Law

Capital Allowances Act 2001

United Kingdom · statute

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In force since 2026-05-01, as the publisher states.

Copy read on 2026-11-08. The page it was read from

Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.

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Contents: 893 provisions
  1. Title and introductory text
  2. 1 Capital allowances
  3. 1A Capital allowances and charges: cash basis
  4. 2 General means of giving effect to capital allowances
  5. 3 Claims for capital allowances
  6. 4 Capital expenditure
  7. 5 When capital expenditure is incurred
  8. 6 Meaning of “chargeable period”
  9. 6A “NIRE company” and “SME (Northern Ireland employer) company”
  10. 6B “Northern Ireland firm” etc
  11. 6C “NI rate activity”
  12. 6D NI rate activity treated as separate trade
  13. 6E Giving effect to allowances and charges: NI rate activity cases
  14. 7 No double allowances
  15. 8 No double relief through pooling under Part 2 (plant and machinery allowances)
  16. 9 Interaction between fixtures claims and other claims
  17. 10 Interpretation
  18. 11 General conditions as to availability of plant and machinery allowances
  19. 12 Expenditure incurred before qualifying activity carried on
  20. 13 Use for qualifying activity of plant or machinery provided for other purposes
  21. 13A Use for other purposes of plant or machinery previously used for long funding leasing
  22. 13B Use for other purposes of plant or machinery: property businesses
  23. 14 Use for qualifying activity of plant or machinery which is a gift
  24. 15 Qualifying activities
  25. 16 Ordinary UK property businesses
  26. 17 UK furnished holiday lettings businesses
  27. 17A Ordinary overseas property business
  28. 17B EEA furnished holiday lettings businesses
  29. 18 Managing the investments of a company with investment business
  30. 19 Special leasing of plant or machinery
  31. 20 Employments and offices
  32. 21 Buildings
  33. 22 Structures, assets and works
  34. 23 Expenditure unaffected by sections 21 and 22
  35. 24 Interests in land
  36. 25 Building alterations connected with installation of plant or machinery
  37. 26 Demolition costs
  38. 27 Application of Part to thermal insulation and personal security
  39. 28 Thermal insulation of ... buildings
  40. 29 Fire safety
  41. 30 Safety at designated sports grounds
  42. 31 Safety at regulated stands at sports grounds
  43. 32 Safety at other sports grounds
  44. 33 Personal security
  45. 33A Expenditure on provision or replacement of integral features
  46. 33B Meaning of “replacement” in section 33A
  47. 34 Expenditure by MPs and others on accommodation
  48. 34A Expenditure on plant or machinery for long funding leasing not qualifying expenditure
  49. 35 Expenditure on plant or machinery for use in dwelling-house not qualifying expenditure in certain cases
  50. 36 Restriction on qualifying expenditure in case of employment or office
  51. 37 Exclusion where sums payable in respect of depreciation
  52. 38 Production animals etc.
  53. 38ZA Vehicles for which deductions allowed at fixed rate under Part 2 of ITTOIA 2005
  54. 38A AIA qualifying expenditure
  55. 38B General exclusions applying to section 38A
  56. 39 First-year allowances available for certain types of qualifying expenditure only
  57. 40 Expenditure incurred for Northern Ireland purposes by small or medium-sized enterprises
  58. 41 Miscellaneous exclusions from section 40 (expenditure for Northern Ireland purposes etc.)
  59. 42 Exclusion of plant or machinery partly for use outside Northern Ireland
  60. 43 Effect of plant or machinery subsequently being primarily for use outside Northern Ireland
  61. 44 Expenditure incurred by small or medium-sized enterprises
  62. 45 ICT expenditure incurred by small enterprises
  63. 45D Expenditure on cars with low carbon dioxide emissions
  64. 45DA Expenditure on zero-emission goods vehicles
  65. 45DB Exclusions from allowances under section 45DA
  66. 45E Expenditure on plant or machinery for gas refuelling station
  67. 45EA Expenditure on plant or machinery for electric vehicle charging point
  68. 45F Expenditure on plant and machinery for use wholly in a ring fence trade
  69. 45G Plant or machinery used for less than five years in a ring fence trade
  70. 45K Expenditure on plant and machinery for use in designated assisted areas
  71. 45L Exclusion of plant or machinery partly for use outside designated assisted areas
  72. 45M Exclusions from allowances under section 45K
  73. 45N Effect of plant or machinery subsequently being primarily for use outside designated assisted areas
  74. 45O Expenditure on plant and machinery for use in special tax sites
  75. 45P Power to amend conditions
  76. 45Q Exclusion of plant or machinery partly for use outside special tax sites
  77. 45R Effect of failing to comply with ongoing requirements
  78. 45S Expenditure on plant or machinery in other cases
  79. 45T Exclusion of expenditure incurred under disqualifying arrangements
  80. 45U Expenditure on plant or machinery in cases not falling with section 45S etc
  81. 45V Exclusion of expenditure incurred under disqualifying arrangements
  82. 46 General exclusions ...
  83. 47 Expenditure of small or medium-sized enterprises: companies
  84. 48 Expenditure of small or medium-sized enterprises: businesses
  85. 49 Whether company is a member of a large or medium-sized group
  86. 50 Time when expenditure is incurred
  87. 51 Disclosure of information between UK tax authorities
  88. 51A Entitlement to annual investment allowance
  89. 51B First restriction: companies
  90. 51C Second restriction: groups of companies
  91. 51D Third restriction: groups of companies under common control
  92. 51E Fourth restriction: other companies under common control
  93. 51F Companies and groups: meaning of “control”
  94. 51G Companies and groups: meaning of “related”
  95. 51H Fifth restriction: qualifying activities under common control
  96. 51I Qualifying activities: meaning of control
  97. 51J Qualifying activity: meaning of “related”
  98. 51JA Sixth restriction: allocation where profits chargeable at NI rate
  99. 51K Operation of annual investment allowance where restrictions apply
  100. 51L Special provision for short chargeable periods
  101. 51M Special provision for long chargeable periods
  102. 51N Special provision for long chargeable periods: supplementary
  103. 52 First-year allowances
  104. 52A Prevention of double relief
  105. 53 Pooling of qualifying expenditure
  106. 54 The different kinds of pools
  107. 55 Determination of entitlement or liability
  108. 56 Amount of allowances and charges
  109. 56A Writing-down allowances for small pools
  110. 57 Available qualifying expenditure
  111. 58 Initial allocation of qualifying expenditure to pools
  112. 59 Unrelieved qualifying expenditure
