Capital Allowances Act 2001

The Finance Act 1999 (c. 16)

Schedule 6 (tax treatment of receipts by way of reverse premium)

104

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

The Greater London Authority Act 1999 (c. 29)

Schedule 33 (taxation)

105

• (1) In paragraph 4(3), for “the Capital Allowances Acts” substitute “ the Capital Allowances Act 2001 ”.

• (2) In paragraph 4(8), for “section 77 of the Capital Allowances Act 1990 (successions to trades: connected persons)” substitute “ section 266 of the Capital Allowances Act 2001 (election where predecessor and successor are connected persons) ”.

• (3) For paragraph 4(9) substitute—

(9) Except as provided by this paragraph, a qualifying transfer in relation to which this paragraph applies shall be taken for the purposes of the Capital Allowances Act 2001 not to give rise to— (a) any writing-down allowances, balancing allowances or balancing charges under Chapter 5 of Part 2 of that Act (plant and machinery allowances and charges), (b) any disposal value being treated as received for the purposes of that Chapter, (c) any qualifying expenditure being treated as incurred for the purposes of that Chapter, or (d) any writing-down allowances, balancing allowances or balancing charges under Part 3 of that Act (industrial buildings allowances). (10) In this paragraph and paragraph 10 below “the Capital Allowances Act 2001” includes, where the context admits, enactments which under the Taxes Act 1988 are to be treated as contained in the Capital Allowances Act 2001.

• (4) In paragraph 10(3), for “the Capital Allowances Acts” substitute “ the Capital Allowances Act 2001 ”.

• (5) In paragraph 10(9), for “section 77 of the Capital Allowances Act 1990 (successions to trades: connected persons)” substitute “ section 266 of the Capital Allowances Act 2001 (election where predecessor and successor are connected persons) ”.

• (6) For paragraph 10(10) substitute—

(10) Except as provided by this paragraph, a relevant transfer in relation to which this paragraph applies shall be taken for the purposes of the Capital Allowances Act 2001 not to give rise to— (a) any writing-down allowances, balancing allowances or balancing charges under Chapter 5 of Part 2 of that Act (plant and machinery allowances and charges), (b) any disposal value being treated as received for the purposes of that Chapter, (c) any qualifying expenditure being treated as incurred for the purposes of that Chapter, or (d) any writing-down allowances, balancing allowances or balancing charges under Part 3 of that Act (industrial buildings allowances).

• (7) In paragraph 11(2)—

• (a) for “Part I of the Capital Allowances Act 1990” substitute “ Part 3 of the Capital Allowances Act 2001 ”, and

• (b) for “Chapter VI of Part II” substitute “ Chapter 14 of Part 2 ”.

• (8) In paragraph 11(4)—

• (a) for “Part I of the Capital Allowances Act 1990” substitute “ Part 3 of the Capital Allowances Act 2001 ”,

• (b) for “Chapter VI of Part II of the Capital Allowances Act 1990” substitute “ Chapter 14 of Part 2 of the Capital Allowances Act 2001 ”, and

• (c) for “section 51(3)” substitute “ section 175(1) ”.

• (9) In paragraph 12(1)—

• (a) omit paragraph (a),

• (b) for “section 52(2)” substitute “ section 176(2) or (3) ”, and

• (c) for “section 60” substitute “ sections 67 and 68. ”

• (10) In paragraph 12(2)—

• (a) for “Part II of the Capital Allowances Act 1990” substitute “ Part 2 of the Capital Allowances Act 2001 ”, and

• (b) for “section 26(1)(f)” substitute “ item 7 in the Table in section 61(2) ”.

The Finance Act 2000 (c. 17)

Section 105 (corporation tax: use of currencies other than sterling)

106

In subsection (3), for “any of the items referred to in section 25(1) of the Capital Allowances Act 1990 which fall to be taken into account” substitute “ any amount falls to be taken into account under Chapter 5 of Part 2 of the Capital Allowances Act as available qualifying expenditure ”.

Schedule 12 (provision of services through an intermediary)

107

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

Schedule 22 (tonnage tax)

108

• (1) In paragraph 41(4), for “section 82A of the Capital Allowances Act 1990” substitute “ section 219 of the Capital Allowances Act 2001 ”.

• (2) For paragraph 69(2) substitute—

(2) In this paragraph “unrelieved qualifying expenditure” has the same meaning as in Chapter 5 of Part 2 of the Capital Allowances Act 2001.

• (3) In paragraph 69(4), for paragraphs (a) and (b) substitute “ section 130 of the Capital Allowances Act 2001 (notice postponing first-year or writing-down allowance) ”.

• (4) For paragraph 70(2) substitute—

(2) Sections 61(1)(e), 206(3) and 207 of the Capital Allowances Act 2001 (effect of use partly for qualifying activity and partly for other purposes) apply as follows— (a) references to a qualifying activity shall be read as not including references to the tonnage tax trade, and (b) references to purposes other than those of a qualifying activity shall be read as including references to the purposes of the tonnage tax trade.

• (5) In paragraph 72(1), for “sections 33A to 33F of the Capital Allowances Act 1990” substitute “ sections 135 to 156 of the Capital Allowances Act 2001 ”.

• (6) For paragraph 73(2) substitute—

(2) Sections 206(1), (2) and (4) and 207 of the Capital Allowances Act 2001 (operation of single asset pool for mixed use assets) apply as follows— (a) references to a qualifying activity shall be read as not including references to the tonnage tax trade, and (b) references to purposes other than those of a qualifying activity shall be read as including references to the purposes of the tonnage tax trade.

• (7) For paragraph 75(2) and (3) substitute—

(2) If the asset was acquired before entry into tonnage tax, section 61(1)(e) of the Capital Allowances Act 2001 applies (disposal event if plant or machinery begins to be used wholly or partly for purposes other than those of the qualifying activity), but reading the reference in that provision to the qualifying activity as a reference to the tonnage tax trade. (3) If the asset was acquired after entry into tonnage tax and begins to be used wholly or partly for the purposes of a qualifying activity carried on by the company, section 13 of the Capital Allowances Act 2001 (use for qualifying activity of plant or machinery provided for other purposes) applies as follows— (a) references to purposes which were not those of any qualifying activity shall be read as including references to the purposes of the tonnage tax trade, and (b) references to the qualifying activity carried on by him shall be read as not including references to the tonnage tax trade.

• (8) For paragraph 76(2) substitute—

(2) Sections 61(1)(e), 206(3) and 207 of the Capital Allowances Act 2001 (effect of use partly for qualifying activity and partly for other purposes) apply as follows— (a) references to a qualifying activity shall be read as not including references to the tonnage tax trade, and (b) references to purposes other than those of a qualifying activity shall be read as including references to the purposes of the tonnage tax trade.

• (9) In paragraph 77(2), for “Part II of the Capital Allowances Act 1990” substitute “ Part 2 of the Capital Allowances Act 2001 ”and for “references in that Part of that Act to a trade” substitute “ references in that Part of that Act to a qualifying activity ”.

• (10) In paragraph 80(2), for “section 24(6)(c)(i) to (iii) of the Capital Allowances Act 1990” substitute “ section 61(1)(a) to (d) of the Capital Allowances Act 2001 ”.

• (11) In paragraph 80(4), for “Sections 33A to 33F of the Capital Allowances Act 1990” substitute “ Sections 135 to 156 of the Capital Allowances Act 2001 ”.

• (12) For paragraph 82 substitute—

(82) If any identifiable part of a building or structure is used for the purposes of a company’s tonnage tax trade, that part is treated for the purposes of Part 3 of the Capital Allowances Act 2001 as used otherwise than as an industrial building.

• (13) In paragraph 83(1), for “disposal event occurs in relation to an industrial building or structure” substitute “ balancing event occurs in relation to an industrial building ”.

• (14) For the first sentence of paragraph 83(2) substitute—

(2) A “balancing event” means an event by reason of which the company is required by Part 3 of the Capital Allowances Act 2001 to bring into account any proceeds.

• (15) For paragraph 83(3)(a) substitute—

(a) the proceeds to be brought into account in respect of the industrial building are limited to the market value of the relevant interest when the company entered tonnage tax; and

.

• (16) In paragraph 84(1), omit “or structure”.

