a contract made with, or with the authorised representative of, the government of a country or territory in which oil is or may be produced, and

(b) the contract provides (among other things) for any plant or machinery of a description specified in the contract which—

(i) is provided by the contractor, and

(ii) has an oil-related use under the contract,

to be transferred (immediately or later) to the government or representative.

(2) For the purposes of this section and sections 168 to 170, plant or machinery has an oil-related use if it is used—

(a) to explore for, win access to or extract oil,

(b) for the initial storage or treatment of oil, or

(3) In this section and sections 168 to 170 “oil” has the meaning given by section 556(3).

Expenditure on plant or machinery incurred by contractor

168

(1) This section applies if—

(a) the contractor incurs capital expenditure on the provision of plant or machinery of a description specified in the contract,

(b) the plant or machinery is to have an oil-related use under the contract, for the purposes of a trade of oil extraction carried on by the contractor,

(d) the plant or machinery is transferred to the government or representative in accordance with the contract.

(2) Despite the transfer, the plant or machinery is to be treated for the purposes of this Part as owned by the contractor (and not by any other person) until—

(a) it ceases to be owned by the government or representative, or

(b) it ceases to be used, or held for use, by any person under the contract.

This is subject to section 170(2).

Expenditure on plant or machinery incurred by participator

169

(1) This section applies if—

(a) a person (“the participator”) acquires an interest in the contract from—

(i) the contractor, or

(ii) another person who has acquired it (directly or indirectly) from the contractor,

(b) the participator incurs capital expenditure on the provision of plant or machinery,

(c) the plant or machinery is to have an oil-related use under the contract, for the purposes of a trade of oil extraction carried on by the participator,

(d) the amount of the expenditure is commensurate with the value of the participator’s interest under the contract, and

(e) the plant or machinery is transferred to the government or representative in accordance with the contract.

(2) Despite the transfer, the plant or machinery is to be treated for the purposes of this Part as owned by the participator (and not by any other person) until—

(a) it ceases to be owned by the government or representative, or

(b) it ceases to be used, or held for use, by any person under the contract.

This is subject to section 170(2).

Participator’s expenditure attributable to plant or machinery

170

(1) This section applies if—

(a) a person (“the relevant participator”) acquires an interest in the contract from—

(i) the contractor, or

(ii) another person who has acquired it (directly or indirectly) from the contractor, and

(b) some of the expenditure incurred by the relevant participator to acquire the interest in the contract is attributable to plant or machinery which—

(i) is treated by section 168 as owned by the contractor, or

(ii) is treated by section 169 or subsection (2) as owned by another person (“the other participator”).

(2) The plant or machinery is to be treated for the purposes of this Part as owned by the relevant participator (and not by any other person) until—

(a) it ceases to be owned by the government or representative, or

(b) it ceases to be used, or held for use, by any person under the contract.

This is subject to a later application of this subsection.

(3) The person who, until subsection (2) applies, is treated as owning the plant or machinery is to be treated for the purposes of this Part as if he had disposed of it for a consideration equal to the relevant participator’s expenditure attributable to it.

(4) The relevant participator is to be treated for the purposes of this Part as if—

(a) he had incurred capital expenditure of an amount given by subsection (5), and

(b) he owned the plant or machinery (in accordance with subsection (2)) as a result of having incurred that expenditure.

(5) The amount of that expenditure is—

(a) the amount of the relevant participator’s expenditure attributable to the plant or machinery, or

(b) if less, the disposal value to be brought into account by the contractor or the other participator as a result of subsection (3).

(6) The expenditure attributable to plant or machinery for the purposes of this section is to be determined having regard to what is just and reasonable in the circumstances.

Disposal values on cessation of ownership

171

(1) This section applies if a person treated as owning plant or machinery under section 168(2), 169(2) or 170(2) ceases to be treated as owning it solely as a result of one of those provisions.

(2) If the person receives capital compensation, the disposal value to be brought into account is the amount of the compensation.

(3) If the person does not receive capital compensation, the disposal value to be brought into account is nil.

Chapter 14 — Fixtures

Introduction

Scope of Chapter etc.

172

(1) This Chapter applies to determine entitlement to allowances under this Part in respect of expenditure on plant or machinery that is, or becomes, a fixture.

(2) For the purposes of this Part, ownership of plant or machinery that is, or becomes, a fixture is determined under this Chapter.

(2A) Subsections (1) and (2) are subject to section 172A.

(3) The provisions of this Chapter that treat a person as being the owner of a fixture (see sections 176 to 184 and 193 to 195B) are subject to the provisions of this Chapter which treat a person as ceasing to be the owner of a fixture (see sections 188 to 192A).