  113. 59A Disposal of assets where first-year allowance made under section 45S for expenditure which is not special rate expenditure
  114. 59B Disposal of assets where first-year allowance made under section 45S for expenditure which is special rate expenditure
  115. 59C Sections 59A and 59B: tax avoidance arrangements
  116. 60 Meaning of “disposal receipt” and “disposal event”
  117. 61 Disposal events and disposal values
  118. 62 General limit on amount of disposal value
  119. 62A Cases in which disposal value is transition value
  120. 63 Cases in which disposal value is nil
  121. 64 Case in which no disposal value need be brought into account
  122. 64A Leased assets: arrangements reducing disposal value of asset
  123. 65 The final chargeable period
  124. 66 List of provisions outside this Chapter about disposal values
  125. 66A Persons leaving cash basis
  126. 66B SME company entering NI corporation tax regime
  127. 66C SME partnership entering NI corporation tax regime
  128. 66D SME company leaving NI corporation tax regime
  129. 66E SME partnership leaving NI corporation tax regime
  130. 67 Plant or machinery treated as owned by person entitled to benefit of contract, etc.
  131. 68 Disposal value on cessation of notional ownership
  132. 69 Hire-purchase etc. and fixtures
  133. 70 Plant or machinery provided by lessee
  134. 70A Entitlement to capital allowances
  135. 70B Long funding operating lease: amount of capital expenditure
  136. 70C Long funding finance lease: amount of capital expenditure
  137. 70D Long funding finance lease: additional expenditure: allowances for lessee
  138. 70DA Transfer and long funding leaseback: restrictions on lessee's allowances
  139. 70E Disposal events and disposal values
  140. 70F Introductory
  141. 70G “Long funding lease”
  142. 70H Lessee: requirement for tax return treating lease as long funding lease
  143. 70I “Short lease”
  144. 70J “Funding lease”
  145. 70K “Plant or machinery lease”
  146. 70L Plant or machinery leased with other assets: separate derived leases
  147. 70M Derived leases of plant or machinery: term and rentals
  148. 70N The finance lease test
  149. 70O The lease payments test
  150. 70P The useful economic life test
  151. 70Q Leases excluded by right of lessor etc to claim capital allowances
  152. 70R Excluded leases of background plant or machinery for a building
  153. 70S The disqualifications
  154. 70T Orders relating to background plant or machinery for a building
  155. 70U Plant or machinery leased with land: low percentage value
  156. 70V Tax avoidance involving international leasing
  157. 70W Transfers, assignments etc by lessor
  158. 70X Transfers, assignments etc by lessee
  159. 70Y Sale and leaseback, lease and leaseback etc: lessors
  160. 70YA Change in accountancy classification of long funding lease
  161. 70YB Long funding operating lease: extension of term of lease
  162. 70YC Extension of term of lease that is not a long funding lease
  163. 70YD Increase in proportion of residual amount guaranteed: review of status
  164. 70YE “Minimum lease payments”
  165. 70YF The “term” of a lease
  166. 70YG “Termination amount”
  167. 70YH “Termination value”
  168. 70YI General definitions
  169. 70YJ Power to vary the meaning of certain expressions
  170. 71 Software and rights to software
  171. 72 Disposal values
  172. 73 Limit on disposal values
  173. 74 Single asset pool
  174. 75 General limit on amount of writing-down allowance
  175. 76 Limit where part of expenditure met by another person
  176. 77 Car used partly for purposes other than those of qualifying activity
  177. 78 Effect of partial depreciation subsidy
  178. 79 Cases where Chapter 17 (anti-avoidance) applies
  179. 80 Vehicles provided for purposes of employment or office
  180. 81 Extended meaning of “car”
  181. 82 Qualifying hire cars
  182. 83 Meaning of “short-life asset”
  183. 84 Cases in which short-life asset treatment is ruled out
  184. 85 Election for short-life asset treatment: procedure
  185. 86 Short-life asset pool
  186. 87 Short-life assets provided for leasing
  187. 88 Sales at under-value
  188. 89 Disposal to connected person
  189. 90 Long-life asset expenditure
  190. 91 Meaning of “long-life asset”
  191. 92 Application of Chapter to part of expenditure
  192. 93 Fixtures etc.
  193. 94 Ships
  194. 95 Railway assets
  195. 96 Cars
  196. 97 Expenditure within the relevant monetary limit: general
  197. 98 Expenditure to which the monetary limits apply
  198. 99 The monetary limit
  199. 100 Exceeding the monetary limit
  200. 101 Allocation of long-life asset expenditure to pool
  201. 102 Writing-down allowance in respect of long-life asset expenditure
  202. 103 Later claims
  203. 104 Disposal value of long-life assets
  204. 104A Special rate expenditure
  205. 104AA Meaning of “main rate car”
  206. 104B Application of Chapter to part of expenditure
  207. 104C Special rate pool
  208. 104D Writing-down allowances at 6% or 10%
  209. 104E Disposal value of special rate assets
  210. 104F Special rate cars: discontinued activity continued by relevant company
  211. 104G Disposal events in respect of cushion gas
  212. 105 “Leasing”, “overseas leasing” etc.
  213. 106 The designated period
  214. 107 The overseas leasing pool
  215. 108 Effect of disposal to connected person on overseas leasing pool
  216. 109 Writing-down allowances at 10%
  217. 110 Cases where allowances are prohibited
  218. 111 Excess allowances: standard recovery mechanism
  219. 112 Excess allowances: connected persons
  220. 113 Excess allowances: special provision for ships
  221. 114 Prohibited allowances: standard recovery mechanism
  222. 115 Prohibited allowances: connected persons
  223. 116 Mitigation of regime
  224. 117 Recovery of allowances in case of joint lessees
  225. 118 Certificate relating to protected leasing
  226. 119 Notice of change of use of plant or machinery
  227. 120 Notice and joint lessees
  228. 121 Meaning of “short-term leasing”
  229. 122 Short-term leasing by buyer, lessee, etc.
  230. 123 Ships and aircraft
  231. 124 Transport containers
  232. 125 Other qualifying purposes
  233. 126 Minor definitions
  234. 127 Single ship pool
  235. 128 Expenditure which is not to be allocated to single ship pool
  236. 129 Election to use the appropriate non-ship pool
  237. 130 Notice postponing first-year or writing-down allowance
  238. 131 Effect of postponement
  239. 132 Disposal events and single ship pool
  240. 133 Ship not used
  241. 134 Deferment of balancing charges: introduction
  242. 135 Claim for deferment
  243. 136 Further conditions for deferment
  244. 137 Effect of deferment
  245. 138 Limit on amount deferred
  246. 139 Amount taken into account in respect of old ship
  247. 140 Notice attributing deferred amounts to new expenditure
  248. 141 Deferred amounts attributed to earlier expenditure first