• (17) In paragraph 84(2), for “The provisions of section 8(1) to (12) of the Capital Allowances Act 1990 (writing off of expenditure and meaning of “residue of expenditure”)” substitute “ Section 313 and Chapter 8 of Part 3 of the Capital Allowances Act 2001 (meaning of “residue of qualifying expenditure” and writing off qualifying expenditure) ”.

• (18) In paragraph 85(1), for “Part II of the Capital Allowances Act 1990 (plant and machinery)” substitute “ Part 2 of the Capital Allowances Act 2001 (plant and machinery allowances) ”.

• (19) In paragraph 86(1), for “Part I of the Capital Allowances Act 1990 (industrial buildings)” substitute “ Part 3 of the Capital Allowances Act 2001 (industrial buildings allowances) ”.

• (20) For paragraph 87(1)(b) substitute—

(b) the expenditure shall be disregarded for the purposes of calculating the person’s entitlement to a writing-down allowance or balancing allowance or liability to a balancing charge.

• (21) In paragraph 88(1), for the definitions of “capital allowance” and “qualifying activity” substitute—

“capital allowance” means any allowance under the Capital Allowances Act 2001; “qualifying activity” means any activity in respect of which a person may be entitled to a capital allowance;

.

• (22) For paragraph 88(2) and (3) substitute—

(2) In this Part of this Schedule any reference to pooling or to single asset pools, class pools or the main pool shall be construed in accordance with sections 53 and 54 of the Capital Allowances Act 2001.

• (23) In paragraph 88(4), for “the Capital Allowances Act 1990” substitute “ the Capital Allowances Act 2001 ”.

• (24) In paragraph 89(1), for “Part II of the Capital Allowances Act 1990” substitute “ Part 2 of the Capital Allowances Act 2001 ”.

• (25) In paragraph 89(2), for “section 82A of the 1990 Act” substitute “ section 219 of that Act ”.

• (26) In paragraph 92(4), for “belonging to him for the purposes of Part II of the Capital Allowances Act 1990” substitute “ owned by him for the purposes of Part 2 of the Capital Allowances Act 2001 ”.

• (27) In paragraph 94(4), for “Part II of the Capital Allowances Act 1990” substitute “ Part 2 of the Capital Allowances Act 2001 ”.

• (28) In paragraph 96(2), for “the Capital Allowances Act 1990” substitute “ the Capital Allowances Act 2001 ”.

• (29) In paragraph 100(2)(b)(ii), for “section 30(1)(a) or (c) of the Capital Allowances Act 1990” substitute “ section 130 of the Capital Allowances Act 2001 ”.

• (30) In paragraph 100(3), for “the balance that would otherwise have been carried forward under Part II of the Capital Allowances Act 1990” substitute “ the unrelieved qualifying expenditure that would otherwise have been carried forward under Chapter 5 of Part 2 of the Capital Allowances Act 2001 ”.

• (31) In paragraph 110(2), for “the provisions of Part II of the Capital Allowances Act 1990 apply” substitute “ Part 2 of the Capital Allowances Act 2001 applies ”.

• (32) In paragraph 110(4)—

• (a) for “Part II of the Capital Allowances Act 1990” substitute “ Part 2 of the Capital Allowances Act 2001 ”, and

• (b) for “section 24(6)(c)” substitute “ section 61(1) ”.

• (33) For paragraph 112(3) substitute—

(3) In this paragraph “unrelieved qualifying expenditure” means the unrelieved qualifying expenditure that would otherwise have been carried forward under Chapter 5 of Part 2 of the Capital Allowances Act 2001.

• (34) In paragraph 112(5), for paragraphs (a) and (b) substitute “ section 130 of the Capital Allowances Act 2001 (notice postponing first-year or writing-down allowance) ”.

• (35) In paragraph 113(2), for “Part II of the Capital Allowances Act 1990” substitute “ Part 2 of the Capital Allowances Act 2001 ”.

• (36) In paragraph 135—

• (a) for “Part II of the Capital Allowances Act 1990 (plant and machinery)” substitute “ Part 2 of the Capital Allowances Act 2001 (plant and machinery allowances) ”, and

• (b) for “unrelieved qualifying expenditure under Part I of that Act (industrial buildings)” substitute “ the residue of qualifying expenditure under Part 3 of that Act (industrial buildings allowances) ”.

The Transport Act 2000 (c. 38)

Schedule 26 (transfers: tax)

109

• (1) In paragraph 1(1)—

• (a) omit the definition of “the 1990 Act”,

• (b) for the definition of “the Capital Allowances Acts” substitute—

“the Capital Allowances Act” means the Capital Allowances Act 2001 and includes, where the context admits, enactments which under the 1988 Act are to be treated as contained in the Capital Allowances Act 2001,

,

and

• (c) in the definition of “fixture”, for “Chapter VI of Part II of the 1990 Act” substitute “ Chapter 14 of Part 2 of the Capital Allowances Act ”.

• (2) In paragraph 1(3), for “the Capital Allowances Acts” substitute “ the Capital Allowances Act ”.

• (3) In paragraph 5(1)(b), for “the Capital Allowances Acts” substitute “ the Capital Allowances Act ” and for “Part II of the 1990 Act” substitute “ Part 2 of that Act ”.

• (4) In paragraph 5(1)(c), for “those Acts” substitute “ that Act ”.

• (5) In paragraph 5(2)—

• (a) for “those Acts” substitute “ the Capital Allowances Act ”, and

• (b) for “section 54 of the 1990 Act” substitute “ sections 181(1) and 182(1) of that Act ”.

• (6) In paragraph 6, for “Part II of the 1990 Act” substitute “ Part 2 of the Capital Allowances Act ”.

• (7) In paragraph 13(1) and (2)(a), for “the Capital Allowances Acts” substitute “ the Capital Allowances Act ”.

• (8) In paragraph 14(1)(c), for “the Capital Allowances Acts” substitute “ the Capital Allowances Act ”.

• (9) In paragraph 14(1)(d), for “those Acts” substitute “ that Act ”.

• (10) In paragraph 14(2)—

• (a) for “those Acts” substitute “ the Capital Allowances Act ”,

• (b) in paragraph (a), for “section 26(1) or 59 of the 1990 Act” substitute “ section 61(2) to (4), 72(3) to (5), 171, 196 or 423 of that Act ”, and

• (c) in paragraph (d), for “section 54 of the 1990 Act” substitute “ sections 181(1) and 182(1) of that Act ”.

• (11) In paragraph 15, for “Part II of the 1990 Act” substitute “ Part 2 of the Capital Allowances Act ”.

• (12) In paragraph 21(1), for “Part I of the 1990 Act” substitute “ Part 3 of the Capital Allowances Act ”.

• (13) In paragraph 21(4), for “Sections 157 and 158 of that Act (sales between connected persons or without change of control)” substitute “ Sections 567 to 570 of that Act (sales treated as being for alternative amount) ”.

• (14) In paragraph 21(5)—

• (a) for “machinery or plant” (in both places) substitute “ plant or machinery ”,

• (b) for “the Capital Allowances Acts” substitute “ the Capital Allowances Act ”, and

• (c) for “section 24 of the 1990 Act (balancing adjustments)” substitute “ section 60 of that Act (meaning of “disposal value” and “disposal event”) ”.

• (15) In paragraph 21(6), for “section 26(2) and (3) of that Act (disposal value of machinery or plant not to exceed capital expenditure incurred on its provision)” substitute “ section 62 of that Act (general limit on amount of disposal value) ”.

• (16) In paragraph 21(7), for “a fixture is treated by section 57(2) of the 1990 Act as ceasing to belong to a person” substitute “ a person is treated by section 188 of the Capital Allowances Act as ceasing to own a fixture ”.

• (17) In paragraph 21(8)—

• (a) for “section 24 of that Act is, subject to section 26(2) and (3) of that Act” substitute “ section 60 of the Capital Allowances Act is, subject to section 62 of that Act ”, and

• (b) for “Part II of that Act” substitute “ Part 2 of that Act ”.

• (18) In paragraph 21(9), for “the Capital Allowances Acts” substitute “ the Capital Allowances Act ”.

• (19) In paragraph 27(1), for “Part I of the 1990 Act” substitute “ Part 3 of the Capital Allowances Act ”.