(4) References in this Chapter to a person being treated—

(a) as the owner of plant or machinery, or

(b) as ceasing to be the owner of plant or machinery,

are to be read as references to the person being so treated for the purposes of this Part.

(5) This Chapter does not affect any entitlement a person has to an allowance as a result of section 538 (contribution allowances for plant and machinery).

Meaning of “fixture” and “relevant land”

173

(1) In this Chapter “fixture”—

(a) means plant or machinery that is so installed or otherwise fixed in or to a building or other description of land as to become, in law, part of that building or other land, and

(b) includes any boiler or water-filled radiator installed in a building as part of a space or water heating system.

(2) In this Chapter “relevant land”, in relation to a fixture means—

(a) the building or other description of land of which the fixture becomes part, or

(b) in the case of a boiler or water-filled radiator which is a fixture as a result of subsection (1)(b), the building in which it is installed as part of a space or water heating system.

Meaning of “equipment lease” and “lease”

174

(1) In this Chapter “equipment lease” means—

(a) an agreement entered into in the circumstances given in subsection (2), or

(b) a lease entered into under or as a result of such an agreement.

(2) The circumstances are that—

(a) a person incurs capital expenditure on the provision of plant or machinery for leasing,

(b) an agreement is entered into for the lease, directly or indirectly from that person, of the plant or machinery to another person,

(d) the agreement is not an agreement for the plant or machinery to be leased as part of the relevant land.

(3) In this Chapter—

“equipment lessor” means the person from whom (directly or indirectly) the equipment lease provides for the plant or machinery to be leased, and

“equipment lessee” means the person to whom the equipment lease provides for the plant or machinery to be leased.

(4) Except in the context of leasing plant or machinery, any reference in this Chapter to a lease is to—

(a) any leasehold estate in or, in Scotland, lease of, the land (whether in the nature of a head-lease, sub-lease or under-lease), or

(b) any agreement to acquire such an estate or, in Scotland, lease;

and, in relation to such an agreement, “grant” is to be read accordingly.

Meaning of “interest in land”, etc.

175

(1) In this Chapter “interest in land” means—

(a) the fee simple estate in the land or an agreement to acquire such an estate,

(b) in relation to Scotland, the interest of the owner or an agreement to acquire such an interest,

(d) an easement or servitude or an agreement to acquire an easement or servitude, and

(e) a licence to occupy land.

(2) If an interest in land is—

(a) conveyed or assigned by way of security, and

(b) subject to a right of redemption,

the person with the right of redemption is treated for the purposes of this Chapter as having that interest, and not the creditor.

Persons who are treated as owners of fixtures

Person with interest in relevant land having fixture for purposes of qualifying activity

176

(1) If—

(a) a person incurs capital expenditure on the provision of plant or machinery for the purposes of a qualifying activity carried on by him,

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

that person is to be treated, on and after that time, as the owner of the fixture as a result of incurring the expenditure.

(2) If there are two or more persons with different interests in the relevant land who would be treated as the owner of the same fixture as a result of subsection (1), one interest only is taken into account under that subsection.

(3) The interest to be taken into account is given by the following rules—

Rule 1

If one of the interests is an easement or servitude or any agreement to acquire an easement or servitude, that interest is the interest to be taken into account.

Rule 2

If Rule 1 does not apply, but one of the interests is a licence to occupy land, that interest is the interest to be taken into account.

Rule 3

In any other case—

(a) except in Scotland, the interest to be taken into account is the interest which is not in reversion (at law or in equity and whether directly or indirectly) on any other interest in the relevant land which is held by any of the persons referred to in subsection (2), and

(b) in Scotland, the interest to be taken into account is the interest of whichever of the persons referred to in subsection (2) has, or last had, the right of use of the relevant land.

(4) Subsection (1) is subject to sections 177(4) and 180A(4) .

Equipment lessors

177

(1) If—

(a) the conditions in—

(i) section 178 (equipment lessee has qualifying activity etc.),

(ii) section 179 (equipment lessor has right to sever fixture that is not part of building), or

(iii) section 180 (equipment lease is part of affordable warmth programme),

are met in relation to an equipment lease,

(b) the equipment lessor and the equipment lessee are not connected persons, and

the equipment lessor is to be treated, on and after the relevant time, as the owner of the fixture as a result of incurring the capital expenditure on the provision of the plant or machinery that is the subject of the equipment lease.

(2) The relevant time for the purposes of subsection (1) is (unless subsection (3) applies) the time when the equipment lessor incurs the expenditure.