  249. 142 Variation of attribution
  250. 143 Effect of attribution
  251. 144 Amounts which cease to be attributable
  252. 145 Requirement to notify where no entitlement to defer amounts
  253. 146 Basic meaning of expenditure on new shipping
  254. 147 Exclusions: ship previously owned
  255. 148 Exclusions: object to secure deferment
  256. 149 Exclusions: later events
  257. 150 Exclusions where expenditure not incurred by shipowner
  258. 151 Basic meaning of qualifying ship
  259. 152 Ships under 100 tons
  260. 153 Ships which are not qualifying ships
  261. 154 Further registration requirement
  262. 155 Change in the persons carrying on the qualifying activity
  263. 156 Connected persons
  264. 157 Adjustment of assessments etc.
  265. 158 Members of same group
  266. 159 Meaning of “mineral extraction trade” etc.
  267. 160 Expenditure treated as incurred for purposes of mineral extraction trade
  268. 161 Pre-trading expenditure on mineral exploration and access
  269. 161A Meaning of “offshore infrastructure”
  270. 161B Meaning of “decommissioning expenditure”
  271. 161C Expenditure related to reuse etc. qualifies for writing-down allowances
  272. 161D Exceptions to section 161C(2)
  273. 162 Ring fence trade a separate qualifying activity
  274. 163 Meaning of “general decommissioning expenditure”
  275. 163A Expenditure in anticipation of approval of abandonment programme
  276. 164 General decommissioning expenditure incurred before cessation of ring fence trade
  277. 165 General decommissioning expenditure after ceasing ring fence trade
  278. 165A Decommissioning services supplied by connected person
  279. 165B Restriction on allowance available
  280. 165C Allowance in respect of certain services related to decommissioning
  281. 165D Allowance where decommissioning undertaken for other participators in oil field
  282. 165E Transaction to obtain tax advantage
  283. 166 Transfers of interests in oil fields: anti-avoidance
  284. 167 Oil production sharing contracts
  285. 168 Expenditure on plant or machinery incurred by contractor
  286. 169 Expenditure on plant or machinery incurred by participator
  287. 170 Participator’s expenditure attributable to plant or machinery
  288. 171 Disposal values on cessation of ownership
  289. 172 Scope of Chapter etc.
  290. 172A Long funding leases etc: cases where this Chapter does not apply.
  291. 173 Meaning of “fixture” and “relevant land”
  292. 174 Meaning of “equipment lease” and “lease”
  293. 175 Meaning of “interest in land”, etc.
  294. 175A Meaning of “energy services agreement”
  295. 176 Person with interest in relevant land having fixture for purposes of qualifying activity
  296. 177 Equipment lessors
  297. 178 Equipment lessee has qualifying activity etc.
  298. 179 Equipment lessor has right to sever fixture that is not part of building
  299. 180 Equipment lease is part of affordable warmth programme
  300. 180A Energy services providers
  301. 181 Purchaser of land giving consideration for fixture
  302. 182 Purchaser of land discharging obligations of equipment lessee
  303. 182A Purchaser of land discharging obligations of client under energy services agreement
  304. 183 Incoming lessee where lessor entitled to allowances
  305. 184 Incoming lessee where lessor not entitled to allowances
  306. 185 Fixture on which a plant and machinery allowance has been claimed
  307. 186 Fixture on which an industrial buildings allowance has been made
  308. 186A Fixtures on which a business premises renovation allowance has been made
  309. 187 Fixture on which a research and development allowance has been made
  310. 187A Effect of changes in ownership of a fixture
  311. 187B Section 187A: supplementary provision
  312. 188 Cessation of ownership when person ceases to have qualifying interest
  313. 189 Identifying the qualifying interest in special cases
  314. 190 Cessation of ownership of lessor where section 183 applies
  315. 191 Cessation of ownership on severance of fixture
  316. 192 Cessation of ownership of equipment lessor
  317. 192A Cessation of ownership of energy services provider
  318. 193 Acquisition of ownership by lessor or licensor on termination of lease or licence
  319. 194 Acquisition of ownership by assignee of equipment lessor
  320. 195 Acquisition of ownership by equipment lessee
  321. 195A Acquisition of ownership by assignee of energy services provider
  322. 195B Acquisition of ownership by client
  323. 196 Disposal values in relation to fixtures: general
  324. 197 Disposal values in avoidance cases
  325. 198 Election to apportion sale price on sale of qualifying interest
  326. 199 Election to apportion capital sum given by lessee on grant of lease
  327. 200 Elections under sections 198 and 199: supplementary
  328. 201 Elections under sections 198 and 199: procedure
  329. 202 Interpretation
  330. 203 Amendment of returns etc.
  331. 204 Appeals etc.
  332. 205 Reduction of annual investment allowance and first-year allowances
  333. 206 Single asset pool etc.
  334. 207 Reduction of allowances and charges on expenditure in single asset pool
  335. 208 Effect of significant reduction in use for purposes of qualifying activity
  336. 208A Cars: disposal value in avoidance cases
  337. 209 Meaning of “partial depreciation subsidy”
  338. 210 Reduction of annual investment allowance and first-year allowances
  339. 211 Single asset pool etc.
  340. 212 Reduction of allowances and charges on expenditure in single asset pool
  341. 212ZA Apportionment of expenditure incurred partly for NI rate activity
  342. 212ZB Single asset pool etc
  343. 212ZC Allowances and charges on expenditure in single asset pool
  344. 212ZD Effect of significant change in balance of use
  345. 212ZE Application of Chapter to partnerships
  346. 212ZF “Main rate activity”
  347. 212A Scope of Chapter
  348. 212B Where Chapter applies
  349. 212C When there is qualifying change in relation to C
  350. 212D Guide to sections explaining section 212C
  351. 212E Principal companies
  352. 212F When company is owned by consortium and consortium members
  353. 212G Qualifying 75% subsidiaries
  354. 212H Ownership proportion
  355. 212I Relevant percentage share
  356. 212J Relevant excess of allowances
  357. 212K Relevant tax written-down value
  358. 212L Balance sheet value
  359. 212LA Limiting conditions
  360. 212M Unallowable purpose
  361. 212N Old and new accounting periods
  362. 212O When there is excess of allowances in pool: amount of excess
  363. 212P Effect of excess of allowances on pools
  364. 212Q When there are postponed capital allowances
  365. 212R Apportionment of proceeds of disposal of relevant plant and machinery
  366. 212S Transactions on relevant day
  367. 212T Cap on first-year allowances: zero-emission goods vehicles
  368. 212U Cap on first-year allowances: expenditure on plant and machinery for use in designated assisted areas