• (20) In paragraph 27(4), for “Sections 157 and 158 of that Act (sales between connected persons or without change of control)” substitute “ Sections 567 to 570 of that Act (sales treated as being for alternative amount) ”.

• (21) In paragraph 27(5)—

• (a) for “machinery or plant”, in both places where it occurs, substitute “ plant or machinery ”,

• (b) for “the Capital Allowances Acts” substitute “ the Capital Allowances Act ”, and

• (c) for “section 24 of the 1990 Act (balancing adjustments)” substitute “ section 60 of that Act (meaning of “disposal value” and “disposal event”) ”.

• (22) In paragraph 27(6), for “section 26(2) and (3) of that Act (disposal value of machinery or plant not to exceed capital expenditure incurred on its provision)” substitute “ section 62 of that Act (general limit on amount of disposal value) ”.

• (23) In paragraph 27(7), for “a fixture is treated by section 57(2) of the 1990 Act as ceasing to belong to a person” substitute “ a person is treated by section 188 of the Capital Allowances Act as ceasing to own a fixture ”.

• (24) In paragraph 27(8)—

• (a) for “section 24 of that Act is, subject to section 26(2) and (3) of that Act” substitute “ section 60 of the Capital Allowances Act is, subject to section 62 of that Act ”, and

• (b) for “Part II of that Act” substitute “ Part 2 of that Act ”

• (25) In paragraph 27(9), for “the Capital Allowances Acts” substitute “ the Capital Allowances Act ”.

• (26) In paragraph 34(1), for “Part I of the 1990 Act” substitute “ Part 3 of the Capital Allowances Act ”.

• (27) In paragraph 34(5), for “Sections 157 and 158 of that Act (sales between connected persons or without change of control)” substitute “ Sections 567 to 570 of that Act (sales treated as being for alternative amount) ”.

• (28) In paragraph 34(6)—

• (a) for “machinery or plant” (in both places) substitute “ plant or machinery ”,

• (b) for “the Capital Allowances Acts” substitute “ the Capital Allowances Act ”, and

• (c) for “section 24 of the 1990 Act (balancing adjustments)” substitute “ sections 60 of that Act (meaning of “disposal value” and “disposal event”) ”.

• (29) In paragraph 34(7), for “section 26(2) and (3) of that Act (disposal value of machinery or plant not to exceed capital expenditure incurred on its provision)” substitute “ section 62 of that Act (general limit on amount of disposal value) ”.

• (30) In paragraph 34(8), for “a fixture is treated by section 57(2) of the 1990 Act as ceasing to belong to a person” substitute “ a person is treated by section 188 of the Capital Allowances Act as ceasing to own a fixture ”.

• (31) In paragraph 34(9)—

• (a) for “section 24 of that Act is, subject to section 26(2) and (3) of that Act” substitute “ section 60 of the Capital Allowances Act is, subject to section 62 of that Act ”, and

• (b) for “Part II of that Act” substitute “ Part 2 of that Act ”.

• (32) In paragraph 34(10), for “the Capital Allowances Acts” substitute “ the Capital Allowances Act ”.

Schedule 3

Part 1 — Continuity of the law

1

The repeal of provisions and their enactment in a rewritten form in this Act does not affect the continuity of the law.

2

Paragraph 1—

• (a) does not apply to any change in the law effected by this Act, and

• (b) is subject to paragraph 8.

3

Any subordinate legislation or other thing which—

• (a) has been made or done, or has effect as if made or done, under or for the purposes of a repealed provision, and

• (b) is in force or effective immediately before the commencement of the corresponding rewritten provision,

has effect after that commencement as if made or done under or for the purposes of the rewritten provision.

4

Any reference (express or implied) in any enactment, instrument or document to—

• (a) a rewritten provision, or

• (b) things done or falling to be done under or for the purposes of a rewritten provision,

is to be read as including, in relation to times, circumstances or purposes in relation to which any corresponding repealed provision had effect, a reference to the repealed provision or (as the case may be) things done or falling to be done under or for the purposes of the repealed provision.

5

Any reference (express or implied) in any enactment, instrument or document to—

• (a) a repealed provision, or

• (b) things done or falling to be done under or for the purposes of a repealed provision,

is to be read as including, in relation to times, circumstances or purposes in relation to which any corresponding rewritten provision has effect, a reference to the rewritten provision or (as the case may be) things done or falling to be done under or for the purposes of the rewritten provision.

6

Paragraphs 1 to 5 have effect instead of section 17(2) of the Interpretation Act 1978 (but are without prejudice to any other provision of that Act).

7

Paragraphs 4 and 5 apply only in so far as the context permits.

Part 2 — Changes in the law

8

• (1) This paragraph applies where, in the case of any person—

• (a) a thing is done or an event occurs before the relevant date, and

• (b) by reason of a change in the law effected by this Act, the tax consequences of that thing or event for a relevant chargeable period are different from what they would otherwise have been.

• (2) If that person so elects, this Act has effect in relation to that period with such modifications as may be necessary to secure that those consequences are the same as they would have been without the change in the law.

• (3) If this paragraph applies in the case of two or more persons in relation to the same thing or event, an election made under sub-paragraph (2) by any one of those persons is of no effect unless a corresponding election is made by the other or each of the others.

• (4) An election under sub-paragraph (2) must be made by notice given to an officer of Revenue and Customs—

• (a) for income tax purposes, within the normal time limit for amending a tax return for the tax year in which the chargeable period ends;

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

• (5) In this paragraph—

• “relevant chargeable period” means—in relation to a change effected by section 536(5)(a) or 537(4), the earliest chargeable period for which the tax consequences of the thing or event are different from what they would otherwise have been;in relation to any other change, a chargeable period which begins before and ends on or after the relevant date;

• “the relevant date” means 6th April 2001 for income tax purposes and 1st April 2001 for corporation tax purposes.

Part 3 — General

Capital expenditure

9

Subsections (2) and (3) of section 4 apply with the omission of the words “or property business” in relation to expenditure incurred or sums paid or received before 26th November 1996.

Exclusion of double relief

10

Section 9 does not apply in relation to expenditure incurred before 24th July 1996.

Part 4 — Plant and machinery allowances

Introduction

Use for qualifying activity of plant or machinery provided for other purposes

11

Subsections (4) and (5) of section 13 do not apply if the plant or machinery was brought into use before 21st March 2000.

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

12

Section 14 applies with the insertion after subsection (1) of—

(1A) This section does not apply unless the donor was required by section 24(6) of CAA 1990 to bring into account for the purposes there mentioned a disposal value equal to the price which the plant or machinery would have fetched if sold in the open market at the time of the gift.

,

Qualifying expenditure

Buildings, structures and land

13

Sections 21 to 24 do not apply in relation to expenditure—

• (a) incurred before 30th November 1993;

• (b) incurred before 6th April 1996 in pursuance of a contract entered into before 30th November 1993; or

• (c) incurred before 6th April 1996 in pursuance of a contract entered into on or after 30th November 1993 for the purpose of securing that obligations under a contract entered into before 30th November 1993 are complied with.

First-year qualifying expenditure

ICT expenditure incurred by small companies

14

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

Hire-purchase and similar contracts

Plant or machinery acquired under hire purchase etc.

15

Section 67(2) applies with the omission of the words in brackets if the contract under which the expenditure was incurred was entered into before 27th July 1989.

Plant or machinery on hire purchase etc.: fixtures

16

Section 69(2) does not apply if the plant or machinery became a fixture before 28th July 2000.

Plant or machinery provided by lessee

17

In section 70(1), paragraphs (c) and (d) do not apply if the lease was entered into before 12th July 1984, or on or after that date under an agreement made before that date.

Computer software

Software and rights to software

18

Section 71 does not apply to expenditure incurred before 10th March 1992.

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

Cars above the cost threshold

19

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

Long-life assets

Long-life asset expenditure

20

• (1) Chapter 10 of Part 2 does not apply to any expenditure incurred—

• (a) before 26th November 1996, or

• (b) before 1st January 2001 in pursuance of a contract entered into before 26th November 1996.

• (2) Chapter 10 of Part 2 does not apply to expenditure incurred by any person (“the purchaser”) on the acquisition of a long-life asset from another (“the seller”) if—

• (a) the seller has made a Part 2 claim in respect of expenditure incurred on the provision of the asset (“the seller’s expenditure”),

• (b) the claim is one which the seller was entitled to make,

• (c) the seller’s expenditure did not fall to be treated as long-life asset expenditure for the purposes of the claim, and

• (d) the seller’s expenditure would have been so treated if one or more of the assumptions specified in sub-paragraph (3) were made.

