195A Acquisition of ownership by assignee of energy services provider
(1) If section 192A(2)(a) applies (cessation of ownership of energy services provider as a result of assignment), the assignee is to be treated, on and after the assignment—
(a) as having incurred expenditure, consisting of the consideration given by him for the assignment, on the provision of the fixture, and
(b) as being the owner of the fixture.
(2) For the purposes of section 192A (and subsection (1) and section 195B) the assignee is to be treated as being an energy services provider who owns the fixture under section 180A.
(1) If section 192A(2)(b) applies (discharge of obligations of client) because the client has paid a capital sum, the client is to be treated—
(a) as having incurred expenditure, consisting of the capital sum, on the provision of the fixture, and
(b) as being, on and after the time of payment, the owner of the fixture.
(2) Section 192A(3)(assignee of client) applies in relation to subsection (1).
196 Disposal values in relation to fixtures: general
(1) The disposal value to be brought into account in relation to a fixture depends on the nature of the disposal event, as shown in the Table—
Table
Disposal values: fixtures
1. Disposal event | 2. Disposal value
1. Cessation of ownership of the fixture under section 188 because of a sale of the qualifying interest except where item 2 applies. | The part of the sale price that— falls to be treated for the purposes of this Part as expenditure incurred by the purchaser on the provision of the fixture, or would fall to be so treated if the purchaser were entitled to an allowance.
2. Cessation of ownership of the fixture under section 188 because of a sale of the qualifying interest where— the sale is at less than market value, and the condition in subsection (2) is met by the purchaser. | The part of the price that would be treated for the purposes of this Part as expenditure by the purchaser on the provision of the fixture if— the qualifying interest were sold at market value, that sale took place immediately before the event which causes the former owner to be treated as ceasing to be the owner of the fixture, and that event were disregarded in determining that market value.
3. Cessation of ownership of the fixture under section 188 where— neither item 1 nor 2 applies, but the qualifying interest continues in existence after that time or would so continue but for its becoming merged in another interest. | The disposal value given for item 2.
4. Cessation of ownership of the fixture under section 188 because of the expiry of the qualifying interest. | If the person receives a capital sum, by way of compensation or otherwise, by reference to the fixture, the amount of the capital sum. In any other case, nil.
5. Cessation of ownership of the fixture under section 190 because the lessee has become the owner under section 183. | The part of the capital sum given by the lessee for the lease referred to in section 183 that falls to be treated for the purposes of this Part as the lessee’s expenditure on the provision of the fixture.
6. Cessation of ownership of the fixture under section 191 (severance). | The market value of the fixture at the time of the severance.
7. Cessation of ownership of the fixture because section 192(2)(a) (assignment of rights) applies. | The consideration given by the assignee for the assignment.
8. Cessation of ownership of the fixture because section 192(2)(b) (discharge of equipment lessee’s obligations) applies on the payment of a capital sum. | The capital sum paid to discharge the financial obligations of the equipment lessee.
8A. Cessation of ownership of the fixture because section 192A(2)(a)(assignment of rights) applies. | The consideration given by the assignee for the assignment.
8B. Cessation of ownership of the fixture because section 192A(2)(b) (discharge of client’s obligations) applies on the payment of a capital sum. | The capital sum paid to discharge the financial obligations of the client.
9. Permanent discontinuance of the qualifying activity followed by the sale of the qualifying interest. | The part of the sale price that— falls to be treated as expenditure incurred by the purchaser on the provision of the fixture, or would fall to be so treated if the purchaser were entitled to an allowance.
10. Permanent discontinuance of the qualifying activity followed by the demolition or destruction of the fixture. | The net amount received for the remains of the fixture, together with— any insurance money received in respect of the demolition or destruction, and any other compensation of any description so received, so far as it consists of capital sums.
11. Permanent discontinuance of the qualifying activity followed by the permanent loss of the fixture otherwise than as a result of its demolition or destruction. | Any insurance money received in respect of the loss and, so far as it consists of capital sums, any other compensation of any description so received.
12. The fixture begins to be used wholly or partly for purposes other than those of the qualifying activity. | The part of the price that would fall to be treated for the purposes of this Part as expenditure incurred by the purchaser on the provision of the fixture if the qualifying interest were sold at market value.
(2) The condition referred to in item 2 of the Table is met by the purchaser if—
(a) the purchaser’s expenditure on the provision of the fixture cannot be qualifying expenditure under this Part or Part 6 (research and development allowances), or
(b) the purchaser is a dual resident investing company which is connected with the former owner.
(3) Items 1 and 5 of the Table are subject to sections 198 and 199 (election to fix apportionment on sale of qualifying interest or grant of lease).
(4) Section 192(3) (assignee of equipment lessee) applies in relation to item 8 of the Table.