  369. 213 Relevant transactions: sale, hire-purchase (etc.) and assignment
  370. 214 Connected persons
  371. 215 Transactions to obtain tax advantages
  372. 216 Sale and leaseback, etc.
  373. 217 No annual investment allowance or first-year allowance for B’s expenditure
  374. 218 Restriction on B’s qualifying expenditure: section 214 or 216
  375. 218ZA Restrictions on writing-down allowances: section 215
  376. 218ZB Disposal values: section 215
  377. 218A Further restriction on annual investment allowance
  378. 219 Meaning of “finance lease”
  379. 220 Allocation of expenditure to a chargeable period
  380. 221 Meaning of “sale and finance leaseback”
  381. 222 Disposal value restricted
  382. 223 No first-year allowance for B’s expenditure
  383. 224 Restriction on B’s qualifying expenditure
  384. 225 B’s qualifying expenditure if lessor not bearing non-compliance risk
  385. 226 Qualifying expenditure limited in subsequent transactions
  386. 227 Sale and leaseback: election for special treatment
  387. 228 Effect of election: relaxation of restriction on B’s qualifying expenditure, etc.
  388. 228A Application of sections 228B and 228C
  389. 228B S's income or profits etc: deductions
  390. 228C S's income or profits: termination of leaseback
  391. 228D Lessor’s income or profits
  392. 228E Lessor’s income or profits: termination of leaseback
  393. 228F Lease and finance leaseback
  394. 228G Leaseback not accounted for as finance lease in S's accounts
  395. 228H Sections 228A to 228G: supplementary
  396. 228J Plant or machinery subject to further operating lease
  397. 228K Disposal of plant or machinery subject to lease where income retained
  398. 228L Determining the net present value of the rentals for purposes of s.228K
  399. 228M Other definitions for the purposes of s.228K
  400. 228MA Restriction of qualifying expenditure
  401. 228MB Calculation of present value
  402. 228MC Rental rebate
  403. 229 Hire-purchase etc.
  404. 229A Transfer followed by hire-purchase etc: restrictions on hirer's allowances
  405. 230 Exception for manufacturers and suppliers
  406. 231 Adjustments of assessments etc.
  407. 232 Meaning of connected person
  408. 233 Additional VAT liabilities and rebates
  409. 234 Introduction
  410. 235 Additional VAT liability treated as qualifying expenditure
  411. 236 Additional VAT liability generates first-year allowance or annual investment allowance
  412. 237 Exceptions to section 236
  413. 238 Additional VAT rebate generates disposal value
  414. 239 Limit on disposal value where additional VAT rebate
  415. 240 Additional VAT liability
  416. 241 No annual investment allowance or first-year allowance in respect of additional VAT liability
  417. 242 Restriction on B’s qualifying expenditure: general
  418. 243 Restriction on B’s qualifying expenditure: sale and finance leaseback
  419. 244 B’s qualifying expenditure if lessor not bearing non-compliance risk
  420. 245 Effect of election under section 227 on additional VAT liability
  421. 246 Miscellaneous
  422. 247 Trades
  423. 248 ...UK property businesses
  424. 249 UK furnished holiday lettings businesses
  425. 250 ... Overseas property businesses
  426. 250A EEA furnished holiday lettings businesses
  427. 251 Professions and vocations
  428. 252 Mines, transport undertakings etc.
  429. 253 Companies with investment business
  430. 254 Introductory
  431. 255 Apportionment of allowances and charges
  432. 256 Different giving effect rules for BLAGAB
  433. 257 Supplementary
  434. 258 Special leasing: income tax
  435. 259 Special leasing: corporation tax (general)
  436. 260 Special leasing: corporation tax (excess allowance)
  437. 261 Special leasing: long-term business
  438. 261A Special leasing: leasing partnerships
  439. 262 Employments and offices
  440. 262A First-year tax credits
  441. 262AA Co-ownership schemes: carrying on qualifying activity
  442. 262AB Co-ownership schemes: election
  443. 262AC Co-ownership schemes: calculation of allowance after election
  444. 262AD Co-ownership schemes: effect of election for participants
  445. 262AE Co-ownership schemes: effect of election for purchasers
  446. 262AEA Co-ownership authorised contractual schemes: withdrawal of election
  447. 262AF Co-ownership schemes: definitions relating to schemes
  448. 263 Qualifying activities carried on in partnership
  449. 264 Partnership using property of a partner
  450. 265 Successions: general
  451. 266 Election where predecessor and successor are connected persons
  452. 267 Effect of election
  453. 267A Restriction on effect of election
  454. 268 Successions by beneficiaries
  455. 268A Meaning of “car” and “motor cycle”
  456. 268B Electrically-propelled vehicles
  457. 268C Terms relating to emissions
  458. 268D Hire cars for disabled persons
  459. 268E Meaning of “assigns”
  460. 269 Use of plant or machinery for business entertainment
  461. 270 Shares in plant or machinery
  462. 270AA Structures and buildings allowances
  463. 270AB Date on which construction begins
  464. 270BA Meaning of “qualifying expenditure”
  465. 270BB Capital expenditure incurred on construction
  466. 270BC Sale of unused buildings or structures (other than by a developer)
  467. 270BD Sale by a developer: unused buildings or structures
  468. 270BE Sale by a developer: used buildings or structures
  469. 270BF Meaning of references to carrying on trade as a developer
  470. 270BG Acquisition or alteration of land etc
  471. 270BH Market value rule
  472. 270BI Provision of plant or machinery
  473. 270BJ Expenditure on renovation, conversion or incidental repairs
  474. 270BK Preparation of sites
  475. 270BL Apportionment of sums partly referable to non-qualifying assets
  476. 270BM Evidence of the amount of expenditure
  477. 270BN Expenditure incurred before qualifying activity carried on
  478. 270BNA Meaning of “special tax site qualifying expenditure”
  479. 270BNB Apportionment
  480. 270BNC Power to amend meaning of “special tax site qualifying expenditure” etc
  481. 270CA Qualifying activities
  482. 270CB Property businesses
  483. 270CC Foreign permanent establishments
  484. 270CD Companies with investment business
  485. 270CE Qualifying use
  486. 270CF Exclusion: residential use
  487. 270CG Use for the purposes of a property business
  488. 270DA General rule as to what is the relevant interest
  489. 270DB Interest acquired on completion of construction
  490. 270DC Effect of creation of subordinate interest
  491. 270DD Leases granted for 35 years or more
  492. 270DE Merger of leasehold interest
  493. 270EA Proportionate adjustment in certain cases
  494. 270EB Multiple uses
  495. 270EC Research and development
  496. 270FA Carrying on of highway undertakings
  497. 270FB The relevant interest
  498. 270FC Cases where highway concession is to be treated as extended
  499. 270GA Introduction
