102 Writing-down allowance in respect of long-life asset expenditure
Chapter 10A (special rate expenditure and the special rate pool) provides for the writing-down allowance to which a person is entitled in respect of long-life asset expenditure.
(1) Subsection (2) applies if—
(a) a person entitled to do so has made a Part 2 claim in respect of expenditure incurred on the provision of plant or machinery, and
(b) the expenditure fell to be treated as long-life asset expenditure for the purposes of the claim.
(2) If—
(a) at any time after making the Part 2 claim, that claimant or another person makes a Part 2 claim in respect of any qualifying expenditure incurred at any time (including a time before the incurring of the expenditure to which the earlier claim relates) on the provision of the same plant or machinery, and
(b) the expenditure to which the later claim relates—
(i) would not (but for this subsection) be treated for the purposes of the later claim as long-life asset expenditure, and
(ii) is not prevented from being long-life asset expenditure by any of sections 93 to 96,
this Part has effect in relation to the later claim as if the expenditure to which it relates were long-life asset expenditure.
(3) A person makes a Part 2 claim in respect of any expenditure if he—
(a) makes a tax return in which the expenditure is taken into account in determining his available qualifying expenditure for the purposes of this Part;
(b) gives notice of an amendment of a tax return which provides for the expenditure to be so taken into account;
(c) makes a claim in any other way for the expenditure to be so taken into account.
(1) “Special rate expenditure” means—
(a) expenditure incurred on or after the first relevant date to which section 28 (thermal insulation) applies,
(b) expenditure incurred on or after that date to which section 33A (integral features) applies,
(c) long-life asset expenditure (within the meaning of Chapter 10) incurred on or after that date, ...
(d) long-life asset expenditure (within the meaning of that Chapter) incurred before that date but allocated to a pool in a chargeable period beginning on or after that date, ...
(e) expenditure incurred on or after the second relevant date on the provision of a car that is not a main rate car ...
(f) expenditure incurred on or after 1 April 2010 on the provision of cushion gas (within the meaning given by section 70J(7)), and
(g) expenditure incurred on or after the third relevant date on the provision of solar panels.
(2) The first relevant date is—
(a) for corporation tax purposes, 1 April 2008, and
(b) for income tax purposes, 6 April 2008.
(3) The second relevant date is—
(a) for corporation tax purposes, 1 April 2009, and
(b) for income tax purposes, 6 April 2009.
(3A) The third relevant date is—
(a) for corporation tax purposes, 1 April 2012, and
(b) for income tax purposes, 6 April 2012.
(4) In this section—
“car” has the meaning given in section 268A;
“main rate car” has the meaning given in section 104AA.
(1) “Main rate car” means—
(a) a car that is first registered before 1 March 2001,
(b) a car that has low CO2 emissions, or
(c) a car that is electrically-propelled.
(2) For the purposes of this section a car has low CO2 emissions if it meets conditions A and B.
(3) Condition A is that, when the car is first registered, it is so registered on the basis of a qualifying emissions certificate.
(4) Condition B is that the applicable CO2 emissions figure in relation to the car does not exceed 50 grams per kilometre driven.
(5) The Treasury may by order amend the amount from time to time specified in subsection (4).
(6) An order under subsection (5) may contain transitional provision and savings.
(7) In this section—
“applicable CO2 emissions figure” and “qualifying emissions certificate” have the meanings given in section 268C;
“car” has the meaning given in section 268A;
“electrically-propelled” has the meaning given in section 268B.
104B Application of Chapter to part of expenditure
(1) If part only of the capital expenditure on plant and machinery is special rate expenditure—
(a) the part which is such expenditure, and
(b) the part which is not,
are to be treated for the purposes of this Act as expenditure on separate items of plant or machinery.
(2) For the purposes of subsection (1), all such apportionments are to be made as are just and reasonable.
(1) Special rate expenditure to which this section applies, if allocated to a pool, must be allocated to a class pool (“the special rate pool”).
(2) This section applies to special rate expenditure if—
(a) it is incurred wholly and exclusively for the purposes of a qualifying activity, and
(b) it is not expenditure which is required to be allocated to a single asset pool.
(1) The amount of the writing-down allowance to which a person is entitled for a chargeable period in respect of expenditure which is special rate expenditure is 6% of the amount by which AQE exceeds TDR (see Chapter 5).
(1A) But, in relation to special rate expenditure incurred wholly for the purposes of a ring fence trade in respect of which tax is chargeable under section 330(1) of CTA 2010 (supplementary charge in respect of ring fence trades), the amount of the writing-down allowance to which a person is entitled for a chargeable period is 10% of the amount by which AQE exceeds TDR.
(2) Subsection (1) applies even if the special rate expenditure is in a single asset pool.
(3) In the case of expenditure in the special rate pool, this section is subject to section 56A (writing-down allowance for small pools).
(4) Subsections (3) and (4) of section 56 (proportionate increases or reductions in amount in certain cases) apply for the purposes of subsection (1) of this section as they apply for the purposes of subsection (1) of that section.