(4A) Section 192A(3)(assignee of client) applies in relation to item 8B of the Table.
(5) Nothing in sections 188 to 192A or this section prevents a disposal value having to be brought into account under Chapter 5 because of a disposal event not dealt with in these sections.
(6) This section is subject to section 197.
(1) This section applies if—
(a) a person (“the taxpayer”) is treated under this Chapter as the owner of any plant or machinery as a result of incurring any expenditure,
(b) any disposal event occurs in relation to the plant or machinery,
(c) the disposal value to be brought into account by the taxpayer would (but for this section) be less than the notional written-down value of the plant or machinery, and
(d) the disposal event is part of, or occurs as a result of, a scheme or arrangement the main purpose or one of the main purposes of which is the obtaining by the taxpayer of a tax advantage under this Part.
(2) The disposal value that the taxpayer must bring into account is the notional written-down value of the plant or machinery.
(3) The notional written-down value is—
QE
-
A
where—
QE is the taxpayer’s expenditure on the plant or machinery that is qualifying expenditure,
A is the total of all allowances which could have been made to the taxpayer in respect of that expenditure if—
that expenditure had been the only expenditure that had ever been taken into account in determining his available qualifying expenditure, and
all allowances had been made in full.
198 Election to apportion sale price on sale of qualifying interest
(1) This section applies if the disposal value of a fixture is required to be brought into account in accordance with item 1 or 9 of the Table in section 196 (sale of qualifying interest at not less than market value, etc.).
(2) The seller and the purchaser may jointly, by an election, fix the amount that is to be treated—
(a) for the purposes of item 1 or (as the case may be) 9 of the Table, and
(b) for the other purposes of this Part,
as the part of the sale price that is expenditure incurred by the purchaser on the provision of the fixture.
(3) The amount fixed by the election must not exceed—
(a) the amount of the capital expenditure which was treated as incurred by the seller on the provision of the fixture or of the plant or machinery which became the fixture, or
(b) the actual sale price.
(4) If an election fixes the amount to be treated as the part of the sale price—
(a) the remaining amount (if any) of the sale price is to be treated for the purposes of this Act as expenditure attributable to the acquisition of the property which is not the fixture but is acquired for that amount, and
(b) if there is no remaining amount, the expenditure so attributable is to be treated for the purposes of this Act as nil.
(5) This section is subject to—
(a) sections 186, 186A and 187 (fixtures on which industrial buildings allowance, business premises renovation allowance or research and development allowance has been made),
(b) section 197 (disposal values in avoidance cases), and
(c) sections 200 and 201 (further provisions about elections).
199 Election to apportion capital sum given by lessee on grant of lease
(1) This section applies if the disposal value of a fixture is required to be brought into account in accordance with item 5 of the Table in section 196 (on acquisition of ownership by incoming lessee under section 183).
(2) The persons who are the lessor and the lessee for the purposes of section 183 may jointly, by an election, fix the amount that is to be treated—
(a) for the purposes of item 5 of the Table, and
(b) for the other purposes of this Part,
as the part of the capital sum that is expenditure incurred by the lessee on the provision of the fixture.
(3) The amount fixed by the election must not exceed—
(a) the amount of the capital expenditure which was treated as incurred by the lessor on the provision of the fixture or of the plant or machinery which became the fixture, or
(b) the actual capital sum.
(4) If an election fixes the amount to be treated as the part of the capital sum—
(a) the remaining amount (if any) of the capital sum is to be treated for the purposes of this Act as expenditure attributable to the acquisition of the property which is not the fixture but is acquired for that amount, and
(b) if there is no remaining amount, the expenditure so attributable is to be treated for the purposes of this Act as nil.
(5) This section is subject to—
(a) sections 186, 186A and 187 (fixtures on which industrial buildings allowance, business premises renovation allowance or research and development allowance has been made),
(b) section 197 (disposal values in avoidance cases), and
(c) sections 200 and 201 (further provisions about elections).
200 Elections under sections 198 and 199: supplementary
(1) In this section and section 201, references to an election are to an election under section 198 or 199.
(2) An apportionment made by an election has effect in place of any apportionment that would otherwise be made under sections 562, 563 and 564(1) (apportionment and procedure for determining apportionment).
(3) An election is irrevocable.
(4) If, as a result of circumstances arising after the making of an election, the maximum amount which could be fixed by the election is reduced to an amount which is less than the amount specified in the election, the election is to be treated, for the purposes of this Act, as having specified the amount to which the maximum is reduced.
201 Elections under sections 198 and 199: procedure
(1) An election must be made by notice to an officer of Revenue and Customs no later than 2 years after the date when—
(a) the purchaser acquires the qualifying interest, in the case of an election under section 198, or
(b) the lessee is granted the lease, in the case of an election under section 199.