  500. 270GB Additional VAT liabilities
  501. 270GC Additional VAT rebates
  502. 270GD Adjustment for pre-April 2020 allowance
  503. 270HA Trades
  504. 270HB ... UK property businesses and ... overseas property businesses
  505. 270HC Professions and vocations
  506. 270HD Mines, transport undertakings etc
  507. 270HE Companies with investment business
  508. 270HF Application of sections 270HG and 270HH
  509. 270HG Apportionment of allowances
  510. 270HH Different giving effect rules for BLAGAB
  511. 270HI Supplementary
  512. 270IA Evidence of qualifying expenditure etc
  513. 270IB Anti-avoidance: general
  514. 270IC Co-ownership schemes: carrying on qualifying activity
  515. 270ID Co-ownership schemes: election
  516. 270IE Co-ownership schemes: calculation of allowance after an election
  517. 270IF Co-ownership schemes: definitions relating to schemes
  518. 270IG Treatment of leases
  519. 270IH Meaning of “lease” etc
  520. 271 Industrial buildings allowances
  521. 272 Expenditure on the construction of a building
  522. 273 Preparation of sites for plant or machinery
  523. 274 Trades and undertakings which are “qualifying trades”
  524. 275 Building used for welfare of workers
  525. 276 Parts of trades and undertakings
  526. 277 Exclusion of dwelling-houses, retail shops, showrooms, hotels and offices etc.
  527. 278 Building used by more than one licensee
  528. 279 Qualifying hotels
  529. 280 Qualifying sports pavilions
  530. 281 Commercial buildings (enterprise zones)
  531. 282 Buildings outside the United Kingdom
  532. 283 Non-industrial part of building disregarded
  533. 284 Roads on industrial estates etc.
  534. 285 Cessation of use and temporary disuse of building
  535. 286 General rule as to what is the relevant interest
  536. 287 Interest acquired on completion of construction
  537. 288 Effect of creation of subordinate interest
  538. 289 Merger of leasehold interest
  539. 290 Election to treat grant of lease exceeding 50 years as sale
  540. 291 Supplementary provisions with respect to elections
  541. 292 Meaning of “qualifying expenditure”
  542. 293 Meaning of references to carrying on a trade as a developer
  543. 294 Capital expenditure on construction of a building
  544. 295 Purchase of unused building where developer not involved
  545. 296 Purchase of building which has been sold unused by developer
  546. 297 Purchase of used building from developer
  547. 298 The time limit for qualifying enterprise zone expenditure
  548. 299 Application of section 294
  549. 300 Application of sections 295 and 296
  550. 301 Purchase of building within 2 years of first use
  551. 302 Qualifying enterprise zone expenditure where section 295 or 296 applies
  552. 303 Purchase of building within 2 years of first use
  553. 304 Application of section 303 where developer involved
  554. 305 Initial allowances for qualifying enterprise zone expenditure
  555. 306 Amount of initial allowance and period for which allowance made
  556. 307 Building not industrial building when first used etc.
  557. 308 Grants affecting entitlement to initial allowances
  558. 309 Entitlement to writing-down allowance
  559. 310 Basic rule for calculating amount of allowance
  560. 311 Calculation of allowance after sale of relevant interest
  561. 312 Allowance limited to residue of qualifying expenditure
  562. 313 Meaning of “the residue of qualifying expenditure”
  563. 313A Calculation of allowance after sale of relevant interest: anti-avoidance
  564. 314 When balancing adjustments are made
  565. 315 Main balancing events
  566. 316 Proceeds from main balancing events
  567. 317 Balancing event where hotel not qualifying hotel for 2 years
  568. 318 Building an industrial building etc. throughout
  569. 319 Building not an industrial building etc. throughout
  570. 320 Overall limit on balancing charge
  571. 321 The relevant period of ownership
  572. 322 Starting expenditure
  573. 323 Adjusted net cost
  574. 324 Net allowances
  575. 325 Balancing allowances restricted where sale subject to subordinate interest
  576. 326 Interpretation of section 325
  577. 327 Capital value provisions: application of provisions
  578. 328 Balancing adjustment on realisation of capital value
  579. 329 Capital value that is attributable to subordinate interest
  580. 330 Exception for payments more than 7 years after agreement
  581. 331 Capital value provisions: interpretation
  582. 332 Introduction
  583. 333 Writing off initial allowances
  584. 334 Writing off writing-down allowances
  585. 335 Writing off research and development allowances
  586. 336 Writing off expenditure when building not an industrial building
  587. 337 Writing off or increase of expenditure where balancing adjustment made
  588. 338 Writing off capital value which has been realised
  589. 339 Crown or other person not within the charge to tax entitled to the relevant interest
  590. 340 Treatment of demolition costs
  591. 341 Carrying on of highway undertakings
  592. 342 The relevant interest
  593. 343 Balancing adjustment on ending of concession
  594. 344 Cases where highway concession is to be treated as extended
  595. 345 Introduction
  596. 346 Additional VAT liabilities and initial allowances
  597. 347 Additional VAT liabilities and writing-down allowances
  598. 348 Additional VAT liabilities and writing off initial allowances
  599. 349 Additional VAT rebates and writing-down allowances
  600. 350 Additional VAT rebates and balancing adjustments
  601. 351 Additional VAT rebates and writing off qualifying expenditure
  602. 352 Trades
  603. 353 Lessors and licensors
  604. 354 Buildings temporarily out of use
  605. 355 Buildings for miners etc.: carry-back of balancing allowances
  606. 356 Apportionment of sums partly referable to non-qualifying assets
  607. 357 Arrangements having an artificial effect on pricing
  608. 358 Requisitioned land
  609. 359 Provisions applying on termination of lease
  610. 360 Meaning of “lease” etc.
  611. 360A Business premises renovation allowances
  612. 360B Meaning of “qualifying expenditure”
  613. 360BA Expenditure not treated as qualifying expenditure if delay in carrying out works etc
  614. 360C Meaning of “qualifying building”
  615. 360D Meaning of “qualifying business premises”
  616. 360E General rule as to what is the relevant interest
  617. 360F Interest acquired on completion of conversion
  618. 360G Initial allowances
  619. 360H Premises not qualifying business premises or relevant interest sold before premises first used or let
  620. 360I Entitlement to writing-down allowances
  621. 360J Amount of allowance
  622. 360K Meaning of “ the residue of qualifying expenditure ”
  623. 360L Grants affecting entitlement to allowances
  624. 360M When balancing adjustments are made
  625. 360N Balancing events
  626. 360O Proceeds from balancing events
  627. 360P Calculation of balancing adjustments