• (3) The assumptions are that—

• (a) expenditure falling within sub-paragraph (1) is not prevented by that sub-paragraph from being long-life asset expenditure,

• (b) the seller’s expenditure was not prevented by sub-paragraph (2) from being long-life asset expenditure, and

• (c) Chapter 10 of Part 2 or any provision corresponding to it applied for chargeable periods ending before 26th November 1996.

• (4) The reference in sub-paragraph (1) to expenditure incurred in pursuance of a contract entered into before 26th November 1996 does not, in the case of a contract varied at any time on or after that date, include a reference to any expenditure incurred under the contract that exceeds the expenditure that would have been incurred if the contract had not been varied.

• (5) Expressions used in this paragraph and in Chapter 10 of Part 2 have the same meaning in this paragraph as in that Chapter; and in particular references in this paragraph to a “Part 2 claim” are to be read in accordance with section 103(3).

Overseas leasing

Meaning of “overseas leasing”

21

Section 105(2) applies with the substitution for paragraph (b) of—

(b) does not use the plant or machinery for the purposes of a qualifying activity carried on there or for earning profits chargeable to tax by virtue of section 830(4) of ICTA,

,

Recovery of first-year allowances in case of joint lessees

22

• (1) Sub-paragraphs (2) and (3) apply if—

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

• (b) the whole or a part of the expenditure has qualified for a first-year allowance under—

• (i) section 43(4) of CAA 1990, or

• (ii) paragraph 47(7).

• (2) Section 117(1) applies as if the reference in paragraph (b) to expenditure qualifying for a normal writing-down allowance under section 116(3) included a reference to expenditure qualifying for the first-year allowance.

• (3) Subsections (3) to (5) of section 117 apply as if the reference in section 117(3)(b) to expenditure qualifying for a normal writing-down allowance under section 116(3) included a reference to expenditure qualifying for the first-year allowance.

Letting ships or aircraft to obtain old first-year allowance not a qualifying purpose

23

Subsections (1) and (2) of section 123 do not apply if the main object, or one of the main objects—

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

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

• (c) of any of the transactions in such a series,

was to obtain a first-year allowance in respect of expenditure which was first-year qualifying expenditure under paragraph 47 and was incurred by any person on the provision of the ship or aircraft.

Ships: deferments etc.

Further registration requirement

24

Section 154 does not apply in the case of a ship that was brought into use before 20th July 1994 for the purposes of a qualifying activity carried on by the person incurring the expenditure on the provision of the ship or a person connected with him.

Mining and oil industries

Pre-trading expenditure on mineral exploration and access

25

Section 161 does not apply if—

• (a) the person incurred the pre-trading expenditure before 1st April 1986; and

• (b) before the first day of trading, the mineral exploration and access at the source in question had ceased.

Abandonment expenditure incurred before cessation of ring fence trade

26

Section 164 does not apply if the chargeable period in which the abandonment expenditure was incurred ended before 1st July 1991.

Abandonment expenditure incurred after cessation of ring fence trade

27

Section 165 does not apply if the abandonment expenditure was incurred before 1st July 1991.

Oil production sharing contracts

28

Sections 167 to 171 do not apply if —

• (a) the expenditure was incurred before 21st March 2000; or

• (b) the expenditure is treated as incurred by virtue of section 13 and the conditions mentioned in subsection (1) of that section were fulfilled before that date.

Fixtures

Meaning of “interest in land” for purposes of Chapter 14 of Part 2 (fixtures)

29

• (1) Sub-paragraph (2) applies if paragraph 51 of Schedule 12 to the Abolition of Feudal Tenure etc. (Scotland) Act 2000 has not come into force before the commencement of section 175.

• (2) Section 175(1) has effect until the appointed day as if for paragraph (b) there were substituted—

(b) in Scotland, the estate or interest of the proprietor of the dominium utile (or, in the case of property other than feudal property, of the owner) and any agreement to acquire such an estate or interest,

.

• (3) In sub-paragraph (2) “the appointed day” means such day as may be appointed by the Scottish Ministers under section 71 of the Abolition of Feudal Tenure etc. (Scotland) Act 2000 for the coming into force of the Act.

Equipment lessors

30

Section 177(1)(a)(i) does not apply if the agreement for the lease of the plant or machinery was entered into before 19th March 1997.

Equipment lessee has qualifying activity etc.

31

Section 178 applies—

• (a) if the agreement for the lease of the plant or machinery was entered into before 19th March 1997, with the omission of the words “which is or is to be” in paragraph (a) and the addition of the word “ and ” at the end of that paragraph; and

• (b) if that expenditure was incurred before 24th July 1996, with the omission of paragraph (c) and the substitution for paragraph (b) of—

(b) if the equipment lessee had incurred the capital expenditure incurred by the equipment lessor on the provision of the plant or machinery, he would, by virtue of section 176, be treated as the owner of the fixture as a result of incurring the expenditure

.

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

32

Section 179(1) does not apply if the agreement for the lease of the plant or machinery was entered into before 19th March 1997 and applies with—

• (a) the addition at the end of paragraph (e) of the word “ and ”, and

• (b) the omission of paragraph (g) and the word “and” immediately before it,

if the expenditure of the equipment lessor was incurred before 24th July 1996.

Equipment lease is part of affordable warmth programme

33

Section 180 does not apply if the expenditure of the equipment lessor was incurred before 28th July 2000.

Purchaser of land giving consideration for fixture

34

Section 181 applies with—

• (a) the omission of the word “and” at the end of paragraph (b) of subsection (1); and

• (b) the insertion after that paragraph of—

(bb) at the time of the purchasers’ acquisition of the interest, either no person has previously become entitled to an allowance in respect of any capital expenditure incurred on the provision of the fixture or, if any person has become so entitled, that person has been or is required to bring the disposal value of the fixture into account under Chapter 5, and

,

if the purchaser acquired the interest in the relevant land before 24th July 1996.

Purchaser of land discharging obligations of equipment lessee

35

Section 182 applies with—

• (a) the omission of the word “and” at the end of paragraph (c) of subsection (1); and

• (b) the insertion after that paragraph of—

(cc) at the time of the purchasers’ acquisition of the interest, either no person has previously become entitled to an allowance in respect of any capital expenditure incurred on the provision of the fixture or, if any person has become so entitled, that person has been or is required to bring the disposal value of the fixture into account under Chapter 5, and

,

if the purchaser acquired the interest in the relevant land before 24th July 1996.

Incoming lessee where lessor entitled to allowances

36

Section 183 applies with the insertion after subsection (2) of—

(3) No election may be made under this section if it appears that the sole or main benefit that may be expected to accrue to the lessor from the grant of the lease and the making of an election is the obtaining of an allowance or deduction or a greater allowance or deduction or the avoidance or reduction of a charge under this Part.

,

Incoming lessee where lessor not entitled to allowances

37

Section 184 applies with—

• (a) the omission of the word “and” at the end of paragraph (c) of subsection (1); and

• (b) the insertion after that paragraph of—

(cc) at the time of the grant of the lease, no person has previously become entitled to an allowance in respect of any capital expenditure incurred on the provision of the fixture, and

,

if the person who had the interest in the relevant land granted the lease before 24th July 1996.

Fixture on which a plant and machinery allowance has been claimed

38

Section 185 does not apply if the disposal event which required the disposal value to be brought into account as mentioned in subsection (1)(d) occurred before 24th July 1996.

Fixture on which industrial buildings allowance has been made

39

Section 186 does not apply if the time mentioned in subsection (1)(c)(ii) is before 24th July 1996.

Fixture on which research and development allowance has been made

40

Section 187 does not apply if the time mentioned in subsection (1)(d)(ii) is before 24th July 1996.