(3) If—

(a) the conditions in section 178 are met in relation to an equipment lease (but the conditions in sections 179 and 180 are not), and

(b) the equipment lessor incurs the capital expenditure before the equipment lessee begins to carry on the qualifying activity,

the relevant time is the time when the equipment lessee begins to carry on the qualifying activity.

(4) If an election is made under this section, the equipment lessee is not to be treated under section 176 as the owner of the fixture.

(5) An election under this section must be made by notice to the 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.

(6) “The relevant chargeable period” means the chargeable period in which the capital expenditure was incurred.

Equipment lessee has qualifying activity etc.

178

The conditions referred to in section 177(1)(a)(i) are that—

(a) the equipment lease is for the lease of the plant or machinery for the purposes of a qualifying activity which is, or is to be, carried on by the equipment lessee,

(b) if the equipment lessee had incurred the capital expenditure incurred by the equipment lessor on the provision of the plant or machinery that is the subject of the equipment lease, he would, as a result of section 176, have been entitled to an allowance in respect of it, and

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

179

(1) The conditions referred to in section 177(1)(a)(ii) are that—

(a) the plant or machinery becomes a fixture by being fixed to land that is neither a building nor part of a building,

(b) the equipment lessee has an interest in the land when taking possession of the plant or machinery under the equipment lease,

(c) under the terms of the equipment lease, the equipment lessor is entitled to sever the plant or machinery, at the end of the period for which it is leased, from the land to which it is fixed at that time,

(d) under the terms of the equipment lease, the equipment lessor will own the plant or machinery on its severance in accordance with the equipment lease,

(e) the nature of the plant or machinery and the way in which it is fixed to land are such that its use on one set of premises does not, to any material extent, prevent it from being used, once severed, for the same purposes on a different set of premises,

(f) the equipment lease is one which under generally accepted accounting practice falls (or would fall) to be treated in the accounts of the equipment lessor as an operating lease, and

(g) the equipment lease is not for the lease of the plant or machinery for use in a dwelling-house.

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

Equipment lease is part of affordable warmth programme

180

(1) The conditions referred to in section 177(1)(a)(iii) are that—

(a) the plant or machinery which is the subject of the equipment lease consists of a boiler, heat exchanger, radiator or heating control that is installed in a building as part of a space or water heating system,

(b) the expenditure of the equipment lessor is incurred before 1st January 2008, and

(c) the equipment lease is approved for the purposes of this section as entered into as part of the affordable warmth programme.

(2) The approval mentioned in subsection (1)(c) may be given, with the consent of the Treasury—

(a) by the Secretary of State;

(b) in the case of buildings in Scotland, by the Scottish Ministers;

(d) in the case of buildings in Northern Ireland, by the Department for Social Development in Northern Ireland.

(3) If an approval is withdrawn, it is to be treated for the purposes of subsection (1)(c) as never having had effect.

Purchaser of land giving consideration for fixture

181

(1) If—

(a) after any plant or machinery has become a fixture, a person (“the purchaser”) acquires an interest in the relevant land,

(b) that interest was in existence before the purchaser’s acquisition of it, and

(c) the consideration which the purchaser gives for the interest is or includes a capital sum that, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture,

the purchaser is to be treated, on and after the time of the acquisition, as the owner of the fixture as a result of incurring that expenditure.

(2) Subsection (1) does not apply, and is to be treated as never having applied, if, immediately after the time of the acquisition, a person has a prior right in relation to the fixture.

(3) For the purposes of subsection (2), a person has a prior right in relation to the fixture if he—

(a) is treated as the owner of the fixture immediately before the time referred to in subsection (2) as a result of incurring expenditure on the provision of the fixture,

(b) is not so treated as a result of section 538 (contribution allowances for plant and machinery),

(d) makes or has made a claim in respect of that expenditure.

(4) Subsection (1) is subject to sections 182 and 182A .

Purchaser of land discharging obligations of equipment lessee

182

(1) If—

(a) after any plant or machinery has become a fixture, a person (“the purchaser”) acquires an interest in the relevant land,

(b) that interest was in existence before the purchaser’s acquisition of it,

(d) in connection with that acquisition, the purchaser pays a capital sum to discharge the obligations of the equipment lessee under the equipment lease,

the purchaser is to be treated, on and after the time of the acquisition, as the owner of the fixture as a result of incurring expenditure, consisting of that capital sum, on the provision of the fixture.

(2) Subsection (1) does not apply, and is to be treated as never having applied, if, immediately after the time of the acquisition, a person has a prior right in relation to the fixture.

(3) Section 181(3)(test for whether person has a prior right) applies for the purposes of subsection (2).