But this is subject to subsection (1A).
(1A) Where—
(a) the requirement of subsection (6) of section 187A (effect of changes in ownership of fixture: fixed value requirement) applies, or may in future apply by reason of a person being required to bring the disposal value of plant and machinery into account in accordance with item 1, 5 or 9 of the Table in section 196,
(b) an application is made to the tribunal for the purposes of section 187A(7)(a), and
(c) that application is not determined before the end of the period mentioned in subsection (1) of this section,
subsection (1) does not apply and an election within section 187A(7)(b) may be made by notice to an officer of Revenue and Customs at any time before the tribunal determines the application or the application is withdrawn.
(2) The amount fixed by an election must be quantified at the time when the election is made.
(3) The notice must state—
(a) the amount fixed by the election,
(b) the name of each of the persons making the election,
(c) information sufficient to identify the plant or machinery,
(d) information sufficient to identify the relevant land,
(e) particulars of—
(i) the interest acquired by the purchaser, in the case of an election under section 198, or
(ii) the lease granted to the lessee, in the case of an election under section 199, and
(f) in relation to each of the persons making the election—
(i) that person's Unique Taxpayer Reference, or
(ii) that the person does not have a Unique Taxpayer Reference.
(4) If a person—
(a) has joined in making an election, and
(b) subsequently makes a tax return for a period which is the first period for which he is making a tax return in which the election has an effect for tax purposes in his case,
a copy of the notice containing the election must accompany the return.
(5) The following provisions do not apply to the election—
(a) section 42 of, and Schedule 1A to, TMA 1970 (claims and elections for income tax purposes);
(b) paragraphs 54 to 60 of Schedule 18 to FA 1998 (claims and elections for corporation tax purposes).
(6) References in this section to a tax return, in the case of an election for the purposes of a trade, profession or business carried on by persons in partnership, are to be read, in relation to those persons, as references to a return under section 12AA of TMA 1970 (partnership returns).
(1) Any reference in this Chapter to a person being entitled to an allowance in respect of expenditure on the provision of a fixture includes the person having a pool to which expenditure on the provision of the fixture has been allocated.
But this is subject to subsection (2).
(2) If—
(a) expenditure on the provision of the fixture has been allocated to a pool, and
(b) the person is required under section 61(1) to bring the disposal value of the fixture into account in the pool,
the person is not entitled to an allowance in respect of the expenditure allocated to that pool for any chargeable period after that in which the disposal event occurs.
(3) For the purposes of this Chapter, a person makes a claim in respect of expenditure if he—
(a) makes a claim for an allowance in respect of that expenditure,
(b) makes a tax return in which that expenditure is taken into account in determining his available qualifying expenditure for the purposes of this Part, or
(c) gives notice of an amendment of a tax return which provides for that expenditure to be so taken into account.
(1) If a person who has made a tax return (“the taxpayer”) becomes aware that, after making it, anything in it has become incorrect for any of the reasons given in subsection (2), the taxpayer must give notice to an officer of Revenue and Customs specifying how the return needs to be amended.
(2) The reasons are that—
(a) an approval given for the purposes of section 180 (affordable warmth programme) has been withdrawn;
(b) section 181(2), 182(2) , 182A(2) or 184(2) (another person has a prior right) applies in the taxpayer’s case;
(c) section 185 (restriction on qualifying expenditure where another person has claimed an allowance) applies in the taxpayer’s case;
(d) an election is made under section 198 or 199 (election to fix apportionment);
(e) section 200(4) (reduction in amount which can be fixed by an election) applies in the taxpayer’s case.
(3) The notice must be given within 3 months beginning with the day on which the taxpayer first became aware that anything contained in the tax return had become incorrect for any of the reasons given in subsection (2).
(4) All such assessments and adjustments of assessments are to be made as are necessary to give effect to this Chapter.
(1) Subsections (2) and (3) apply if—
(a) any question arises as to whether any plant or machinery has become, in law, part of a building or other land, and
(b) that question is material to the tax liability (for whatever period) of two or more persons.
(2) The question is to be determined, for the purposes of the tax of all the persons concerned, by the tribunal.
(3) 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.
(4) Subsections (5) and (6) apply if any question relating to an election under section 198 or 199 (apportionments) arises for determination by the tribunal for the purposes of any proceedings before it.
(5) The tribunal must determine the question separately from any other questions in those proceedings.
(6) Each of the persons who has joined in the election is entitled to be a party to the proceedings of the tribunal concerned with the determination of the question; and the tribunal’s determination has effect as if made in an appeal to which each of those persons was a party.