(1) This section applies if—
(a) section 104D (writing-down allowances at 6% or 10%) has had effect in relation to any special rate expenditure incurred by a person (“the taxpayer”),
(b) any disposal event occurs in relation to the item on which the expenditure was incurred,
(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 item, 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 item.
(3) The notional written-down value is—
QE-A
where—
QE is the taxpayer's expenditure on the item that is qualifying expenditure, and
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 the taxpayer's available qualifying expenditure,
where the item is a long-life asset, that expenditure had not been prevented by the application of a monetary limit from being long-life asset expenditure, and
all allowances had been made in full.
104F Special rate cars: discontinued activity continued by relevant company
(1) This section applies if—
(a) a company (“the taxpayer”) has incurred special rate expenditure within section 104A(1)(e) (expenditure on a car other than a main rate car) to which section 104C applies (allocation to special rate pool),
(b) the qualifying activity carried on by the taxpayer is permanently discontinued, and
(c) conditions A, B and C are met.
(2) Condition A is that the qualifying activity carried on by the taxpayer consisted of or included (other than incidentally) making cars available to other persons.
(3) Condition B is that, at any time in the 6 months after the taxpayer's qualifying activity is permanently discontinued, the qualifying activity of a group relief company consists of or includes (other than incidentally) making cars available to other persons.
(4) Condition C is that the balancing allowance (“SBA”) to which the taxpayer would be entitled (but for this section) in respect of the special rate pool is greater than—
BC–OBA
where—
BC is the total of the balancing charges (if any) to which the taxpayer is liable for the final chargeable period in respect of any pool, and
OBA is the total of the balancing allowances to which the taxpayer is entitled for that period in respect of any pool other than the special rate pool.
For the purposes of this section if BC–OBA is a negative amount it is to be treated as if it were nil.
(5) The balancing allowance to which the taxpayer is entitled in respect of the special rate pool is reduced to an amount equal to BC–OBA.
(6) The relevant company is to be treated as having incurred qualifying expenditure within section 104A(1)(e) (“notional expenditure”), whether or not the relevant company owns cars previously owned by the taxpayer.
(7) The amount of the notional expenditure is an amount equal to the amount by which SBA exceeds BC–OBA.
(8) The relevant company is to be treated as having incurred the notional expenditure on the day after the end of the taxpayer's final chargeable period.
(9) If part of the chargeable period in which the relevant company is treated as incurring expenditure under this section (“the acquisition period”) overlaps with the taxpayer's penultimate chargeable period—
(a) the part of the expenditure which is proportional to that part of the acquisition period is not to be taken into account in determining the relevant company's available qualifying expenditure for the acquisition period, but
(b) this does not prevent that part of the expenditure being taken into account in determining the relevant company's available qualifying expenditure for any subsequent chargeable period.
(10) In this section—
“car” has the meaning given in section 268A;
“company” means any body corporate;
“group relief company” means—
a company to which group relief under Part 5 of CTA 2010 would be available (on the making of a claim) in respect of balancing allowances surrendered by the taxpayer in the taxpayer's final chargeable period, and
a company to which such relief would be available (on the making of a claim) in respect of balancing allowances surrendered by a company within paragraph (a);
“main rate car” has the meaning given in section 104AA;
“penultimate chargeable period” means the chargeable period preceding the final chargeable period;
“the relevant company” means the group relief company mentioned in subsection (3) or, if there is more than one, the one—
nominated by the taxpayer not more than 6 months after the end of the taxpayer's final chargeable period, or
in the absence of such a nomination, nominated by Her Majesty's Revenue and Customs.
(1) This section applies if expenditure incurred by a person on the provision of cushion gas used in a particular gas storage facility includes both new expenditure and old expenditure.
(2) Any disposal event which concerns any of that cushion gas is to be treated for the purposes of this Part as relating to cushion gas which is the subject of the new expenditure before cushion gas which is the subject of the old expenditure.
(3) The result of subsection (2) (including any further application of that subsection) is that a disposal event may be treated as relating—
(a) only to cushion gas which is the subject of the new expenditure,
(b) both to—
(i) cushion gas which is the subject of the new expenditure, and
(ii) cushion gas which is the subject of the old expenditure, or
(c) only to cushion gas which is the subject of the old expenditure.
(4) If a disposal event is treated, as a result of subsection (2), as relating both to—
(a) cushion gas which is the subject of the new expenditure, and
(b) cushion gas which is the subject of the old expenditure,
it is to be treated for the purposes of this Part as two separate disposal events, the first relating to cushion gas within paragraph (a) and the second relating to cushion gas within paragraph (b).
(5) In this section—
“cushion gas” has the meaning given by section 70J(7),
“new expenditure” means expenditure incurred on or after 1 April 2010, and
“old expenditure” means expenditure incurred before that date.
(1) In this Chapter—
(a) “leasing” includes letting a ship or aircraft on charter or letting any other asset on hire, and
(b) references to a lease include a sub-lease (and references to a lessor or lessee are to be read accordingly).