Incoming lessee where lessor entitled to allowances

183

(1) If—

(a) after any plant or machinery has become a fixture, a person (“the lessor”) who has an interest in the relevant land grants a lease,

(b) the lessor is entitled to an allowance in respect of the fixture for the chargeable period in which the lease is granted or would be if he were within the charge to tax,

(c) the consideration which the lessee gives for the lease is or includes a capital sum that, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture,

(d) the lessor and the lessee are not connected persons, and

(e) the lessor and the lessee make an election under this section,

the lessee is to be treated, on and after the time when the lease is granted, as the owner of the fixture as a result of incurring that expenditure.

(2) An election under this section must be made by notice to an officer of Revenue and Customs within 2 years after the date on which the lease takes effect.

Incoming lessee where lessor not entitled to allowances

184

(1) If—

(a) after any plant or machinery has become a fixture, a person (“the lessor”) who has an interest in the relevant land grants a lease,

(b) the lessor is not within section 183(1)(b),

(c) before the lease is granted, the fixture has not been used for the purposes of a qualifying activity carried on by the lessor or any person connected with the lessor, and

(d) the consideration which the lessee gives for the lease is or includes a capital sum that, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture,

the lessee is to be treated, on and after the time when the lease is granted, as the owner of the fixture as a result of incurring that expenditure.

(2) Subsection (1) does not apply, and is to be treated as never having applied, if, immediately after the time when the lease is granted, a person has a prior right in relation to the fixture.

(3) Section 181(3)(test for whether person has a prior right) applies for the purposes of subsection (2).

Restrictions on amount of qualifying expenditure

Fixture on which a plant and machinery allowance has been claimed

185

(1) This section applies if—

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

(b) the plant or machinery is treated as having been owned at a relevant earlier time by any person (“the past owner”) as a result of incurring other expenditure,

(c) the plant or machinery is within paragraph (b) otherwise than as a result of section 538 (contribution allowances for plant and machinery), and

(d) the past owner is or has been required to bring the disposal value of the plant or machinery into account (as a result of having made a claim in respect of that other expenditure).

(2) If the new expenditure exceeds the maximum allowable amount, the excess—

(a) is to be left out of account in determining the current owner’s qualifying expenditure, or

(b) if the new expenditure has already been taken into account for this purpose, is to be treated as expenditure that should never have been taken into account.

(3) The maximum allowable amount is—

$$D+I$where—D is the disposal value of the plant or machinery which the past owner has been or is required to bring into account, andI is any of the new expenditure that is treated under section 25 (building alterations in connection with installation) as expenditure on the provision of the plant or machinery.$

(4) If more than one disposal event has occurred requiring the past owner to bring the disposal value of the plant or machinery into account, the maximum allowable amount is calculated by reference only to the most recent of those events.

(5) For the purposes of this section, the current owner and the past owner may be the same person.

(6) In subsection (1)(b) “relevant earlier time” means (subject to subsection (7)) any time before the earliest time when the current owner is treated as owning the plant or machinery as a result of incurring the new expenditure.

(7) If, before the earliest time when the current owner is treated as owning the plant or machinery as a result of incurring the new expenditure—

(a) any person has ceased to own the plant or machinery as a result of a sale,

(b) the sale was not a sale of the plant or machinery as a fixture, and

the relevant earlier time does not include any time before the seller ceased to own the plant or machinery.

Fixture on which an industrial buildings allowance has been made

186

(1) This section applies if—

(a) a person (“the past owner”) has at any time claimed an allowance to which he was entitled under Part 3 (industrial buildings allowances) in respect of expenditure which was or included expenditure on the provision of plant or machinery,

(b) the past owner has transferred the interest which was the relevant interest for the purposes of Part 3, and

(i) on the provision of the plant or machinery, and

(ii) at a time when it is a fixture in the building.

(2) If the new expenditure exceeds the maximum allowable amount, the excess is to be left out of account in determining the current owner’s qualifying expenditure.

(3) If the total consideration for the transfer by the past owner exceeds R, the maximum allowable amount is—

$$FTxR$where—F is the part of the consideration for the transfer by the past owner that is attributable to the fixture,T is the total consideration for that transfer, andR is the residue of qualifying expenditure which would have been attributable to the relevant interest immediately after that transfer, calculated on the assumption that the transfer was a sale of the relevant interest, had the time immediately after the transfer fallen immediately before the repeal of Part 3 by section 84 of FA 2008.$

(3A) Where subsection (3) does not apply, the maximum allowable amount is the part of the consideration for the transfer by the past owner that is attributable to the fixture.