205 Reduction of annual investment allowance and first-year allowances
(1) If it appears that a person carrying on a qualifying activity has incurred expenditure on the provision of plant or machinery—
(a) partly for the purposes of the qualifying activity, and
(b) partly for other purposes,
any annual investment allowance or first-year allowance to which he is entitled in respect of the expenditure must be reduced to an amount which is just and reasonable having regard to the relevant circumstances.
(2) The relevant circumstances include, in particular, the extent to which it appears that the plant or machinery is likely to be used for purposes other than those of the qualifying activity in question.
(3) In calculating for the purposes of section 58 the balance left after deducting a first-year allowance, a reduction under subsection (1) is to be disregarded.
(1) Qualifying expenditure to which this subsection applies, if allocated to a pool, must be allocated to a single asset pool.
(2) Subsection (1) applies to qualifying expenditure incurred by a person carrying on a qualifying activity—
(a) partly for the purposes of the qualifying activity, and
(b) partly for other purposes.
(3) If a person is required to bring a disposal value into account in a pool for a chargeable period because the plant or machinery begins to be used partly for purposes other than those of the qualifying activity, an amount equal to that disposal value is allocated (as expenditure on the plant or machinery) to a single asset pool for that chargeable period.
(4) In the case of a single asset pool under subsection (1), there is no final chargeable period or disposal event merely because the plant or machinery begins to be used partly for purposes other than those of the qualifying activity.
207 Reduction of allowances and charges on expenditure in single asset pool
(1) This section applies if a person’s expenditure is in a single asset pool under section 206(1) or (3).
(2) The amount of—
(a) any writing-down allowance or balancing allowance to which the person is entitled, or
(b) any balancing charge to which the person is liable,
must be reduced to an amount which is just and reasonable having regard to the relevant circumstances.
(3) The relevant circumstances include, in particular, the extent to which it appears that the plant or machinery was used in the chargeable period in question for purposes other than those of the person’s qualifying activity.
(4) In calculating under section 59 the amount of unrelieved qualifying expenditure carried forward, a reduction of a writing-down allowance under subsection (2) is to be disregarded.
(5) If a person entitled to a writing-down allowance for a chargeable period—
(a) does not claim the allowance, or
(b) claims less than the full amount of the allowance,
the unrelieved qualifying expenditure carried forward from the period is to be treated as not reduced or (as the case may be) only proportionately reduced.
208 Effect of significant reduction in use for purposes of qualifying activity
(1) This section applies if—
(a) expenditure is allocated to a single asset pool under this Chapter,
(b) there is such a change of circumstances as would make it appropriate for any reduction falling to be made under section 207—
(i) for the chargeable period in which the change takes place (“the relevant chargeable period”), or
(ii) for any subsequent chargeable period,
to represent a larger proportion of the amount reduced than would have been appropriate apart from the change,
(c) no disposal value in respect of the plant or machinery would, apart from this section, fall to be brought into account for the relevant chargeable period, and
(d) the market value of the plant or machinery at the end of the relevant chargeable period exceeds the available qualifying expenditure in that pool for that period by more than £1 million.
(2) If this section applies—
(a) a disposal value is required to be brought into account in the single asset pool for the relevant chargeable period, and
(b) section 206 applies as if, at the beginning of the following chargeable period, expenditure had been incurred on the provision of the plant or machinery of an amount equal to the disposal value brought into account as a result of paragraph (a).
(1) This section applies if—
(a) a disposal value is required to be brought into account under section 61,
(b) the disposal event is that the person ceases to own a section 206 car because of a sale or the performance of a contract, and
(c) allowances under this Part in respect of the person's expenditure under that transaction are restricted under section 217 or 218 (anti-avoidance).
(2) A car is a section 206 car if expenditure on the provision of the car is required to be allocated to a single asset pool under that section.
(3) The disposal value to be brought into account is—
(a) the market value of the car at the time of the disposal event, or
(b) if less, the capital expenditure incurred, or treated as incurred, on the provision of the car by the person disposing of it.
(4) The person acquiring the car is to be treated as having incurred capital expenditure on its provision of an amount equal to the disposal value required to be brought into account under subsection (3).
(5) In this section “car” has the meaning given in section 268A.
In this Chapter “partial depreciation subsidy” means a sum which—
(a) is payable directly or indirectly to a person who has incurred qualifying expenditure for the purposes of a qualifying activity,
(b) is in respect of, or takes account of, part of the depreciation of the plant or machinery resulting from its use for the purposes of that activity, and
(c) does not fall to be taken into account as income of that person or in calculating the profits of any qualifying activity carried on by him.
210 Reduction of annual investment allowance and first-year allowances
(1) If—
(a) a person has incurred qualifying expenditure for the purposes of a qualifying activity carried on by him, and
(b) it appears that a partial depreciation subsidy is, or will be, payable to him in the period during which the plant or machinery will be used for the purposes of that qualifying activity,
the amount of any annual investment allowance or first-year allowance in respect of that expenditure must be reduced to an amount which is just and reasonable having regard to the relevant circumstances.