Disposal value in relation to fixtures: general

41

In relation to a fixture which a person is treated as ceasing to own before 24th July 1996, section 196 applies with the substitution for subsection (6) of—

(6) If— (a) a person (“the former owner”) is treated by virtue of section 188, 190 or 191 as ceasing to own a fixture, (b) another person incurs expenditure on the provision of the fixture, and (c) the former owner brings a disposal value into account under Chapter 5, there is to be disregarded for the purposes of this Part so much (if any) of that expenditure as exceeds that disposal value. (7) In relation to expenditure incurred before 27th July 1989, subsection (6) has effect with the substitution for the words following “the fixture” in paragraph (b) of the words “there is to be disregarded for the purposes of this Part so much (if any) of that expenditure as exceeds the disposal value which the former owner is required to bring into account under Chapter 5”

.

Assets provided or used only partly for qualifying activity

Effect of significant reduction in use for purposes of qualifying activity

42

Section 208 does not apply if the change of circumstances referred to in subsection (1)(b) of that section occurs before 21st March 2000.

Anti-avoidance

Relevant transactions: sale, hire-purchase (etc.) and assignment

43

Section 213(3) does not apply if the plant or machinery was brought into use before 27th July 1989.

Hire purchase etc. and finance leases

44

Sections 220 and 229 do not apply in relation to expenditure incurred before 2nd July 1997, or in the 12 months beginning with that date in pursuance of a contract entered into before that date.

Sale and finance leasebacks

45

Sections 221, 222 and 224 to 226 do not apply in relation to expenditure incurred before 2nd July 1998 if the relevant transaction—

• (a) is a purchase under a contract entered into before 2nd July 1997;

• (b) is itself a contract entered into before that date; or

• (c) is an assignment made before that date, or in pursuance of a contract entered into before that date.

Additional VAT liabilities and rebates

Expenditure which is first-year qualifying expenditure: general

46

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

Expenditure incurred 1992-93

47

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

Expenditure by small or medium-sized enterprises, 1997-98

48

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

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

49

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

Expenditure which is not first-year qualifying expenditure

50

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

Anti-avoidance

51

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

Supplementary provisions

Successions by beneficiaries

52

Section 266(7) does not apply if the succession occurred before 27th July 1989.

53

Subsections (6) and (7) of section 268 do not apply if the election under that section was made before 6th April 1990.

General

Vehicles provided by employees in 1990-91

54

• (1) This paragraph applies if—

• (a) at the beginning of the tax year 1990-91 machinery consisting of a mechanically propelled road vehicle was provided by a person for use in the performance of the duties of an office or employment held by him, and

• (b) the machinery was also provided by him at the end of the tax year 1989-90 for use in the performance of the duties of that office or employment but without that provision being necessary.

• (2) Part 2 of this Act has effect as if the person had incurred capital expenditure on the provision of the machinery for the purposes of the office or employment in the tax year 1990-91—

• (a) the amount of that expenditure being taken as the price which the machinery would have fetched if sold in the open market on 6th April 1990, and

• (b) the person being treated as owning the machinery as a result of his having incurred that expenditure.

Certain expenditure incurred before 6th April 1976

55

Part 2 of this Act does not apply to capital expenditure—

• (a) which was not eligible expenditure within the meaning of section 39 of FA 1976 (which brought expenditure previously not within Chapter I of Part III of FA 1971 within that Chapter but with certain exceptions), and

• (b) which was incurred in a chargeable period ending before 6th April 1976.

Part 5 — Industrial buildings allowances

Industrial buildings

Bridge undertakings

56

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

Building used by more than one licensee

57

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

Qualifying hotels

58

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

Non-industrial part of building disregarded

59

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

Qualifying expenditure

Purchase of used building from developer

60

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

Qualifying enterprise zone expenditure

61

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

62

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

63

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

Initial allowances

Building occupied by qualifying licensee

64

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

Grants affecting entitlement to initial allowances

65

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

Writing-down allowances

Basic rule for calculating amount of allowance

66

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

Calculation of amount after relevant event

67

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

Balancing adjustments

When balancing adjustments are made

68

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

Net allowance given

69

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

70

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

Balancing adjustment on realisation of capital value

71

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

Writing off qualifying expenditure

Writing off qualifying expenditure when building not an industrial building

72

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

Crown or other person not within the charge to tax entitled to the relevant interest

73

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

Highway undertakings

Special provisions relating to highway concessions

74

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

Additional VAT liabilities and rebates

Additional VAT liabilities and initial allowances: 1992-93 cases

75

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

Additional VAT liabilities and initial allowances: further case

76

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

1992-93 qualifying expenditure

77

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

Supplementary provisions

Arrangements having an artificial effect on pricing

78

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

General

Expenditure on preparatory work on land where building used before 6th April 1956

79

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

Part 6 — Agricultural buildings allowances

Overall limit on balancing charge

80

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

Meaning of “freehold interest in land” for purposes of Part 4

81

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

Exclusion of expenditure incurred before 1st April 1986

82

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

The writing-down period

83

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

Part 7 — Mineral extraction allowances

Qualifying expenditure on acquiring a mineral asset

Qualifying expenditure where buildings or structures cease to be used

84

In section 405(3) “A” does not include, in cases where the buildings or structures have permanently ceased to be used for any purpose before 27th July 1989, the amount of any agricultural buildings allowances.

Qualifying expenditure: second-hand assets

Claims before 26th November 1996 in respect of acquisition of mineral asset owned by previous trader

85

Section 407(4) does not apply in relation to claims made before 26th November 1996.

Acquisition of oil licence from non-trader before 13th September 1995

86

Section 408 does not apply to acquisitions occurring before 13th September 1995.

Restrictions on qualifying expenditure in case of UK oil licence and certain other assets inapplicable for expenditure pre-16th July 1985

87

• (1) The sections listed in sub-paragraph (2) do not apply if—

• (a) asset X is a mineral asset situated in the United Kingdom, and

• (b) the capital expenditure incurred by the buyer consists of the payment of sums under a contract entered into by him before 16th July 1985.

• (2) The sections are—

• (a) section 407 (acquisition of mineral asset owned by previous trader),

• (b) section 410 (UK oil licence: qualifying expenditure limited by reference to original licence payment), and

• (c) section 411 (assets generally: qualifying expenditure limited by reference to previous trader’s unrelieved qualifying expenditure).

• (3) Sections 407 and 411 apply, in relation to a case where asset X is a mineral asset situated in the United Kingdom, as if the references to an earlier owner of the asset did not include a person who has not owned the asset at any time after 31st March 1986.

• (4) In the case of a mineral asset which consists of or includes an interest in or right over mineral deposits or land, the asset is not to be regarded for the purposes of this paragraph as situated in the United Kingdom unless the deposits or land are or is so situated.

• (5) Expressions used in this paragraph and Chapter 4 of Part 5 have the same meaning in this paragraph as they have in that Chapter.

Expenditure incurred pre-1st April 1986

88

• (1) Part 5 of this Act does not apply in relation to expenditure incurred before 1st April 1986 (“old expenditure”) except as provided by the following provisions of this paragraph.

• (2) Sections 401 and 402 apply to old expenditure if—

• (a) that expenditure was incurred on mineral exploration and access,

• (b) immediately before 1st April 1986, no allowance had been made under Chapter III of Part I of CAA 1968 in respect of it, and

• (c) after that day and before mineral exploration and access ceases at the source in question, the person by whom the expenditure was incurred began or begins to carry on a trade of mineral extraction.

In this sub-paragraph “source” has the same meaning as it had in Schedule 14 to FA 1986.

• (3) For the purposes of Part 5—

• (a) expenditure which by virtue of any provision of section 119 of CAA 1990 (read with any provision of Schedule 14 to FA 1986) was treated immediately before the coming into force of this Act as expenditure incurred on 1st April 1986 for any purpose or purposes is to continue to be so treated;

• (b) any allowances treated as having been made under Schedule 13 to FA 1986 is to continue to be so treated;

• (c) any amount treated as qualifying expenditure for the purposes of that Schedule is to continue to be so treated; and

• (d) in relation to any expenditure to which paragraph 6(4)(a) of Schedule 14 to FA 1986 applied, section 424 does not apply (so that no deduction is to be made from the amount of any disposal receipt by reference to the undeveloped market value of the land in question).

• (4) In the case of expenditure incurred in the acquisition of a mineral asset, nothing in sub-paragraph (3)(c) affects the time as at which under section 404 the undeveloped market value of an interest is to be determined.