(2) Plant or machinery is used for overseas leasing if it is used for the purpose of being leased to a person who—
(a) is not resident in the United Kingdom, and
(b) does not use the plant or machinery exclusively for earning profits chargeable to tax.
(2A) In determining whether plant or machinery is used for overseas leasing, no account shall be taken of any lease finalised, within the meaning of Part 4 of Schedule 8 to FA 2006, on or after 1st April 2006.
(3) In this Chapter “profits chargeable to tax”—
(a) includes profits chargeable under section 1313(2) of CTA 2009 (profits from exploration and exploitation of the seabed etc.), but
(b) excludes profits arising to a person who, under double taxation arrangements, is afforded or is entitled to claim any relief from the tax chargeable on those profits.
(4) “Double taxation arrangements” means arrangements which have effect under section 2(1) of the Taxation (International and Other Provisions) Act 2010 (double taxation relief by agreement with territories outside the United Kingdom).
(5) “Protected leasing” of plant or machinery means—
(a) short-term leasing of the plant or machinery (as defined in section 121), or
(b) if the plant or machinery is a ship, aircraft or transport container, the use of the ship, aircraft or transport container for a qualifying purpose under section 123 or 124 (letting on charter to UK resident etc.).
(6) In this Chapter “qualifying activity” includes (subject to any provision to the contrary) any activity listed in section 15(1) even if any profits or gains from it are not chargeable to tax.
(1) Subject to subsection (2), the designated period, in relation to expenditure incurred by a person on the provision of plant or machinery, is the period of 10 years beginning with the date on which he first brought the plant or machinery into use.
(2) If the person who incurred the expenditure ceases to own the plant or machinery before the end of the 10 year period, the designated period ends on the date when he ceases to own it.
(3) For the purposes of subsection (2), a person is to be treated as continuing to own plant or machinery so long as it is owned by a person who—
(a) is connected with him, or
(b) acquired it from him as a result of one or more disposals on the occasion of which, or each of which there was a change in the persons carrying on the qualifying activity in relation to which Condition A or Condition B was met.
(3A) Condition A is that—
(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and
(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.
(3B) Condition B is that—
(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,
(b) a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and
(c) at least one company which carried the activity on before the change continued to carry it on after the change.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) Qualifying expenditure to which this section applies, if allocated to a pool, must be allocated to a class pool (“the overseas leasing pool”).
(2) This section applies to qualifying expenditure if—
(a) it is incurred on the provision of plant or machinery for leasing,
(b) the plant or machinery is at any time in the designated period used for overseas leasing which is not protected leasing, and
(c) the expenditure is not—
(i) long-life asset expenditure, or
(ii) expenditure that is required to be allocated to a single asset pool.
108 Effect of disposal to connected person on overseas leasing pool
(1) This section applies if—
(a) a person who has incurred qualifying expenditure which has been allocated to an overseas leasing pool disposes of the plant or machinery to a connected person,
(b) the disposal does not occur on the occasion of a change in the persons carrying on the qualifying activity—
(i) which falls within Chapter 1 of Part 22 of CTA 2010 (transfers of trade without a change of ownership), or
(ii) in relation to which Condition A or Condition B is met, and
(c) a disposal value is required to be brought into account on that occasion under this Part.
(1A) Condition A is that—
(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and
(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.
(1B) Condition B is that—
(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,
(b) a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and
(c) at least one company which carried the activity on before the change continued to carry it on after the change.
(2) The disposal value to be brought into account is—
(a) the market value of the plant or machinery at the time of the disposal, or
(b) if less, the qualifying expenditure incurred by the person disposing of the plant or machinery.
(3) The person acquiring the plant or machinery is to be treated for the purposes of this Part as having incurred expenditure on its provision of an amount equal to the disposal value given by subsection (2).
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) The amount of the writing-down allowance to which a person is entitled for a chargeable period in respect of expenditure to which this section applies is 10% of the amount by which AQE exceeds TDR (see Chapter 5).
(2) This section applies to expenditure incurred on the provision of plant or machinery for leasing if—
(a) the plant or machinery is at any time in the designated period used for overseas leasing which is not protected leasing, and
(b) the expenditure is not long-life asset expenditure.
(3) Subsection (2) applies to expenditure even if the expenditure is in a single asset pool.
(4) Subsections (3) and (4) of section 56 (proportionate increases or reductions in amount in certain cases) apply for the purposes of subsection (1) of this section as they apply for the purposes of subsection (1) of that section.
(1) A person is not entitled to any writing-down or balancing allowances in respect of qualifying expenditure which is within subsection (2).
(2) Expenditure is within this subsection if—
(a) it is incurred on the provision of plant or machinery for leasing,
(b) the plant or machinery is at any time in the designated period used for overseas leasing which is not protected leasing,
(c) the plant or machinery is used otherwise than for a qualifying purpose (see sections 122 to 125), and
(d) the lease is within any of the items in the list below.
List
Leases in relation to which allowances are prohibited
1. | The lease is expressed to be for a period of more than 13 years.
2. | The lease, or a separate agreement, provides for— extending or renewing the lease, or the grant of a new lease,making it possible for the plant or machinery to be leased for a period of more than 13 years.