(2) In calculating for the purposes of section 58 the balance left after deducting a first-year allowance, a reduction under subsection (1) is to be disregarded.
(1) Qualifying expenditure to which this subsection applies, if allocated to a pool, must be allocated to a single asset pool.
(2) Subsection (1) applies to qualifying expenditure if a partial depreciation subsidy relating to the plant or machinery has been paid to the person who incurred the expenditure.
(3) Subsection (4) applies if—
(a) qualifying expenditure has been allocated to a pool, and
(b) a partial depreciation subsidy relating to the plant or machinery is paid to that person.
(4) For the chargeable period in which the partial depreciation subsidy is paid—
(a) the person is required to bring a disposal value into account in the pool referred to in subsection (3), and
(b) an amount equal to the disposal value is allocated (as expenditure on the plant or machinery) to a single asset pool.
(5) If qualifying expenditure in respect of any plant or machinery is in a single asset pool under this section, there is no further allocation of that qualifying expenditure because a further partial depreciation subsidy is paid in respect of that plant or machinery.
212 Reduction of allowances and charges on expenditure in single asset pool
(1) This section applies if expenditure is in a single asset pool under section 211(1) or (4).
(2) The amount of—
(a) any writing-down allowance or balancing allowance to which the person is entitled, or
(b) any balancing charge to which the person is liable,
must be reduced to an amount which is just and reasonable having regard to the relevant circumstances.
(3) In calculating under section 59 the amount of unrelieved qualifying expenditure carried forward, a reduction of a writing-down allowance under subsection (2) is to be disregarded.
(4) If a person entitled to a writing-down allowance for a chargeable period—
(a) does not claim the allowance, or
(b) claims less than the full amount of the allowance,
the unrelieved qualifying expenditure carried forward from the period is to be treated as not reduced or (as the case may be) only proportionately reduced.
212ZA Apportionment of expenditure incurred partly for NI rate activity
(1) If in a chargeable period a company has incurred qualifying expenditure on the provision of plant or machinery—
(a) partly for the purposes of an NI rate activity, and
(b) partly for the purposes of a main rate activity,
then for the purposes of any annual investment allowance or first year allowance to which the company is entitled the expenditure is to be apportioned between the NI rate activity and the main rate activity on a basis which is just and reasonable having regard to the relevant circumstances.
(2) The relevant circumstances include, in particular, the extent to which it appears that the plant or machinery is likely to be used for purposes of the NI rate activity and the extent to which it appears that it is likely to be used for the main rate activity.
(3) If the allowance falls to be reduced under section 205 or 210, it is the reduced amount that is apportioned under subsection (1).
(1) Qualifying expenditure to which this subsection applies, if allocated to a pool, must be allocated to a single asset pool.
(2) Subsection (1) applies to qualifying expenditure incurred by a company carrying on both an NI rate activity and a main rate activity where the expenditure is incurred—
(a) partly for the purposes of the NI rate activity, and
(b) partly for the purposes of the main rate activity.
(3) If a company is required to bring a disposal value into account in a pool for a chargeable period because the plant or machinery begins to be used for the purposes of an NI rate activity as well as for the purposes of a main rate activity, or begins to be used for the purposes of a main rate activity as well as for the purposes of an NI rate activity, an amount equal to that disposal value is allocated (as expenditure on the plant or machinery) to a single asset pool for that chargeable period.
(4) In the case of a single asset pool under subsection (1) or (3), there is no disposal event merely because the plant or machinery begins to be used to a greater extent for the purposes of the NI rate activity or for the purposes of the main rate activity.
212ZC Allowances and charges on expenditure in single asset pool
(1) This section applies if a company's expenditure is in a single asset pool under section 212ZB(1) or (3).
(2) The amount of—
(a) any writing-down allowance or balancing allowance to which the company is entitled, or
(b) any balancing charge to which the company is liable,
is to be apportioned between the NI rate activity and the main rate activity on a basis which is just and reasonable having regard to the relevant circumstances.
(3) The relevant circumstances include, in particular, the extent to which it appears that the plant or machinery was used in the chargeable period in question for the purposes of the NI rate activity and the extent to which it was used in the chargeable period in question for the purposes of the main rate activity.