  628. 360Q Introduction
  629. 360R Writing off initial allowances and writing-down allowances
  630. 360S Treatment of demolition costs
  631. 360T Introduction
  632. 360U Additional VAT liabilities and initial allowances
  633. 360V Additional VAT liabilities and writing-down allowances
  634. 360W Additional VAT liabilities and writing off initial allowances
  635. 360X Additional VAT rebates and balancing adjustments
  636. 360Y Additional VAT rebates and writing off qualifying expenditure
  637. 360Z Giving effect to allowances and charges: trades
  638. 360Z1 Giving effect to allowances and charges: lessors and licensees
  639. 360Z2 Apportionment of sums partly referable to non-qualifying assets
  640. 360Z3 Provisions applying on termination of lease
  641. 360Z4 Meaning of “lease” etc.
  642. 361 Agricultural buildings allowances
  643. 362 Meaning of “husbandry”
  644. 363 Expenditure on the construction of a building
  645. 364 General rule as to what is the relevant interest
  646. 365 Effect of creation of subordinate lease
  647. 366 Interest conveyed or assigned by way of security
  648. 367 Merger of leasehold interest
  649. 368 Provisions applying on ending of lease
  650. 369 Capital expenditure on construction of agricultural building
  651. 370 Purchase of relevant interest before first use of agricultural building
  652. 371 Different relevant interests in different parts of the related agricultural land
  653. 372 Entitlement to writing-down allowance
  654. 373 Basic rule for calculating amount of allowance
  655. 374 First use of building not for purposes of husbandry, etc.
  656. 375 Effect of acquisition of relevant interest after first use of building
  657. 376 Calculation of allowance after acquisition
  658. 377 Chargeable period when balancing adjustment made
  659. 378 Allowance limited to residue of qualifying expenditure
  660. 379 Final writing-down allowance
  661. 380 When balancing adjustments are made
  662. 381 Balancing events (on making an election)
  663. 382 Requirements as to elections
  664. 383 Proceeds from balancing events
  665. 384 Exclusion of proportion of proceeds
  666. 385 Calculation of balancing adjustment
  667. 386 The residue of qualifying expenditure
  668. 387 Overall limit on balancing charge
  669. 388 Acquisition of relevant interest in part of land, etc.
  670. 389 Balancing allowances restricted where sale subject to subordinate interest etc.
  671. 390 Interpretation of section 389
  672. 391 Trades
  673. 392 UK property businesses
  674. 393 Meaning of “freehold interest”, “lease”, etc.
  675. 394 Mineral extraction allowances
  676. 395 Qualifying expenditure
  677. 396 Meaning of “mineral exploration and access”
  678. 397 Meaning of “mineral asset”
  679. 398 Relationship between main types of qualifying expenditure
  680. 399 Expenditure excluded from being qualifying expenditure
  681. 400 Qualifying expenditure on mineral exploration and access
  682. 401 Pre-trading exploration expenditure
  683. 402 Pre-trading expenditure on plant or machinery
  684. 403 Qualifying expenditure on acquiring a mineral asset
  685. 404 Exclusion of undeveloped market value of land
  686. 405 Qualifying expenditure where buildings or structures cease to be used
  687. 406 Reduction where premium relief previously allowed
  688. 407 Acquisition of mineral asset owned by previous trader
  689. 408 Acquisition of oil licence from non-trader
  690. 409 Acquisition of other assets from non-traders
  691. 410 UK oil licence: limit is original licence payment
  692. 411 Assets generally: limit is residue of previous trader’s qualifying expenditure
  693. 412 Transfers of mineral assets within group: limit is initial group expenditure
  694. 413 Transfers of mineral assets within group: supplementary
  695. 414 Expenditure on works likely to become valueless
  696. 415 Contribution to buildings or works for benefit of employees abroad
  697. 416 Non-ring fence trades: expenditure on restoration within 3 years of ceasing to trade
  698. 416ZA Ring fence trades: expenditure on site restoration
  699. 416ZB “Notional accounting period”
  700. 416ZC Site restoration services supplied by connected person
  701. 416ZD Restriction on allowance available
  702. 416ZE Allowance where site restoration undertaken for other participators in oil field
  703. 416A First-year allowances available for certain types of qualifying expenditure
  704. 416B Expenditure incurred by company for purposes of a ring fence trade
  705. 416C Time when expenditure is incurred
  706. 416D First-year allowances
  707. 416E Artificially inflated claims for first-year allowances
  708. 417 Determination of entitlement or liability
  709. 418 Amount of allowances and charges
  710. 419 Unrelieved qualifying expenditure
  711. 419A Unrelieved qualifying expenditure: entry to cash basis
  712. 420 Meaning of “disposal receipt”
  713. 421 Disposal of, or ceasing to use, asset
  714. 422 Use of asset otherwise than for permitted development etc.
  715. 423 Sections 421 and 422: amount of disposal value to be brought into account
  716. 424 Disposal value restricted in case of interest in land
  717. 425 Receipt of capital sum
  718. 426 Pre-trading expenditure
  719. 427 Giving up exploration, search or inquiry
  720. 428 Ceasing to work mineral deposits
  721. 429 Buildings etc. for benefit of employees abroad ceasing to be used
  722. 430 Disposal of asset, etc.
  723. 431 Discontinuance of trade
  724. 431A Foreign permanent establishment exemption
  725. 431B Disposal value: no allowance/no charge cases
  726. 431C Notional allowances
  727. 431D Persons leaving cash basis
  728. 432 Giving effect to allowances and charges
  729. 433 Treatment of demolition costs
  730. 434 Time when expenditure incurred
  731. 435 Shares in assets
  732. 436 Meaning of “development” etc.
  733. 437 Research and development allowances
  734. 438 Expenditure on research and development
  735. 439 Qualifying expenditure
  736. 439A Qualifying expenditure incurred for purposes of NI rate activity
  737. 440 Excluded expenditure: land
  738. 441 Allowances
  739. 442 Balancing charges
  740. 443 Disposal values and disposal events
  741. 444 Disposal events: chargeable period for which disposal value is to be brought into account
  742. 445 Costs of demolition
  743. 446 Introduction
  744. 447 Additional VAT liability treated as additional expenditure etc.
  745. 448 Additional VAT rebate generates disposal value
  746. 449 Effect on balancing charges of additional VAT rebates in earlier chargeable periods
  747. 450 Giving effect to allowances and charges
  748. 451 Sales: time of cessation of ownership
  749. 452 Know-how allowances
  750. 453 Know-how as property
  751. 454 Qualifying expenditure
  752. 455 Excluded expenditure
  753. 456 Pooling of expenditure
  754. 457 Determination of entitlement or liability