(4) For the purposes of this section the current owner of the plant or machinery is—

(a) the person to whom the past owner transferred the relevant interest, or

(b) any person who is subsequently treated as the owner of the plant or machinery.

(5) In this section “building” and “residue of qualifying expenditure” have the same meaning as for the purposes of Part 3 immediately before its repeal by section 84 of FA 2008.

Fixture on which a research and development allowance has been made

187

(1) This section applies if—

(a) a person has at any time claimed an allowance to which he is entitled under Part 6 (research and development allowances) in respect of qualifying expenditure under that Part (“Part 6 expenditure”),

(b) an asset representing the whole or part of the Part 6 expenditure (“the Part 6 asset”) has ceased to be owned by that person (“the past owner”),

(d) the current owner makes a claim under this Part in respect of expenditure (“new expenditure”) incurred—

(i) on the provision of the plant or machinery, and

(ii) at a time when it is a fixture.

(2) If the new expenditure exceeds the maximum allowable amount, the excess is to be left out of account in determining the current owner’s qualifying expenditure.

(3) The maximum allowable amount is—

$$FTxA$where—F is the part of the consideration for the disposal of the Part 6 asset by the past owner that is attributable to the fixture,T is the total consideration for that disposal, andA is an amount equal to whichever is the smaller of—the disposal value of the Part 6 asset when the past owner ceased to own it, andso much of the Part 6 expenditure as related to the provision of the Part 6 asset.$

(4) For the purposes of this section the current owner of the plant or machinery is—

(a) the person who acquired the Part 6 asset from the past owner, or

(b) any person who is subsequently treated as the owner of the plant or machinery.

Cessation of ownership of fixtures

Cessation of ownership when person ceases to have qualifying interest

188

(1) This section applies if a person is treated as the owner of a fixture under—

(a) section 176 (person with interest in land having fixture for purposes of qualifying activity),

(b) section 181 (purchaser of land giving consideration for fixture),

(ca) section 182A (purchaser of land discharging obligations of client under energy services agreement),

(d) section 183 (incoming lessee where lessor entitled to allowances), or

(e) section 184 (incoming lessee where lessor not entitled to allowances).

(2) If the person ceases at any time to have the qualifying interest, he is to be treated as ceasing to be the owner of the fixture at that time.

(3) In this Chapter “the qualifying interest” means—

(a) if section 176, 181 , 182 or 182A applies, the interest in the relevant land referred to in that section, and

(b) if section 183 or 184 applies, the lease referred to in that section.

(4) This section is subject to section 189.

Identifying the qualifying interest in special cases

189

(1) If—

(a) a person’s qualifying interest is an agreement to acquire an interest in land, and

(b) that interest is subsequently transferred or granted to that person,

the interest transferred or granted is to be treated as the qualifying interest.

(2) If a person’s qualifying interest ceases to exist as a result of its being merged in another interest acquired by that person, that other interest is to be treated as the qualifying interest.

(3) If—

(a) the qualifying interest is a lease, and

(b) on its termination, a new lease of the relevant land (with or without other land) is granted to the lessee,

the new lease is to be treated as the qualifying interest.

(4) If—

(a) the qualifying interest is a licence, and

(b) on its termination, a new licence to occupy the relevant land (with or without other land) is granted to the licensee,

the new licence is to be treated as the qualifying interest.

(5) If—

(a) the qualifying interest is a lease, and

(b) with the consent of the lessor, the lessee remains in possession of the relevant land after the termination of the lease without a new lease being granted to him,

the qualifying interest is to be treated as continuing so long as the lessee remains in possession of the relevant land.

Cessation of ownership of lessor where section 183 applies

190

(1) This section applies if a lessee is treated under section 183 (incoming lessee where lessor entitled to allowances) as the owner of a fixture.

(2) The lessor is to be treated as ceasing to be the owner of the fixture when the lessee begins to be treated as the owner.

Cessation of ownership on severance of fixture

191

If—

(a) a person is treated as the owner of the fixture as a result of any provision of this Chapter,

(b) the fixture is permanently severed from the relevant land (so that it ceases to be a fixture), and

that person is to be treated as ceasing to be the owner of the fixture when it is severed.

Cessation of ownership of equipment lessor

192

(1) This section applies if an equipment lessor is treated under section 177 as the owner of a fixture.

(2) If—

(a) the equipment lessor at any time assigns his rights under the equipment lease, or

(b) the financial obligations of the equipment lessee under an equipment lease are at any time discharged (on the payment of a capital sum or otherwise),

the equipment lessor is to be treated as ceasing to be the owner of the fixture at that time (or, as the case may be, at the earliest of those times).