212ZD Effect of significant change in balance of use
(1) This section applies if—
(a) expenditure is allocated to a single asset pool under this Chapter,
(b) there is such a change of circumstances as would make it appropriate for any apportionment falling to be made under section 212ZC—
(i) for the chargeable period in which the change takes place (“the relevant chargeable period”), or
(ii) for any subsequent chargeable period,
to be substantially different from the apportionment that would have been appropriate apart from the change,
(c) no disposal value in respect of the plant and machinery would, apart from this section, fall to be brought into account for the relevant chargeable period, and
(d) the market value of the plant and machinery at the end of the relevant chargeable period exceeds the available qualifying expenditure by more than £1 million.
(2) If this section applies—
(a) a disposal value is required to be brought into account in the single asset pool for the relevant chargeable period, and
(b) section 212ZA applies as if, at the beginning of the following chargeable period, expenditure has been incurred on the provision of the plant or machinery of an amount equal to the disposal value brought into account as a result of paragraph (a).
For the purposes of the corporate partner calculation, this Chapter applies in relation to partnerships as if—
(a) references to a company were references to a partnership,
(b) references to an SME (Northern Ireland employer) company were references to a Northern Ireland Chapter 6 firm,
(c) references to a NIRE company were references to a Northern Ireland Chapter 7 firm, and
(d) the reference in section 212ZA(1) to an annual investment allowance were omitted.
This Chapter provides for restrictions on the ways in which effect may be given to an allowance in certain circumstances where there has been a qualifying change in relation to a company (“C”).
(1) This Chapter applies where—
(a) C carries on a qualifying activity (“the relevant activity”) (whether or not in partnership with another person or other persons),
(b) there is a qualifying change in relation to C on any day (“the relevant day”),
(c) C, or (where the relevant activity is carried on in partnership) the partnership (“P”), has a relevant excess of allowances in relation to the relevant activity, and
(d) the qualifying change meets one of the limiting conditions.
(2) Sections 212C to 212I specify when there is a qualifying change in relation to C on the relevant day.
(3) Sections 212J to 212L specify when C or P has a relevant excess of allowances in relation to the relevant activity.
(4) Sections 212LA and 212M set out the limiting conditions and specify when those conditions are met.
(5) Sections 212N to 212S make provision about what happens when this Chapter applies.
212C When there is qualifying change in relation to C
(1) There is a qualifying change in relation to C on the relevant day if one or more of conditions A to D is met.
(2) Condition A is that—
(a) the principal company or companies of C at the beginning of the relevant day is not, or are not, the same as at the end of that day, or
(b) there is no principal company of C at the beginning of the relevant day but there is one, or are more than one, at the end of the relevant day.
(3) Condition B is that—
(a) any principal company of C is a consortium principal company (“CPC”), and
(b) CPC's ownership proportion at the end of the relevant day is more than at the beginning of the relevant day.
(4) Condition C is that the relevant activity is a trade (within the meaning of this Part) and on the relevant day—
(a) C ceases to carry on the whole or part of the relevant activity, and
(b) it begins to be carried on in partnership by two or more companies,
in circumstances in which Chapter 1 of Part 22 of CTA 2010 (transfers of trade without change of ownership) applies in relation to the transfer of the relevant activity.
(5) Condition D is that—
(a) the relevant activity is, at the beginning of the relevant day, carried on by C in partnership, and
(b) C's relevant percentage share in the relevant activity at the end of the relevant day is less than at the beginning of the relevant day (or is nil).
(1) Section 212E explains—
(a) what are principal companies of C, and
(b) which are consortium principal companies of C,
for the purposes of section 212C(2) and (3).
(2) Section 212F explains—
(a) when a company is owned by a consortium, and
(b) who are the members of the consortium,
for the purposes of section 212E.
(3) Section 212G explains the meaning of “qualifying 75% subsidiary” for the purposes of sections 212E and 212F.
(4) Section 212H explains the meaning of “ownership proportion” in section 212C(3).
(5) Section 212I explains the meaning of “relevant percentage share” in section 212C(5).
(1) A company (“U”) is a principal company of C if—
(a) C is a qualifying 75% subsidiary of U, and
(b) U is not a qualifying 75% subsidiary of another company.
(2) A company (“V”) is a principal company of C if—
(a) C is a qualifying 75% subsidiary of U,
(b) U is a qualifying 75% subsidiary of V, and
(c) V is not a qualifying 75% subsidiary of another company.
(3) If V is a qualifying 75% subsidiary of another company (“W”), W is a principal company of C unless W is a qualifying 75% subsidiary of another company, and so on.
(4) A company (“X”) is a principal company of C if—
(a) C is owned by a consortium of which X is a member, or
(b) C is a qualifying 75% subsidiary of a company owned by a consortium of which X is a member,
and X is not a qualifying 75% subsidiary of another company.
(5) A company (“Y”) is a principal company of C if—
(a) C is owned by a consortium of which X is a member, or
(b) C is a qualifying 75% subsidiary of a company owned by a consortium of which X is a member,
and X is a qualifying 75% subsidiary of Y but Y is not a qualifying 75% subsidiary of another company.