  755. 458 Amount of allowances and charges
  756. 459 Available qualifying expenditure
  757. 460 Allocation of qualifying expenditure to pools
  758. 461 Unrelieved qualifying expenditure
  759. 461A Unrelieved qualifying expenditure: entry to cash basis
  760. 462 Disposal values
  761. 462A Persons leaving cash basis
  762. 463 Giving effect to allowances and charges
  763. 464 Patent allowances
  764. 465 Future patent rights
  765. 466 Grant of licences
  766. 467 Qualifying expenditure
  767. 468 Qualifying trade expenditure
  768. 469 Qualifying non-trade expenditure
  769. 470 Pooling of expenditure
  770. 471 Determination of entitlement or liability
  771. 472 Amount of allowances and charges
  772. 473 Available qualifying expenditure
  773. 474 Allocation of qualifying expenditure to pools
  774. 475 Unrelieved qualifying expenditure
  775. 475A Unrelieved qualifying expenditure: entry to cash basis
  776. 476 Disposal value of patent rights
  777. 477 Limit on amount of disposal value
  778. 477A Persons leaving cash basis
  779. 478 Persons having qualifying trade expenditure
  780. 479 Persons having qualifying non-trade expenditure: income tax
  781. 480 Persons having qualifying non-trade expenditure: corporation tax
  782. 481 Anti-avoidance: limit on qualifying expenditure
  783. 482 Sums paid for Crown use etc. treated as paid under licence
  784. 483 Meaning of “income from patents”
  785. 484 Dredging allowances
  786. 485 Qualifying expenditure
  787. 486 Pre-trading expenditure of qualifying trades, etc.
  788. 487 Writing-down allowances
  789. 488 Balancing allowances
  790. 489 Giving effect to allowances
  791. 490 Assured tenancy allowances
  792. 491 Allowances available in relation to old expenditure only
  793. 492 Meaning of “approved body”
  794. 493 Expenditure on the construction of a building
  795. 494 Introduction
  796. 495 General rule as to what is the relevant interest in the building
  797. 496 Interest acquired on completion of construction
  798. 497 Effect of creation of subordinate interest
  799. 498 Merger of leasehold interest
  800. 499 Provisions applying on termination of lease
  801. 500 The relevant interest in the dwelling-house
  802. 501 Capital expenditure on construction
  803. 502 Purchase of unused dwelling-house where developer not involved
  804. 503 Purchase of dwelling-house sold unused by developer
  805. 504 Requirements relating to the landlord
  806. 505 Qualifying dwelling-houses: exclusions
  807. 506 Dwelling-house ceasing to be qualifying dwelling-house
  808. 507 Entitlement to writing-down allowance
  809. 508 Basic rule for calculating amount of allowance
  810. 509 Calculation of allowance after sale of relevant interest
  811. 510 Allowance limited to residue of qualifying expenditure attributable to dwelling-house
  812. 511 Qualifying expenditure attributable to dwelling-house
  813. 512 Residue of qualifying expenditure attributable to dwelling-house
  814. 513 When balancing adjustments are made
  815. 514 Balancing events
  816. 515 Proceeds from balancing events
  817. 516 Dwelling-house a qualifying dwelling-house throughout
  818. 517 Dwelling-house not a qualifying dwelling-house throughout
  819. 518 Overall limit on balancing charge
  820. 519 Recovery of old initial allowances made on incorrect assumptions
  821. 520 The relevant period of ownership
  822. 521 Starting expenditure
  823. 522 Adjusted net cost
  824. 523 Introduction
  825. 524 Writing off initial allowances
  826. 525 Writing off writing-down allowances
  827. 526 Writing off expenditure for periods when building not used as qualifying dwelling-house
  828. 527 Writing off or increase of expenditure where balancing adjustment made
  829. 528 Treatment of demolition costs
  830. 529 Giving effect to allowances and charges
  831. 530 Apportionment of sums partly referable to non-qualifying assets
  832. 531 Meaning of “dwelling-house”, “lease” etc.
  833. 532 The general rule excluding contributions
  834. 533 Exclusion of contributions to dredging
  835. 534 Northern Ireland regional development grants
  836. 535 Insurance or compensation money
  837. 536 Contributions not made by public bodies and not eligible for tax relief
  838. 537 Conditions for contribution allowances under Parts 2, 2A ... and 5
  839. 538 Plant and machinery
  840. 538A Buildings and structures
  841. 539 Industrial buildings
  842. 540 Agricultural buildings
  843. 541 Mineral extraction
  844. 542 Transfer of C’s trade ...
  845. 543 Contribution allowances under Part 9
  846. 544 Management assets
  847. 545 Investment assets
  848. 546 Introduction
  849. 547 “Additional VAT liability” and “additional VAT rebate”
  850. 548 Time when additional VAT liability or rebate is incurred or made
  851. 549 Chargeable period in which, and time when, additional VAT liability or rebate accrues
  852. 550 Apportionment of additional VAT liabilities and rebates
  853. 551 Supplementary
  854. 552 Meaning of “oil licence” and “interest in an oil licence”
  855. 553 Consideration to be treated as nil
  856. 554 Circumstances in which oil licence relates to undeveloped area
  857. 555 Disposal of oil licence with exploitation value
  858. 556 Minor definitions
  859. 557 Application of sections 558 and 559
  860. 558 Effect of partnership changes
  861. 559 Effect of successions
  862. 560 Transfer of insurance company business
  863. 560A Transfers of trade without a change of ownership
  864. 561 Transfer or division of UK business
  865. 561A Transfer of asset by reason of cross-border merger
  866. 562 Apportionment where property sold together
  867. 563 Procedure for determining certain questions affecting one or more persons
  868. 564 Questions to which procedure in section 563 applies
  869. 565 Tax agreements for income tax purposes
  870. 566 Companies not resident in the United Kingdom
  871. 567 Sales treated as being for alternative amount: introductory
  872. 568 Sales treated as being at market value
  873. 569 Election to treat sale as being for alternative amount
  874. 570 Elections: supplementary
  875. 570A Avoidance affecting proceeds of balancing event
  876. 570B Orders and regulations made by Treasury or Commissioners
  877. 571 Application of Act to parts of assets
  878. 572 References to sale of property and time of sale
  879. 573 Transfers treated as sales
  880. 573A Special tax sites
  881. 574 Meaning of “control”
  882. 575 Meaning of “connected” persons
  883. 575A Section 575: supplementary
  884. 576 Meaning of “the Inland Revenue” etc.
  885. 577 Other definitions
  886. 578 Consequential amendments
  887. 579 Commencement and transitional provisions and savings
  888. 580 Repeals
  889. 581 Citation
  890. Schedule 1 Abbreviations and defined expressions
  891. Schedule 2 Consequential amendments
  892. Schedule 3 Transitionals and savings
  893. Schedule 4 Repeals