3. | There is a period of more than one year between the dates on which any two consecutive payments become due under the lease.
4. | Any payments are due under the lease or a collateral agreement other than periodical payments.
5. | If payments due under the lease or a collateral agreement are expressed as monthly amounts due over a period, any payment due for that period is not the same as any of the others. But, for this purpose, ignore variations made under the terms of the lease which are attributable to changes in— the rate of corporation tax or income tax, the rate of capital allowances, any rate of interest where the changes are linked to changes in the rate of interest applicable to inter-bank loans, or the premiums charged for insurance of any description by a person who is not connected with the lessor or the lessee.
6. | The lessor or a person connected with the lessor will, or may in certain circumstances, become entitled at any time to receive from the lessee or any other person a payment, other than a payment of insurance money, which is— of an amount determined before the expiry of the lease, and referable to a value of the plant or machinery at or after the expiry of the lease. For this purpose, it does not matter whether the payment relates to a disposal of the plant or machinery.
(3) In items 4 and 5 of the list “collateral agreement” means an agreement which might reasonably be construed as being collateral to the lease.
111 Excess allowances: standard recovery mechanism
(1) If—
(a) expenditure incurred by a person in providing plant or machinery has qualified for a first-year allowance or a normal writing-down allowance, and
(b) at any time in the designated period, the plant or machinery is used for overseas leasing which is not protected leasing,
the following provisions of this section have effect in relation to the person who is the owner of the plant or machinery when it is first so used.
(2) For the chargeable period in which the plant or machinery is first used as described in subsection (1)(b), the owner is—
(a) liable to a balancing charge of an amount given by subsection (4), and
(b) required to bring into account a disposal value of an amount given by that subsection.
(3) For the chargeable period following that in which the plant or machinery is first used as described in subsection (1)(b), an amount given by subsection (4) is to be allocated to whatever pool is appropriate for plant or machinery which is of that description and is provided for leasing and used for overseas leasing.
(4) The amounts are—
The balancing charge
The amount, if any, by which F + N exceeds T, where—
F is the amount of any first-year allowance made in respect of the qualifying expenditure referred to in subsection (1)(a) (“E”),
N is the total of any normal writing-down allowances made in respect of E for the relevant chargeable periods, and
T is the total of the allowances that could have been made for the relevant chargeable periods if no first-year allowance or normal writing-down allowances had been or could have been made.
The disposal value
The amount, if any, by which E exceeds (F + N), where E, F and N have the meaning given in relation to the amount of the balancing charge.
The amount to be allocated to the pool
The aggregate of the balancing charge and the disposal value.
(5) For the purpose of calculating N, the normal writing-down allowances that were made in respect of expenditure on an item of plant or machinery are to be determined as if that item were the only item of plant or machinery in relation to which Chapter 5 had effect.
(6) “The relevant chargeable periods” means the chargeable period in which the qualifying expenditure was incurred and any subsequent chargeable period up to and including the one in which the plant or machinery was first used as described in subsection (1)(b).
(1) Section 111 applies with the modifications in subsections (2) to (4) in a case in which—
(a) the owner acquired the plant or machinery as a result of a transaction between connected persons (or a series of transactions each of which was between connected persons),
(b) the transaction was not effected (or, if more than one, none of the transactions was effected) on the occasion of a change in the persons carrying on the qualifying activity—
(i) which falls within Chapter 1 of Part 22 of CTA 2010 (transfers of trade without change of ownership), or
(ii) in relation to which Condition A or Condition B is met, and
(c) any of the connected persons is a person to whom—
(i) a first-year allowance or a normal writing-down allowance has been made in respect of expenditure on the provision of the plant or machinery, or
(ii) a balancing allowance has been made in respect of such expenditure without a first-year allowance or normal writing-down allowance having been claimed.
(1A) Condition A is that—
(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and
(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.
(1B) Condition B is that—
(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,
(b) a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and
(c) at least one company which carried the activity on before the change continued to carry it on after the change.
(2) For the purposes of section 111(2) and (3)—
E is the amount of the expenditure in respect of which an allowance within subsection (1)(c) has been made,
F is the amount of any first-year allowance within subsection (1)(c), and
N is the amount of any normal writing-down allowance or balancing allowance within subsection (1)(c).
(3) For the purposes of section 111(2) and (3), any consideration paid or received on a disposal of the plant or machinery between the connected persons is to be disregarded.
(4) If a balancing allowance or a balancing charge has been made in respect of any of the transactions, the amount representing F + N is to be adjusted in a just and reasonable manner.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
113 Excess allowances: special provision for ships
(1) If the plant or machinery referred to in section 111 is a ship—
(a) no allowance is to be made in respect of the ship under section 131(3) (postponed allowances) for the first chargeable period of overseas use or any subsequent chargeable period,
(b) nothing in section 132(2) (disposal events and single ship pool) restricts the operation of section 111, and
(c) the amount of any first-year or writing-down allowance in respect of the ship which has been postponed under section 130 and not made is to be allocated to a long-life asset pool or an overseas leasing pool for the chargeable period following the first chargeable period of overseas use.