(6) If Y is a qualifying 75% subsidiary of another company (“Z”), Z is a principal company of C unless Z is a qualifying 75% subsidiary of another company, and so on.
(7) A company that is a principal company of C by virtue of any of subsections (4) to (6) is a consortium principal company of C.
212F When company is owned by consortium and consortium members
(1) This section defines what a company being owned by, or a member of, a consortium means for the purposes of section 212E.
(2) A company is owned by a consortium if—
(a) it is not a qualifying 75% subsidiary of another company,
(b) at least 75% of its ordinary share capital is beneficially owned between them by other companies, and
(c) none of those other companies owns less than 5% of that capital.
(3) Those other companies are the members of the consortium.
(1) For the purposes of sections 212E and 212F a company (“the subsidiary company”) is a qualifying 75% subsidiary of another company (“the parent company”) if condition 1 or 2 is met and condition 3 is met.
(2) Condition 1 is that—
(a) the subsidiary company has ordinary share capital, and
(b) the subsidiary company is a 75% subsidiary of the parent company (see section 1154(3) of CTA 2010).
(3) Condition 2 is that—
(a) the subsidiary company does not have ordinary share capital, and
(b) the parent company has control of the subsidiary company.
(4) Condition 3 is that the parent company—
(a) is beneficially entitled to at least 75% of any profits available for distribution to equity holders of the subsidiary company, and
(b) would be beneficially entitled to at least 75% of any assets of the subsidiary company available for distribution to its equity holders on a winding-up.
(5) Chapter 6 of Part 5 of CTA 2010 (equity holders and profits or assets available for distribution) applies for the purposes of subsection (4) as that Chapter applies for the purposes of section 151(4)(a) and (b) of that Act (meaning of “75% subsidiary”).
(6) But in a case where the subsidiary company does not have ordinary share capital, Chapter 6 of Part 5 of that Act applies for those purposes as if the members of that company were equity holders of that company for the purposes of that Chapter.
(1) For the purposes of section 212C(3) CPC's “ownership proportion” is the lowest of—
(a) the percentage of the ordinary share capital of C that is beneficially owned by CPC,
(b) the percentage to which CPC is beneficially entitled of any profits available for distribution to equity holders of C, and
(c) the percentage to which CPC would be beneficially entitled of any assets of C available for distribution to its equity holders on a winding-up.
(2) Chapter 6 of Part 5 of CTA 2010 applies for the purposes of subsection (1) as that Chapter applies for the purposes of section 143(3)(b) and (c) (condition 1: surrendering company owned by consortium) and section 144(3)(b) and (c) (condition 1: claimant company owned by consortium) of that Act.
(3) But in a case where the subsidiary company does not have ordinary share capital, Chapter 6 of Part 5 of that Act applies for those purposes as if the members of that company were equity holders of that company for the purposes of that Chapter.
(1) For the purposes of section 212C(5) C's “relevant percentage share” is C's percentage share in the profits or losses of the activity.
(2) For this purpose C's percentage share in the profits or losses of an activity at any time is determined on a just and reasonable basis.
(3) In making that determination regard must be had, in particular, to any matter that would be taken into account in determining under section 1262 of CTA 2009 (but without regard to sections 1263 and 1264 of that Act) the company's share at that time in the profits or losses of the activity.
(1) C or P has a relevant excess of allowances in relation to the relevant activity if—
RTWDV>BSV
(2) Section 212K defines RTWDV and section 212L defines BSV.
(3) References in this Chapter to plant and machinery do not include excluded plant and machinery.
(4) Plant and machinery is “excluded plant and machinery” if—
(a) expenditure incurred on the provision of it is not, as a result of section 34A, qualifying expenditure for the purposes of this Part, or
(b) it is, as a result of section 67, treated for the purposes of this Part as owned otherwise than by C or P.
(1) RTWDV is the relevant tax written-down value and is to be found by adding together amounts 1 and 2.
(2) Amount 1 is the total amount of any unrelieved qualifying expenditure in respect of plant and machinery contained in—
(a) single asset pools,
(b) class pools, or
(c) the main pool,
which is available to be carried forward (in accordance with section 59) from the old period and used in calculating the profits of the relevant activity.
(3) Amount 2 is the total of any qualifying expenditure incurred on the provision of a ship for the purposes of the relevant activity which, at the end of the old period, is unrelieved by virtue of notice having been given under section 130.