• (5) In a case where—

• (a) by virtue of any provision of this paragraph, the whole or any part of the outstanding balance (within the meaning of paragraph 1 of Schedule 14 to FA 1986) of an item of old expenditure is treated for the purposes of Part 5 as qualifying expenditure, and

• (b) a balancing charge falls to be made under Chapter 6 of that Part in respect of the expenditure,

then, in determining the amount on which that charge falls to be made, subsection (4) of section 418 has effect (subject to sub-paragraph (6)) as if paragraph (b) of that subsection included a reference to allowances made in respect of the item under Chapter III of Part I of CAA 1968.

• (6) Where the qualifying expenditure in respect of which a balancing charge falls to be made represents part only of the outstanding balance of an item of old expenditure, the reference in sub-paragraph (5) to allowances made in respect of that item is to be construed as a reference to such part of those allowances as it is just and reasonable to apportion to that part of the balance (having regard to any apportionment made under paragraph 3(2) of Schedule 14 to FA 1986).

Part 8 — Research and development allowances

Expenditure incurred partly on research and development

89

Section 439(4) does not apply to expenditure incurred before 27th July 1989.

References to research and development in relation to new trades

90

• (1) Where—

• (a) a trade is set up and commenced in the year of assessment 1999-00, and

• (b) its first period of account ends after 6th April 2001,

Part 6 of this Act has effect in relation to that year as if references to research and development were references to scientific research.

• (2) In this paragraph “scientific research” means any activities in the fields of natural or applied science for the extension of knowledge.

Disposal of oil licences

91

• (1) Sub-paragraphs (2) and (3) apply where—

• (a) a person (“the transferor”) disposes of any interest in an oil licence to another (“the transferee”) during the transitional period,

• (b) part of the value of the interest is attributable to allowable exploration expenditure incurred by the transferor, and

• (c) an election is made in accordance with this paragraph specifying an amount as the amount to be treated as so attributable.

• (2) Chapter 3 of Part 6 has effect in relation to the disposal as if—

• (a) the disposal were a disposal by which an asset representing the allowable exploration expenditure ceases to belong to the transferor, and

• (b) the disposal value of that asset were an amount equal to the amount specified in the election.

• (3) For the purposes of Part 5 of this Act, the amount of any expenditure incurred—

• (a) by the transferee in acquiring the interest from the transferor, or

• (b) by any person subsequently acquiring the interest (or an interest deriving from the interest),

which is taken to be attributable to expenditure incurred, before the disposal to the transferee, on mineral exploration and access is the lesser of the amount specified in the election and the amount which, apart from this sub-paragraph, would be taken to be so attributable.

• (4) An election—

• (a) must be made by notice to the Commissioners for Her Majesty’s Revenue and Customs given by the transferor, and

• (b) subject to sub-paragraph (5), does not have effect unless a copy of it is served on the transferee and the transferee consents to it.

• (5) If the tribunal is satisfied—

• (a) that the disposal was made under or in pursuance of an agreement entered into by the transferor and the transferee on the mutual understanding that a quantified (or quantifiable) part of the value of the interest disposed of was attributable to allowable exploration expenditure, and

• (b) that the part quantified in accordance with that understanding and the amount specified in the election are the same,

the tribunal may dispense with the need for the transferee to consent to the election.

• (6) An application for the tribunal to determine the question is to be subject to the relevant provisions of Part 5 of the Taxes Management Act 1970 (see, in particular, section 48(2)(b) of that Act), and each of the persons concerned is entitled to be a party to the proceedings on the application.

• (7) Subject to sub-paragraph (8), an election may specify any amount, including a nil amount, as the amount to be treated as mentioned in sub-paragraph (1)(c).

• (8) Where—

• (a) a return has been made for a chargeable period of the transferor, and

• (b) the return includes, at the time when it is made, an amount which, disregarding the provisions of this paragraph, would be treated under Chapter 3 of Part 6 as a trading receipt accruing in that period,

the election must not specify an amount less than the amount included in the return unless the Commissioners for Her Majesty’s Revenue and Customs agrees the lesser amount in question.

• (9) An election made in accordance with this paragraph—

• (a) is irrevocable, and

• (b) may not be varied after it is made.

• (10) For the purposes of this paragraph a disposal is a disposal made during the transitional period if it is one made—

• (a) before 13th September 1995, or

• (b) on or after that date in pursuance of any obligation to make the disposal which, immediately before that date, was an unconditional obligation.

• (11) For the purposes of sub-paragraph (10), the fact that a third party who is not connected with the transferor or the transferee may, by exercising any right or withholding any permission, prevent the fulfilment of an obligation does not prevent the obligation from being treated as unconditional.

• (12) In sub-paragraph (11) the reference to a third party is a reference to any person, body, government or public authority, whether within or outside the United Kingdom.

• (13) In this paragraph—

• “allowable exploration expenditure” has the same meaning as in section 555;

• “mineral exploration and access” has the same meaning as in Part 5.

• (14) All such assessments and adjustments of assessments are to be made as are necessary to give effect to this paragraph.

Part 9 — Patent allowances

Expenditure incurred before 1st April 1986

Scope of paragraphs 93 to 101

92

• (1) Paragraphs 93 to 101 apply to capital expenditure incurred by a person before 1st April 1986 on the purchase of patent rights.

• (2) Chapters 2 to 4 of Part 8 do not apply to such expenditure, except for certain provisions which are specifically applied by paragraph 101.

Qualifying expenditure and unrelieved qualifying expenditure

93

• (1) In this paragraph and paragraphs 94 to 101, “qualifying expenditure” means capital expenditure incurred before 1st April 1986 on the purchase of patent rights.

• (2) The result of Steps 1 to 3 is the unrelieved qualifying expenditure for a chargeable period.

Step 1

Take an item of qualifying expenditure.

Step 2

Subtract any writing-down allowances made in respect of that expenditure for earlier chargeable periods.

Step 3

If the person who incurred the expenditure sold any part of the patent rights before the beginning of the chargeable period, subtract the net proceeds of sale (so far as they consist of capital sums).

Entitlement to writing-down allowances

94

• (1) A writing-down allowance is made for a chargeable period in respect of an item of qualifying expenditure if—

• (a) the chargeable period falls wholly or partly within the writing-down period for that expenditure (as determined in accordance with paragraph 95),

• (b) paragraph 97 does not prohibit writing-down allowances for that period, and

• (c) either—

• (i) the trade use condition is met for that period, or

• (ii) any income receivable by that person in respect of the patent rights in that period would be liable to tax.

• (2) The trade use condition is that—

• (a) the person is carrying on in the chargeable period a trade which is within the charge to tax, and

• (b) at any time in the chargeable period the patent rights, or other rights out of which they were granted, were, or were to be, used for the purposes of the trade.

• (3) The total writing-down allowances made in respect of an item of qualifying expenditure (whether to the same or to different persons) must not exceed the amount of that expenditure.

The writing-down period

95

• (1) The writing-down period for an item of qualifying expenditure—

• (a) begins at the beginning of the chargeable period in respect of which the expenditure is incurred, and

• (b) is of a length determined in accordance with the Table, which shows the basic rule, and the rules which apply instead of the basic rule in the cases described in items 2 and 3.

Rule	Length of writing-down period
1. Basic rule.	17 years.
2. Patent rights are purchased for a specified period.	Whichever is shorter—(a) 17 years;(b) the number of years comprised within the specified period.
3. Patent rights begin one complete year or more after the commencement of the patent, and item 2 does not apply.	17 years, less the number of complete years which, when the rights began, have elapsed since the commencement of the patent; orif 17 complete years have so elapsed, one year.

• (2) For the purpose of determining the writing-down period, expenditure incurred for the purposes of a trade by a person about to carry on the trade is treated as if incurred on the first day on which that person carries on that trade, unless that person has by then sold all the rights on which the expenditure was incurred.

• (3) “The commencement of the patent”, means, in relation to a patent, the date as from which the patent rights become effective.

Calculation of writing-down allowances

96

• (1) The basic rule for calculating a writing-down allowance for an item of qualifying expenditure is—

$$ExCW$where—E is the amount of the qualifying expenditure;C is the length of the part of the chargeable period falling within the writing-down period;W is the length of the writing-down period.$

• (2) The basic rule is subject to the rules about—

• (a) cessation of writing-down allowances (paragraph 97), and

• (b) reduced writing-down allowances (paragraph 98).