(2) “The first chargeable period of overseas use” means the chargeable period in which the plant or machinery is first used for overseas leasing which is not protected leasing.
114 Prohibited allowances: standard recovery mechanism
(1) If—
(a) a first-year allowance, a writing-down allowance or a balancing allowance has been made in respect of expenditure incurred in providing plant or machinery, and
(b) at any time in the designated period, an event occurs such that the expenditure is brought within section 110(2) (cases where allowances are prohibited),
the following provisions have effect in relation to the person owning the plant or machinery immediately before that event.
(2) For the chargeable period in which the event occurs, the owner is—
(a) liable to a balancing charge of an amount equal to A — R, and
(b) required to bring into account a disposal value of an amount equal to E - (A - R).
(3) For the purposes of subsection (2)—
A is the amount of any allowances within subsection (1)(a),
R is any amount previously recovered under section 111 or 112 (recovery of excess allowances), and
E is the amount of the expenditure referred to in subsection (1)(a).
(4) For the purpose of calculating A, the amount of the allowances made in respect of expenditure on an item of plant or machinery is to be determined as if that item were the only item of plant or machinery in relation to which Chapter 5 had effect.
(1) Section 114 applies with the modifications in subsection (2) in a case in which—
(a) an amount falls to be treated as a balancing charge under that section,
(b) the person on whom the balancing charge is to be imposed acquired the plant or machinery in question as a result of a transaction between connected persons (or a series of transactions each of which was between connected persons),
(c) the transaction was not effected (or, if more than one, none of the transactions was effected) on the occasion of a change in the persons carrying on the qualifying activity—
(i) which falls within Chapter 1 of Part 22 of CTA 2010 (transfers of trade without change of ownership), or
(ii) in relation to which Condition A or Condition B is met, and
(d) a first-year allowance, a writing-down allowance or a balancing allowance in respect of expenditure on the provision of that plant or machinery has been made to any of those persons.
(1A) Condition A is that—
(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and
(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.
(1B) Condition B is that—
(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,
(b) a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and
(c) at least one company which carried the activity on before the change continued to carry it on after the change.
(2) For the purpose of calculating the balancing charge—
(a) A is the amount of any allowances within subsection (1)(d),
(b) any consideration paid or received on a disposal of the plant or machinery between the connected persons is to be disregarded, and
(c) if a balancing allowance or a balancing charge has been made in respect of any of the transactions, A is to be adjusted in a just and reasonable manner.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) This section applies if—
(a) plant or machinery is leased to two or more persons jointly,
(b) at least one of them is a person who—
(i) is not resident in the United Kingdom, and
(ii) does not use the plant or machinery exclusively for earning profits chargeable to tax, and
(c) the leasing is not protected leasing.
(2) Subsection (3) applies if, at any time when the plant or machinery is leased as described in subsection (1), the lessees use the plant or machinery for the purposes of a qualifying activity or activities but not for leasing.
(3) The expenditure on the provision of the plant or machinery is to be treated as not subject to sections 107, 109 and 110 if, and to the extent to which, it appears that the profits of the qualifying activity or activities will be chargeable to tax throughout—
(a) the designated period, or
(b) if shorter, the period of the lease.
(4) Subsection (5) applies if, under subsection (3), part of the expenditure is treated as not subject to section 107, 109 or 110.
(5) Whether or not the plant or machinery continues to be leased as described in subsection (1), Chapters 5 (allowances and charges) and 10 (long-life assets) and this Chapter have effect as if—
(a) the part of the expenditure that is not subject to section 107, 109 or 110 were expenditure on the provision of a separate item of plant or machinery, and
(b) the rest were expenditure which has been incurred on the provision of another item of plant or machinery (and which is subject to those sections).
(6) All such apportionments are to be made as are necessary as a result of subsection (5).
117 Recovery of allowances in case of joint lessees
(1) If—
(a) expenditure is incurred on the provision of plant or machinery which is leased as described in section 116(1),
(b) the whole or a part of the expenditure has qualified for a normal writing-down allowance under section 116(3),
(c) at any time in the designated period while the plant or machinery is so leased, no lessee uses the plant or machinery for the purposes of a qualifying activity or activities the profits of which are chargeable to tax, and
(d) section 114 (recovery of prohibited allowances) does not apply at that time and has not applied at any earlier time,
sections 111 and 112 (recovery of excess allowances) apply as if the plant or machinery or (as the case may be) the separate item of plant or machinery referred to in section 116(5)(a) had at that time begun to be used for overseas leasing which is not protected leasing.
(2) If—
(a) the whole or a part of any expenditure has qualified for—
(i) a normal writing-down allowance otherwise than as a result of section 116(3), or
(ii) a first-year allowance,
(b) subsequently, but during the designated period, the plant or machinery is leased as described in section 116(1),
(c) at any time in the designated period while the plant or machinery is so leased, no lessee uses the plant or machinery for the purposes of a qualifying activity or activities the profits of which are chargeable to tax, and
(d) section 114 (recovery of prohibited allowances) does not apply at that time and has not applied at any earlier time,
sections 111 and 112 (recovery of excess allowances) apply as if the plant or machinery (and not any separate item of plant or machinery referred to in section 116(5)(a)) had at that time begun to be used for overseas leasing which is not protected leasing.