(3) The reference in subsection (2)(b) to the equipment lessee is, in a case where the financial obligations of the equipment lessee have become vested in another person (by assignment, operation of law or otherwise), a reference to the person in whom the obligations are vested when the capital sum is paid.

Acquisition of ownership of fixture when another ceases to own it

Acquisition of ownership by lessor or licensor on termination of lease or licence

193

If, on the termination of a lease or licence, the outgoing lessee or licensee is treated under section 188 as ceasing to be the owner of a fixture, the lessor or licensor is to be treated, on and after the termination of the lease or licence, as the owner of the fixture.

Acquisition of ownership by assignee of equipment lessor

194

(1) If section 192(2)(a) applies (cessation of ownership of equipment lessor as a result of assignment), the assignee is to be treated, on and after the assignment—

(a) as having incurred expenditure, consisting of the consideration given by him for the assignment, on the provision of the fixture, and

(b) as being the owner of the fixture.

(2) For the purposes of section 192 (and subsection (1) and section 195) the assignee is to be treated as being an equipment lessor who owns the fixture under section 177.

Acquisition of ownership by equipment lessee

195

(1) If section 192(2)(b) applies (discharge of obligations of equipment lessee) because the equipment lessee has paid a capital sum, the equipment lessee is to be treated—

(a) as having incurred expenditure, consisting of the capital sum, on the provision of the fixture, and

(b) as being, on and after the time of payment, the owner of the fixture.

(2) Section 192(3) (assignee of equipment lessee) applies in relation to subsection (1).

Disposal values

Disposal values in relation to fixtures: general

196

(1) The disposal value to be brought into account in relation to a fixture depends on the nature of the disposal event, as shown in the Table—

1. Disposal event	2. Disposal value
1. Cessation of ownership of the fixture under section 188 because of a sale of the qualifying interest except where item 2 applies.	The part of the sale price that—falls to be treated for the purposes of this Part as expenditure incurred by the purchaser on the provision of the fixture, orwould fall to be so treated if the purchaser were entitled to an allowance.
2. Cessation of ownership of the fixture under section 188 because of a sale of the qualifying interest where—the sale is at less than market value, andthe condition in subsection (2) is met by the purchaser.	The part of the price that would be treated for the purposes of this Part as expenditure by the purchaser on the provision of the fixture if—the qualifying interest were sold at market value,that sale took place immediately before the event which causes the former owner to be treated as ceasing to be the owner of the fixture, andthat event were disregarded in determining that market value.
3. Cessation of ownership of the fixture under section 188 where—neither item 1 nor 2 applies, butthe qualifying interest continues in existence after that time or would so continue but for its becoming merged in another interest.	The disposal value given for item 2.
4. Cessation of ownership of the fixture under section 188 because of the expiry of the qualifying interest.	If the person receives a capital sum, by way of compensation or otherwise, by reference to the fixture, the amount of the capital sum.In any other case, nil.
5. Cessation of ownership of the fixture under section 190 because the lessee has become the owner under section 183.	The part of the capital sum given by the lessee for the lease referred to in section 183 that falls to be treated for the purposes of this Part as the lessee’s expenditure on the provision of the fixture.
6. Cessation of ownership of the fixture under section 191 (severance).	The market value of the fixture at the time of the severance.
7. Cessation of ownership of the fixture because section 192(2)(a) (assignment of rights) applies.	The consideration given by the assignee for the assignment.
8. Cessation of ownership of the fixture because section 192(2)(b) (discharge of equipment lessee’s obligations) applies on the payment of a capital sum.	The capital sum paid to discharge the financial obligations of the equipment lessee.
8A. Cessation of ownership of the fixture because section 192A(2)(a)(assignment of rights) applies.	The consideration given by the assignee for the assignment.
8B. Cessation of ownership of the fixture because section 192A(2)(b) (discharge of client’s obligations) applies on the payment of a capital sum.	The capital sum paid to discharge the financial obligations of the client.
9. Permanent discontinuance of the qualifying activity followed by the sale of the qualifying interest.	The part of the sale price that—falls to be treated as expenditure incurred by the purchaser on the provision of the fixture, orwould fall to be so treated if the purchaser were entitled to an allowance.
10. Permanent discontinuance of the qualifying activity followed by the demolition or destruction of the fixture.	The net amount received for the remains of the fixture, together with—any insurance money received in respect of the demolition or destruction, andany other compensation of any description so received, so far as it consists of capital sums.
11. Permanent discontinuance of the qualifying activity followed by the permanent loss of the fixture otherwise than as a result of its demolition or destruction.	Any insurance money received in respect of the loss and, so far as it consists of capital sums, any other compensation of any description so received.
12. The fixture begins to be used wholly or partly for purposes other than those of the qualifying activity.	The part of the price that would fall to be treated for the purposes of this Part as expenditure incurred by the purchaser on the provision of the fixture if the qualifying interest were sold at market value.