End of writing-down allowances

97

• (1) No writing-down allowance is to be made to a person for a chargeable period in respect of qualifying expenditure incurred on the purchase of patent rights if any of the following occur in that period—

• (a) the patent rights come to an end without being subsequently revived,

• (b) the person sells all of those rights, or so much of them as that person still owned at the beginning of the chargeable period, or

• (c) the person sells part of those rights, and the net proceeds of sale for that period (so far as they consist of capital sums) are not less than the amount of the unrelieved qualifying expenditure for that period.

• (2) If a writing-down allowance in respect of qualifying expenditure is prohibited by sub-paragraph (1) for a chargeable period, no writing-down allowance is to be made in respect of that expenditure for any subsequent chargeable period.

Reduced writing-down allowance

98

• (1) If a person sells part of any patent rights in a chargeable period, and for that period U is greater than N, the writing-down allowance for that period is—

$$U-NY$where—U is the unrelieved qualifying expenditure for the chargeable period,N is the net proceeds of any sales of the patent rights which take place in the chargeable period (so far as those proceeds consist of capital sums), andY is the number of complete years of the writing-down period remaining at the beginning of the chargeable period.$

• (2) If an amount is calculated under sub-paragraph (1) for a chargeable period, that amount is also the amount of the writing-down allowance for subsequent chargeable periods until another sale in a period for which U is greater than N causes a fresh calculation to be made under sub-paragraph (1).

• (3) If a chargeable period is more or less than a year, an allowance calculated under sub-paragraph (1) or (2) is proportionately increased or reduced.

Balancing allowance on sale or expiry of patent rights

99

• (1) A person is entitled to a balancing allowance for a chargeable period in respect of qualifying expenditure if there is unrelieved qualifying expenditure for that period and any of the following occur in that period—

• (a) the patent rights come to an end without subsequently being revived, or

• (b) the person sells all of those rights, or so much of them as that person still owned at the beginning of the period.

This is subject to sub-paragraph (2).

• (2) The person is not entitled to a balancing allowance unless—

• (a) a writing-down allowance has been given in respect of the expenditure, or

• (b) a writing-down allowance could, but for the rights coming to an end or being sold, have been given in respect of the expenditure.

• (3) The amount of the balancing allowance is—

• (a) in the case of a sale, equal to the unrelieved qualifying expenditure for the chargeable period, less the net proceeds of sales taking place in the chargeable period (so far as they consist of capital sums), and

• (b) in any other case, equal to the unrelieved qualifying expenditure for the chargeable period.

Balancing charges

100

• (1) A balancing charge is made on a person for a chargeable period in respect of qualifying expenditure if in that period—

• (a) the person sells some or all of the patent rights, and

• (b) the net proceeds of sale (so far as they consist of capital sums) from the sales in that period exceed any unrelieved qualifying expenditure for that period.

The charge is calculated in accordance with sub-paragraphs (2) to (5).

• (2) If there is no unrelieved qualifying expenditure, the amount of the balancing charge is equal to the net proceeds of sale (so far as they consist of capital sums).

This is subject to sub-paragraphs (4) and (5).

• (3) If there is some unrelieved qualifying expenditure, the amount of the balancing charge is equal to the amount by which the net proceeds of sale (so far as they consist of capital sums) exceed the unrelieved qualifying expenditure.

This is subject to sub-paragraphs (4) and (5).

• (4) The total amount of the first balancing charge must not exceed the total writing-down allowances actually given in respect of the expenditure.

• (5) The total amount on which a second or further balancing charge is made must not exceed the total writing-down allowances actually made in respect of the expenditure, less the amount of any earlier charge.

Giving effect to allowances and charges

101

• (1) Sub-paragraph (2) applies if—

• (a) a person is entitled to a writing-down allowance or a balancing allowance or liable to a balancing charge in respect of qualifying expenditure, and

• (b) the trade use condition is met.

• (2) The allowance or charge is to be given effect in calculating the profits of that person’s trade, by treating—

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

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

• (3) Sub-paragraph (4) applies if—

• (a) a person is entitled to a writing-down allowance or a balancing allowance or liable to a balancing charge in respect of qualifying expenditure, and

• (b) the trade use condition is not met.

• (4) Sections 479 and 480 apply in relation to giving effect to the allowance or charge referred to in sub-paragraph (3) as they apply in relation to giving effect to an allowance or charge under Chapter 3 of Part 8 in respect of qualifying non-trade expenditure.

• (5) For the purposes of Part 8 a person’s “income from patents” includes balancing charges to which the person is liable in respect of qualifying expenditure.

Supplementary provisions

Limit on qualifying expenditure

102

Section 481 does not apply to expenditure incurred before 1st April 1986, and subsections (5) and (6) of that section do not apply to expenditure incurred before 27th July 1989.

Part 10 — Dredging allowances

Writing-down allowances

103

• (1) Section 487(2) applies with the substitution of “ 50 years ” for “25 years” in the case of expenditure incurred before 6th November 1962.

• (2) Section 487(3) applies with the substitution of “ 2% ” for “4%” in the case of expenditure incurred before 6th November 1962.

Balancing allowances

104

The reference in section 488(1)(d) to allowances previously made in respect of the expenditure—

• (a) includes any initial allowance made in respect of it under section 17 of FA 1956 or section 67 of CAA 1968, and

• (b) except in relation to initial allowances, is to be construed as if section 17 of FA 1956 had always had effect (instead of having effect only for chargeable periods after the year 1955-56).

The writing-down period

105

• (1) This paragraph applies where it is provided under Part 9 that writing-down allowances are to be made in respect of any expenditure during a writing-down period of any specified length.

• (2) If allowances were made under paragraph 27(2) of Schedule 14 to FA 1965—

• (a) for income tax purposes, for either of the tax years 1964-65 and 1965-66, and

• (b) for accounting periods of a company falling wholly or partly within either of those years,

the periods for which allowances were made are added together in calculating the writing-down period, even though (according to the calendar) the same time is counted twice.

Part 11 — Contributions

Regional development grants

106

• (1) Section 534(1) applies as if a grant falling within that subsection included—

• (a) a grant made under Part II of the Industrial Development Act 1982 (c. 52) on an application made before 1st April 1988;

• (b) a grant made under Part I of the Industry Act 1972 (c. 63), or a grant made under Northern Ireland legislation and declared by the Treasury to correspond to a grant under that Part.

• (2) Section 534(2) does not apply if the expenditure was incurred, or the grant was paid, before 10th March 1982.

Contributions not made by public bodies and not eligible for tax relief

107

Section 536 applies with the omission of subsection (3)(b) in relation to contributions made before 27th July 1989.

Conditions for allowances

108

In section 536(5), as it applies for the purposes of section 537(2), paragraphs (a)(iv) and (b) do not apply in relation to contributions made before 27th July 1989.

Agricultural buildings

109

Section 538(2)(b)(ii) applies in relation to contributions made before 6th April 1990 with the omission of “or to allocate the expenditure to a pool under Part 2”.

110

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

Part 12 — Supplemental

Transfer of insurance company business

111

Section 560 applies with—

• (a) the substitution for subsection (1) of—

(1) This section applies if assets are transferred as part of, or in connection with, a transfer of the whole or part of the long term business of an insurance company to another company in accordance with a scheme sanctioned by a court under section 49 of the Insurance Companies Act 1982.

;

and

• (b) the omission of subsection (2),

in relation to transfers sanctioned or authorised before 1st July 1994.

Election regarding sale consideration

112

• (1) In relation to a transfer to which this paragraph applies, section 569(3) applies with the substitution for paragraph (a) of—

(a) any of the parties is not resident in the United Kingdom at the time of the transfer and the circumstances are not at that time such that a relevant allowance or charge falls or might fall to be made to or on that party as a result of the transfer;

.

• (2) This paragraph applies to—

• (a) a transfer before 16th March 1993;

• (b) a transfer in pursuance of a contract entered into before that date; and

• (c) a transfer in pursuance of a contract entered into for the purpose of securing that obligations under a contract entered into before that date are complied with.

Part 13 — Other enactments

113

• (1) Subsections (2) and (3) of section 578A of ICTA (expenditure on car hire) apply with the substitution of “ £8,000 ” for “£12,000” in relation to expenditure incurred under a contract entered into before 11th March 1992.