(3) Subsections (4) and (5) apply if—
(a) expenditure is incurred on the provision of plant or machinery which is leased as described in section 116(1),
(b) the whole or a part of the expenditure has qualified for a normal writing-down allowance under section 116(3),
(c) at the end of the designated period, the plant or machinery is leased as described in section 116(1) but subsection (1) has not had effect, and
(d) it appears that the extent to which the plant or machinery has been used for the purposes of a qualifying activity or activities the profits of which are chargeable to tax is less than the extent of such use taken into account in determining the amount of the expenditure which qualified for a normal writing-down allowance.
(4) Sections 111 and 112 (recovery of excess allowances) apply as if—
(a) a part of the expenditure corresponding to the reduction in the extent of use referred to in subsection (3)(d) were expenditure on the provision of a separate item of plant or machinery, and
(b) the separate item of plant or machinery had been used, on the last day of the designated period, for overseas leasing which is not protected leasing.
(5) Any disposal value subsequently brought into account under this Part in respect of the plant or machinery must be apportioned by reference to the extent of its use (determined at the end of the designated period) for the purposes of a qualifying activity or activities the profits of which are chargeable to tax.
(6) If an apportionment is made under subsection (5), section 116(6) does not apply.
(1) If—
(a) expenditure is incurred on the provision of plant or machinery, and
(b) before the expenditure has qualified for a normal writing-down allowance, the plant or machinery is used for overseas leasing which is protected leasing,
a claim for a writing-down allowance which takes account of that expenditure must be accompanied by a certificate.
(2) The certificate must specify—
(a) the description of protected leasing,
(b) the person to whom the plant or machinery has been leased, and
(c) if the certificate is given by reference to a chargeable period, all the items of plant or machinery (if more than one) relevant to that period.
(3) Subsection (1) applies, for the purposes of claims to first-year allowances, as if the references to a normal writing-down allowance and to a writing-down allowance included a first-year allowance.
(4) But nothing in subsection (3) prevents subsection (1) from continuing to apply if the use for protected leasing occurs after the expenditure has qualified for one allowance and before it qualifies for another.
(1) If—
(a) any expenditure on plant or machinery has qualified for a first-year allowance or a normal writing-down allowance, and
(b) the plant or machinery is subsequently used at any time in the designated period for overseas leasing which is not protected leasing,
the person who then owns the plant or machinery must give notice of the fact to an officer of Revenue and Customs.
(2) The notice must specify—
(a) the person who is not resident in the United Kingdom to whom the plant or machinery has been leased, and
(b) if the notice is given by reference to a chargeable period, all the items of plant or machinery (if more than one) relevant to that period.
(3) The notice must be given—
(a) no later than 3 months after the end of the chargeable period in which the plant or machinery is first used for overseas leasing which is not protected leasing, or
(b) if at the end of the 3 months the person required to give the notice does not know and cannot reasonably be expected to know that the plant or machinery is being so used, within 30 days of coming to know of it.
(1) If expenditure is incurred on the provision of plant or machinery which is leased as described in section 116(1) (joint lessees: mitigation of regime), the lessor must give notice to an officer of Revenue and Customs.
(2) A notice under subsection (1) must specify—
(a) the names and addresses of the persons to whom the asset is jointly leased,
(b) the part of the expenditure properly attributable to each of them, and
(c) which of them (so far as the lessor knows) is resident in the United Kingdom.
(3) If circumstances occur such that section 117(1) or (2) (recovery of allowances) applies, the person who is then the lessor must give notice of the fact to an officer of Revenue and Customs.
(4) A notice under subsection (3) must specify—
(a) any of the joint lessees who is not resident in the United Kingdom to whom the plant or machinery has been leased, and
(b) if it is given by reference to a chargeable period, all the items of plant or machinery (if more than one) relevant to that period.
(5) A notice under this section must be given—
(a) no later than 3 months after the end of the chargeable period in which the plant or machinery is first leased as described in section 116(1) or (as the case may be) in which the circumstances referred to in subsection (3) occur, or
(b) if at the end of the 3 months the person required to give the notice does not know and cannot reasonably be expected to know that the plant or machinery is being so used, within 30 days of coming to know of it.
(1) Leasing of plant or machinery is short-term leasing if—
(a) the number of consecutive days for which it is leased to the same person will normally be less than 30, and
(b) the total number of days for which it is leased to that person in any period of 12 months will normally be less than 90.
(2) Leasing of plant or machinery is also short-term leasing if—
(a) the number of consecutive days for which the plant or machinery is leased to the same person will not normally exceed 365, and
(b) the total length of the periods for which it is leased in any consecutive period of 4 years within the designated period to lessees in circumstances not falling within section 125(4) (other qualifying purposes: non-leasing use) will not exceed 2 years.