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

(a) the purchaser’s expenditure on the provision of the fixture cannot be qualifying expenditure under this Part or Part 6 (research and development allowances), or

(b) the purchaser is a dual resident investing company which is connected with the former owner.

(3) Items 1 and 5 of the Table are subject to sections 198 and 199 (election to fix apportionment on sale of qualifying interest or grant of lease).

(4) Section 192(3) (assignee of equipment lessee) applies in relation to item 8 of the Table.

(4A) Section 192A(3)(assignee of client) applies in relation to item 8B of the Table.

(5) Nothing in sections 188 to 192A or this section prevents a disposal value having to be brought into account under Chapter 5 because of a disposal event not dealt with in these sections.

(6) This section is subject to section 197.

Disposal values in avoidance cases

197

(1) This section applies if—

(a) a person (“the taxpayer”) is treated under this Chapter as the owner of any plant or machinery as a result of incurring any expenditure,

(b) any disposal event occurs in relation to the plant or machinery,

(c) the disposal value to be brought into account by the taxpayer would (but for this section) be less than the notional written-down value of the plant or machinery, and

(d) the disposal event is part of, or occurs as a result of, a scheme or arrangement the main purpose or one of the main purposes of which is the obtaining by the taxpayer of a tax advantage under this Part.

(2) The disposal value that the taxpayer must bring into account is the notional written-down value of the plant or machinery.

(3) The notional written-down value is—

$$QE-A$where—QE is the taxpayer’s expenditure on the plant or machinery that is qualifying expenditure,A is the total of all allowances which could have been made to the taxpayer in respect of that expenditure if—that expenditure had been the only expenditure that had ever been taken into account in determining his available qualifying expenditure, andall allowances had been made in full.$

Election to fix apportionment

Election to apportion sale price on sale of qualifying interest

198

(1) This section applies if the disposal value of a fixture is required to be brought into account in accordance with item 1 or 9 of the Table in section 196 (sale of qualifying interest at not less than market value, etc.).

(2) The seller and the purchaser may jointly, by an election, fix the amount that is to be treated—

(a) for the purposes of item 1 or (as the case may be) 9 of the Table, and

(b) for the other purposes of this Part,

as the part of the sale price that is expenditure incurred by the purchaser on the provision of the fixture.

(3) The amount fixed by the election must not exceed—

(a) the amount of the capital expenditure which was treated as incurred by the seller on the provision of the fixture or of the plant or machinery which became the fixture, or

(b) the actual sale price.

(4) If an election fixes the amount to be treated as the part of the sale price—

(a) the remaining amount (if any) of the sale price is to be treated for the purposes of this Act as expenditure attributable to the acquisition of the property which is not the fixture but is acquired for that amount, and

(b) if there is no remaining amount, the expenditure so attributable is to be treated for the purposes of this Act as nil.

(5) This section is subject to—

(a) sections 186, 186A and 187 (fixtures on which industrial buildings allowance, business premises renovation allowance or research and development allowance has been made),

(b) section 197 (disposal values in avoidance cases), and

Election to apportion capital sum given by lessee on grant of lease

199

(1) This section applies if the disposal value of a fixture is required to be brought into account in accordance with item 5 of the Table in section 196 (on acquisition of ownership by incoming lessee under section 183).

(2) The persons who are the lessor and the lessee for the purposes of section 183 may jointly, by an election, fix the amount that is to be treated—

(a) for the purposes of item 5 of the Table, and

(b) for the other purposes of this Part,

as the part of the capital sum that is expenditure incurred by the lessee on the provision of the fixture.

(3) The amount fixed by the election must not exceed—

(a) the amount of the capital expenditure which was treated as incurred by the lessor on the provision of the fixture or of the plant or machinery which became the fixture, or

(b) the actual capital sum.

(4) If an election fixes the amount to be treated as the part of the capital sum—

(a) the remaining amount (if any) of the capital sum is to be treated for the purposes of this Act as expenditure attributable to the acquisition of the property which is not the fixture but is acquired for that amount, and

(b) if there is no remaining amount, the expenditure so attributable is to be treated for the purposes of this Act as nil.

(5) This section is subject to—

(a) sections 186, 186A and 187 (fixtures on which industrial buildings allowance, business premises renovation allowance or research and development allowance has been made),

(b) section 197 (disposal values in avoidance cases), and

Elections under sections 198 and 199: supplementary

200

(1) In this section and section 201, references to an election are to an election under section 198 or 199.