• (2) Subsection (4) of that section does not apply in relation to rebates made or transactions occurring before 29th April 1996.

114

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

115

The repeals made by CAA 1990 do not have effect in relation to capital expenditure—

• (a) which was not eligible expenditure within the meaning of section 39 of FA 1976 (which brought expenditure previously not within Chapter I of Part III of FA 1971 within that Chapter but with certain exceptions), and

• (b) which was incurred in a chargeable period ending before 6th April 1976.

116

• (1) Sections 40A to 40D of F(No.2)A 1992 (films) apply with the necessary modifications in relation to—

• (a) expenditure on the production of a film—

• (i) completed before 21st March 2000, or

• (ii) completed on or after that date, if the first day of principal photography is before that date, unless the person incurring the expenditure elects that those modifications should not apply;

• (b) expenditure on the acquisition of a film, tape or disc incurred before 6th April 2000.

• (2) The necessary modifications are—

• (a) the substitution for section 40A(1) of—

(1) Expenditure which— (a) is incurred on the production or acquisition of a film, tape or disc, and (b) would, apart from this subsection, constitute capital expenditure on the provision of plant or machinery for the purposes of Part 2 of the Capital Allowances Act, is to be regarded for the purposes of the Tax Acts as expenditure of a revenue nature unless an election under section 40D below has effect with respect to it.

;

• (b) in section 40A(2), the substitution of “ the production or acquisition of a film, tape or disc ” for “the original master version of a film” and of “ of the film, tape or disc ” for “of the original master version”;

• (c) in section 40A(3), the substitution of “ a film, tape or disc ” for “the original master version of a film” and of “ the film, tape or disc ” for “the original master version” (in both places);

• (d) the insertion after section 40A(4) of—

(5) In this section and sections 40B to 40D below— (a) any reference to a film is a reference to an original master negative of the film and its soundtrack, if any; (b) any reference to a tape is a reference to an original master film tape or original master audio tape; and (c) any reference to a disc is a reference to an original master film disc or original master audio disc; and any reference to the acquisition of a film, tape or disc includes a a reference to the acquisition of any description of rights in a film, tape or disc.

;

• (e) in section 40B(1), the substitution of “ films, tapes or discs ” for “original master versions of films” and of “ a film, tape or disc ” for “the original master version of a film”;

• (f) in section 40B(4), the substitution of “ film, tape or disc ” for “original master version of the film” and of “ film, tape or disc ” for “original master version”;

• (g) in section 40B(5), the substitution of “ film, tape or disc ” for “original master version of the film”;

• (h) in section 40C(1), the substitution of “ film, tape or disc ” for “original master version of the film”;

• (i) in section 40C(2), the substitution of “ film, tape or disc ” for “original master version of the film”;

• (j) in section 40D(2), the substitution of “ films, tapes or discs ” for “original master versions of films”, of a “ film, tape or disc ” for “the original master version of a film” and of “ film, tape or disc ” for “original master version” (in both places);”

• (k) in section 40D(3), the substitution of “ film, tape or disc ” for “original master version”;

• (l) in section 40D(4), the substitution of “ film, tape or disc ” for “original master version of the film” (in both places);

• (m) in section 40D(6), the substitution of “ a film, tape or disc ” for “the original master version of a film” and of “ of the film, tape or disc ” for “of the original master version”; and

• (n) in section 40D(7), the substitution of “a film, tape or disc ” for “the original master version of a film”.

• (3) An election under sub-paragraph (1)(a) is irrevocable.

• (4) For the purposes of sub-paragraph (1)(a) a film is completed at the time when it is first in a form in which it can reasonably be regarded as ready for copies of it to be made and distributed for presentation to the general public.

• (5) In sub-paragraph (1)(b)—

• (a) “film” means an original master negative of the film and its soundtrack, if any;

• (b) “tape” means an original master film tape or original master audio tape; and

• (c) “disc” means an original master film disc or original master audio disc;

and the acquisition of a film, tape or disc includes the acquisition of any description of rights in a film, tape or disc.

117

Section 40D of F(No.2)A 1992 (election relating to tax treatment of films expenditure) applies with the omission of—

• (a) paragraph (a) of subsection (1); and

• (b) subsections (3) to (7),

if the film, tape or disc of the film was completed before 10th March 1992.

Schedule 4

Capital allowances

Claims for capital allowances

No double relief through pooling under Part 2 (plant and machinery allowances)

Expenditure incurred before qualifying activity carried on

Ordinary Schedule A businesses

Structures, assets and works

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

Exclusion where sums payable in respect of depreciation

45A

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

45B

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

Energy-saving components of plant or machinery

45C

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

Expenditure on cars with low carbon dioxide emissions

45D

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

• (a) it is incurred in the relevant period,

• (b) it is expenditure on a car which is first registered on or after 17th April 2002 and which is unused and not second-hand,

• (c) the car—

• (i) is electrically-propelled, or

• (ii) has low CO₂ emissions, and

• (d) the expenditure is not excluded by section 46 (general exclusions).

• (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (1B) The “relevant period” is the period beginning with 17 April 2002 and ending with—

• (a) in the case of expenditure incurred by a company 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.

• (1C) The Treasury may by regulations amend subsection (1B) so as to extend the relevant period.

• (2) For the purposes of this section a car has low CO₂ emissions if it satisfies the conditions in subsections (3) and (4).

• (3) The first condition is that, when the car is first registered, it is so registered on the basis of a qualifying emissions certificate.

• (4) The second condition is that the applicable CO ₂ emissions figure in relation to the car does not exceed 0 grams per kilometre driven.

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

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

• (7) The Treasury may by order amend the amount from time to time specified in subsection (4).

• (8) In this section any reference to a car is to a car within the meaning of section 268A, except that it—

• (a) includes a reference to a mechanically propelled road vehicle of a type commonly used as a hackney carriage, ...

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

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

• (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (11) In this section—

• “applicable CO₂ emissions figure” and “qualifying emissions certificate” have the meanings given in section 268C;

• “electrically-propelled” has the meaning given in section 268B.

Expenditure on plant or machinery for gas refuelling station

45E

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

• (a) it is incurred in the period beginning with 17th April 2002 and ending with 31st March 2025,

• (b) it is expenditure on plant or machinery for a gas refuelling station where the plant or machinery is unused and not second-hand, and

• (c) it is not excluded by section 46 (general exclusions).

• (1A) The Treasury may by order amend subsection (1)(a) so as to extend the period specified.

• (2) For the purposes of this section expenditure on plant or machinery for a gas refuelling station is expenditure on plant or machinery installed at a gas refuelling station for use solely for or in connection with refuelling vehicles with natural gas, biogas or hydrogen fuel.

• (3) For the purposes of subsection (2) the plant or machinery which is for use for or in connection with refuelling vehicles with natural gas, biogas or hydrogen fuel includes—

• (a) any storage tank for natural gas , biogas or hydrogen fuel,

• (b) any compressor, pump, control or meter used for or in connection with refuelling vehicles with natural gas, biogas or hydrogen fuel, and

• (c) any equipment for dispensing natural gas, biogas or hydrogen fuel to the fuel tank of a vehicle.

• (4) For the purposes of this section—

• “biogas” means gas produced by the anaerobic conversion of organic matter and used for propelling vehicles;

• “gas refuelling station” means any premises, or that part of any premises, where vehicles are refuelled with natural gas, biogas or hydrogen fuel;

• “hydrogen fuel” means a fuel consisting of gaseous or cryogenic liquid hydrogen which is used for propelling vehicles;

• “vehicle” means a mechanically propelled road vehicle.

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

45F

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

• (a) it is incurred on or after 17th April 2002,

• (b) it is incurred by a company,

• (c) it is incurred on the provision of plant or machinery for use wholly for the purposes of a ring fence trade, and

• (d) it is not excluded by section 46 (general exclusions).

• (2) This section is subject to section 45G (plant or machinery used for less than five years in a ring fence trade).

• (3) In this section “ ring fence trade ” means a ring fence trade in respect of which tax is chargeable under section 330(1) of CTA 2010 (supplementary charge in respect of ring fence trades).

45G

• (1) Expenditure incurred by a company on the provision of plant or machinery is to be treated as never having been first-year qualifying expenditure under section 45F if the plant or machinery—