(3) If any plant or machinery is leased as a number of items which—
(a) form part of a group of items of the same or a similar description, and
(b) are not separately identifiable,
all items in the group may be treated as used for short-term leasing if substantially the whole of the items in the group are so used.
(4) For the purposes of subsections (1) and (2) persons who are connected with each other are to be treated as the same person.
(1) Plant or machinery is used for a qualifying purpose at any time when any of the persons listed in subsection (2) uses it for short-term leasing (as defined by section 121).
(2) The persons are—
(a) the person (“X”) who incurred expenditure on the provision of the plant or machinery;
(b) a person who is connected with X;
(c) a person who acquired the plant or machinery from X as a result of a disposal on the occasion of which, or two or more disposals on the occasion of each of which there was a change in the persons carrying on the qualifying activity in relation to which Condition A or B was met.
(d) a person to whom the plant or machinery is leased and who is resident in the United Kingdom;
(e) a person to whom the plant or machinery is leased, who is carrying on a qualifying activity in the United Kingdom and who uses the plant or machinery for the short-term leasing in the course of that activity.
(2A) Condition A is that—
(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and
(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.
(2B) Condition B is that—
(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,
(b) a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and
(c) at least one company which carried the activity on before the change continued to carry it on after the change.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) A ship is used for a qualifying purpose at any time when it is let on charter in the course of a trade which consists of or includes operating ships by a person who is—
(a) resident in the United Kingdom or carries on the trade there, and
(b) responsible for navigating and managing the ship throughout the period of the charter and for defraying—
(i) all expenses in connection with the ship throughout that period, or
(ii) substantially all such expenses other than those directly incidental to a particular voyage or to the employment of the ship during that period.
(2) Subsection (1) applies, with the necessary modifications, in relation to aircraft as it applies in relation to ships.
(3) For the purposes of subsection (1)(b) a person is responsible for something if he—
(a) is responsible as principal, or
(b) appoints another person to be responsible in his place.
(4) Subsections (1) and (2) do not apply if the main object, or one of the main objects—
(a) of the letting of the ship or aircraft on charter,
(b) of a series of transactions of which the letting of the ship or aircraft on charter was one, or
(c) of any of the transactions in such a series,
was to obtain a writing-down allowance determined without regard to section 109 (writing-down allowances at 10%) in respect of expenditure incurred by any person on the provision of the ship or aircraft.
(1) A transport container is used for a qualifying purpose at any time when it is leased in the course of a trade which is carried on by a person who—
(a) is resident in the United Kingdom, or
(b) carries on the trade there,
and either of the conditions given below is met.
(2) The first condition is that—
(a) the person’s trade consists of or includes the operation of ships or aircraft, and
(b) the container is at other times used by that person in connection with the operation of the ships or aircraft.
(3) The second condition is that the container is leased under a succession of leases to different persons who are not, or most of whom are not, connected with each other.
(1) Plant or machinery is used for a qualifying purpose at any time when subsection (2) or (4) applies.
(2) This subsection applies if any of the persons listed in subsection (3) uses the plant or machinery for the purpose of a qualifying activity without leasing it.
(3) The persons are—
(a) the person (“X”) who incurred expenditure on the provision of the plant or machinery;
(b) a person who is connected with X;
(c) a person who acquired the plant or machinery from X as a result of a disposal on the occasion of which, or two or more disposals on the occasion of each of which there was a change in the persons carrying on the qualifying activity in relation to which Condition A or B was met.
(3A) Condition A is that—
(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and
(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.
(3B) Condition B is that—
(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,
(b) a company which was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and
(c) at least one company which carried the activity on before the change continued to carry it on after the change.
(4) This subsection applies if—
(a) a lessee uses the plant or machinery for the purposes of a qualifying activity without leasing it, and
(b) if he had incurred expenditure on the provision of the plant or machinery at that time, the expenditure would have fallen to be included, in whole or in part, in his available qualifying expenditure for a chargeable period.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) In this Chapter “normal writing-down allowance” means a writing-down allowance of an amount determined without regard to sections 102 and 109 (reduced rates).
(2) In this Chapter any reference, in relation to any person, to expenditure having qualified for a normal writing-down allowance is to—
(a) the expenditure, or part of it, having fallen to be included in that person’s available qualifying expenditure for any chargeable period, and
(b) that available qualifying expenditure being expenditure which is not subject to section 102 or 109.
(3) Any reference in this Chapter to a person’s expenditure having qualified for a first-year allowance is to such an allowance having fallen to be made in respect of the whole or any part of the expenditure.
(1) Qualifying expenditure incurred on the provision of a ship for the purposes of a qualifying activity, if allocated to a pool, must be allocated to a single asset pool (a “single ship pool”).
(2) Subsection (1) is subject to the exceptions given in section 128 and any election under section 129 to use the appropriate non-ship pool.
(3) In this Chapter “the appropriate non-ship pool”, in relation to a ship, means the pool to which the expenditure incurred on the provision of the ship would be allocated, or would have been allocated, apart from this Chapter.