(2) An apportionment made by an election has effect in place of any apportionment that would otherwise be made under sections 562, 563 and 564(1) (apportionment and procedure for determining apportionment).

(3) An election is irrevocable.

(4) If, as a result of circumstances arising after the making of an election, the maximum amount which could be fixed by the election is reduced to an amount which is less than the amount specified in the election, the election is to be treated, for the purposes of this Act, as having specified the amount to which the maximum is reduced.

Elections under sections 198 and 199: procedure

201

(1) An election must be made by notice to an officer of Revenue and Customs no later than 2 years after the date when—

(a) the purchaser acquires the qualifying interest, in the case of an election under section 198, or

(b) the lessee is granted the lease, in the case of an election under section 199.

But this is subject to subsection (1A).

(1A) Where—

(a) the requirement of subsection (6) of section 187A (effect of changes in ownership of fixture: fixed value requirement) applies, or may in future apply by reason of a person being required to bring the disposal value of plant and machinery into account in accordance with item 1, 5 or 9 of the Table in section 196,

(b) an application is made to the tribunal for the purposes of section 187A(7)(a), and

subsection (1) does not apply and an election within section 187A(7)(b) may be made by notice to an officer of Revenue and Customs at any time before the tribunal determines the application or the application is withdrawn.

(2) The amount fixed by an election must be quantified at the time when the election is made.

(3) The notice must state—

(a) the amount fixed by the election,

(b) the name of each of the persons making the election,

(d) information sufficient to identify the relevant land,

(e) particulars of—

(i) the interest acquired by the purchaser, in the case of an election under section 198, or

(ii) the lease granted to the lessee, in the case of an election under section 199, and

(f) in relation to each of the persons making the election—

(i) that person's Unique Taxpayer Reference, or

(ii) that the person does not have a Unique Taxpayer Reference.

(4) If a person—

(a) has joined in making an election, and

(b) subsequently makes a tax return for a period which is the first period for which he is making a tax return in which the election has an effect for tax purposes in his case,

a copy of the notice containing the election must accompany the return.

(5) The following provisions do not apply to the election—

(a) section 42 of, and Schedule 1A to, TMA 1970 (claims and elections for income tax purposes);

(b) paragraphs 54 to 60 of Schedule 18 to FA 1998 (claims and elections for corporation tax purposes).

(6) References in this section to a tax return, in the case of an election for the purposes of a trade, profession or business carried on by persons in partnership, are to be read, in relation to those persons, as references to a return under section 12AA of TMA 1970 (partnership returns).

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Capital Allowances Act 2001

Requirement to notify where no entitlement to defer amounts

145

Expenditure on new shipping

Basic meaning of expenditure on new shipping

146

Exclusions: ship previously owned

147

Exclusions: object to secure deferment

148

Exclusions: later events

149

Exclusions where expenditure not incurred by shipowner

150

Qualifying ships

Basic meaning of qualifying ship

151

Ships under 100 tons

152

Ships which are not qualifying ships

153

Further registration requirement

154

Deferment of balancing charges: supplementary provisions

Change in the persons carrying on the qualifying activity

155

Connected persons

156

Further provisions

Adjustment of assessments etc.

157

Members of same group

158

Chapter 13 — Provisions affecting mining and oil industries

Expenditure connected with mineral extraction trades

Meaning of “mineral extraction trade” etc.

159

Expenditure treated as incurred for purposes of mineral extraction trade

160

Pre-trading expenditure on mineral exploration and access

161

Provisions relating to ring fence trades

Ring fence trade a separate qualifying activity

162

Meaning of “abandonment expenditure”

163

Abandonment expenditure incurred before cessation of ring fence trade

164

Abandonment expenditure within 3 years of ceasing ring fence trade

165

Transfers of interests in oil fields: anti-avoidance

Transfers of interests in oil fields: anti-avoidance

166

Oil production sharing contracts

Oil production sharing contracts

167

Expenditure on plant or machinery incurred by contractor

168

Expenditure on plant or machinery incurred by participator

169

Participator’s expenditure attributable to plant or machinery

170

Disposal values on cessation of ownership

171

Chapter 14 — Fixtures

Introduction

Scope of Chapter etc.

172

Meaning of “fixture” and “relevant land”

173

Meaning of “equipment lease” and “lease”

174

Meaning of “interest in land”, etc.

175

Persons who are treated as owners of fixtures

Person with interest in relevant land having fixture for purposes of qualifying activity

176

Equipment lessors

177

Equipment lessee has qualifying activity etc.