(4) For the purposes of this Part the amount of unrelieved qualifying expenditure contained in any pool which is available to be carried forward (in accordance with section 59) from the old period and used in calculating the profits of the relevant activity is to be calculated on the assumptions—
(a) that any qualifying expenditure that could have been (but was not) allocated to the pool before the end of the old period had been so allocated at the end of the old period,
(b) that any qualifying expenditure prevented from being allocated to the pool by section 58(5) had been so allocated at the end of the old period, and
(c) that any transaction taking place on the relevant day that has the effect of reducing the amount of unrelieved qualifying expenditure in the pool had not taken place.
(5) Where condition C in section 212C is met—
(a) references in subsection (2) to any unrelieved qualifying expenditure in respect of plant and machinery contained in a pool which is available to be carried forward (in accordance with section 59) from the old period and used in calculating the profits of the relevant activity, and
(b) the reference in subsection (3) to any qualifying expenditure incurred on the provision of a ship for the purposes of the relevant trade which, at the end of the old period, is unrelieved by virtue of notice having been given under section 130,
are to what it would have been but for the qualifying change.
(6) In this section “the old period” means the period which is the old period for the purposes of section 212O (or would be if this Chapter applied): see section 212N(3).
(7) The plant and machinery in respect of which there is unrelieved qualifying expenditure such as is mentioned in subsection (2), or qualifying expenditure such as is mentioned in subsection (3), is referred to in the following provisions as “the relevant plant and machinery”.
(1) BSV is the balance sheet value of the relevant plant and machinery and is to be found by adding together the amounts (if any) which would be shown in respect of it in the appropriate balance sheet of C or P.
(2) For this purpose the amounts shown in the appropriate balance sheet in respect of the relevant plant or machinery are—
(a) the amounts shown in that balance sheet as the net book value (or carrying amount) in respect of it, and
(b) the amounts shown in that balance sheet as the net investment in respect of finance leases of it.
(3) If—
(a) any of the relevant plant or machinery is a fixture in any land, and
(b) the amount which falls (or would fall) to be shown in the appropriate balance sheet as the net book value (or carrying amount) of the land would include an amount in respect of the fixture,
the amount of the net book value (or carrying amount) in respect of the fixture is determined on a just and reasonable basis.
(4) If—
(a) any of the relevant plant or machinery is subject to a finance lease, and
(b) any land or asset which is not plant or machinery is subject to that lease,
the amount of the net investment in respect of the finance lease of that plant or machinery is determined on a just and reasonable basis.
(5) In this section any reference to any amount shown in the appropriate balance sheet of C or P is the amount which, assuming that a balance sheet of C or P were drawn up in accordance with subsection (6), would fall to be shown in that balance sheet.
(6) A balance sheet is drawn up in accordance with this subsection if it is drawn up in accordance with generally accepted accounting practice so as to reflect the position as at the beginning of the relevant day but adjusted to reflect the disposal of any of the relevant plant or machinery which is disposed of on the relevant day.
(7) In this section—
“finance lease” means a lease which, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as a finance lease or loan in accounts of C or P;
“fixture”—
means any plant or machinery that is so installed or otherwise fixed in or to a building or other description of land as to become, in law, part of that building or other land, and
includes any boiler or water-filled radiator installed in a building as part of a space or water heating system.
(1) The qualifying change meets one of the limiting conditions if condition A, B, C or D is met.
(2) Condition A is that the amount of the relevant excess of allowances is £50 million or more.
(3) Condition B is that the amount of the relevant excess of allowances—
(a) is £2 million or more but less than £50 million, and
(b) is not insignificant as a proportion of the total amount or value of the benefits derived by any relevant person by virtue of the qualifying change or change arrangements.
(4) “Relevant person” means a person who, at the end of the relevant day, is—
(a) a principal company of C,
(b) a person carrying on the relevant activity in partnership, or
(c) a person who is connected to a person within paragraph (a) or (b) (within the meaning of section 1122 of CTA 2010).
(5) Condition C is that—
(a) the amount of the relevant excess of allowances is less than £2 million, and
(b) the qualifying change has an unallowable purpose.
See section 212M for the meaning of “unallowable purpose”.
(6) Condition D is that the main purpose, or one of the main purposes, of any arrangements is to procure that condition A or B or paragraph (a) of condition C is not met.
(7) In this section—
the amount of the relevant excess of allowances is the difference between RTWDV and BSV (see sections 212K and 212L);
“change arrangements” and “arrangements” have the same meaning as in section 212M.
(1) The qualifying change has an unallowable purpose if the main purpose, or one of the main purposes, of change arrangements is to obtain a relevant tax advantage (for any person).
(2) “Change arrangements” means any arrangements made to bring about, or otherwise connected with, the qualifying change; and “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(3) “Obtain a relevant tax advantage” means become entitled to a reduction in profits, or an increase in losses, for the purposes of corporation tax in consequence of a claim to allowances in respect of qualifying expenditure in respect of the relevant plant and machinery or qualifying expenditure within section 212K(3).