128 Expenditure which is not to be allocated to single ship pool
(1) The expenditure is not to be allocated to a single ship pool if the ship is provided for leasing unless—
(a) the ship is not used for overseas leasing at any time in the designated period, or if it is, is used only for protected leasing, and
(b) it appears that the ship will be used for a qualifying purpose in the designated period and will not be used for any other purpose at any time in that period.
(2) The expenditure is not to be allocated to a single ship pool if the qualifying activity for the purposes of which the ship is provided is special leasing of plant or machinery.
(3) In subsection (1) “leasing”, “overseas leasing”, “protected leasing”, “qualifying purpose” and “designated period” have the same meaning as in Chapter 11 (overseas leasing).
(1) A person who has incurred qualifying expenditure on the provision of a ship may, by an election made for a chargeable period, allocate to the appropriate non-ship pool—
(a) all or a part of any qualifying expenditure that would otherwise be allocated to a single ship pool, or
(b) all or a part of the available qualifying expenditure in a single ship pool.
(2) An election under this section must be made by notice given to an officer of Revenue and Customs—
(a) for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;
(b) for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.
(3) “The relevant chargeable period” means the chargeable period for which the election is made.
130 Notice postponing first-year or writing-down allowance
(1) A person who is entitled to a first-year allowance for a chargeable period in respect of qualifying expenditure on the provision of a ship may, by notice, postpone all or part of the allowance.
(2) A person who is entitled to a writing-down allowance for a chargeable period in respect of qualifying expenditure allocated to a single ship pool may, by notice, postpone all or part of the allowance.
(3) A notice under this section must specify the amount postponed.
(4) A notice under this section must be given to an officer of Revenue and Customs—
(a) for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;
(b) for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.
(5) “The relevant chargeable period” means the chargeable period for which the person is entitled to the allowance.
(6) If a person entitled to a first-year allowance in respect of qualifying expenditure on the provision of a ship claims the allowance in respect of part of the expenditure, subsection (1) applies to the allowance claimed.
(7) If a person entitled to a writing-down allowance in respect of qualifying expenditure allocated to a single ship pool requires the allowance to be reduced to a specified amount, subsection (2) applies to the allowance as so reduced.
(1) If a person gives notice in respect of a chargeable period under section 130—
(a) the allowance is withheld or withdrawn to the extent that it is postponed, but
(b) sections 57 to 59 (calculation of available qualifying expenditure) apply as if the allowance had been made to the person without any postponement.
(2) On making a claim, the person is entitled to have all or part of a postponed first-year allowance made to him as a first-year allowance for one or more subsequent chargeable periods in which he is carrying on the qualifying activity.
(3) On making a claim, the person is entitled to have all or part of a postponed writing-down allowance made to him as a writing-down allowance for one or more subsequent chargeable periods in which he is carrying on the qualifying activity.
(4) The total amount of any first-year allowances made under subsection (2) or writing-down allowances made under subsection (3) must not exceed the amount of the postponed allowance in question.
(5) A writing-down allowance made under subsection (3) is ignored for the purposes of section 59 (unrelieved qualifying expenditure).
(6) The fact that a postponed writing-down allowance is claimed for a chargeable period does not affect entitlement to, or the amount of, any other writing-down allowance to which the person is otherwise entitled for that chargeable period.
(7) A postponed allowance is not, merely because of the postponement, included in the reference in section 101(3) of CTA 2010 (group relief: meaning of “capital allowance excess”) to an allowance or amount brought forward from an earlier period.
(1) A person is required to bring a disposal value into account in a single ship pool if the ship—
(a) is provided for leasing, and
(b) begins to be used otherwise than for a qualifying purpose within the first 4 years of the designated period.
(2) If any disposal event (including one under subsection (1)) occurs in relation to a single ship pool—
(a) the available qualifying expenditure in the single ship pool is allocated, for the chargeable period in which the event occurs, to the appropriate non-ship pool,
(b) the disposal value must be brought into account as a disposal value for that chargeable period in the appropriate non-ship pool, and
(c) the single ship pool ends without a final chargeable period and without any liability to a balancing charge arising.
(3) Subsections (1) and (2) apply even if, as a result of an election under section 129, some of the qualifying expenditure on the provision of the ship has been allocated to the appropriate non-ship pool.
(4) In subsection (1) “leasing”, “qualifying purpose” and “designated period” have the same meaning as in Chapter 11 (overseas leasing).
(1) This section applies if—
(a) a person has incurred qualifying expenditure on the provision of a ship for the purposes of a qualifying activity, and
(b) the ship ceases to be owned by the person without having been brought into use for the purposes of the qualifying activity.
(2) Any writing-down allowances that have previously been made in respect of qualifying expenditure in the single ship pool (or which have been postponed) must be withdrawn.
(3) The amount of any writing-down allowances withdrawn under subsection (2) is allocated, for the chargeable period in which the person ceases to own the ship, to the appropriate non-ship pool.
(4) Any adjustments required by this section are in addition to any adjustments required under section 132 (disposal events and single ship pool).