Proposed changes to this act

No one has proposed a change to this act yet.

893 provisions

429 Buildings etc. for benefit of employees abroad ceasing to be used

A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if— (a) the expenditure is qualifying expenditure under section 415 (contributions to buildings or works for benefit of employees abroad), and (b) in that chargeable period the buildings or works permanently cease to be used for the purposes of or in connection with the mineral extraction trade.

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430 Disposal of asset, etc.

(1) A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if— (a) the qualifying expenditure was incurred on the provision of any assets, and (b) in that chargeable period any of those assets— (i) is disposed of, or (ii) otherwise permanently ceases to be used by him for the purposes of the mineral extraction trade. (2) A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if any of the following events occurs in that chargeable period in relation to assets representing the qualifying expenditure— (a) the person loses possession of the assets in circumstances where it is reasonable to assume that the loss is permanent; (b) the assets cease to exist as such (as a result of destruction, dismantling or otherwise); (c) the assets begin to be used wholly or partly for purposes other than those of the mineral extraction trade carried on by the person.

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431 Discontinuance of trade

A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if in that chargeable period the mineral extraction trade is permanently discontinued.

Propose a change

431A Foreign permanent establishment exemption

(1) Subsection (2) applies if— (a) an election under section 18A of CTA 2009 has effect in relation to a company, and (b) the company carries on any trade which consists of, or includes, the working of a source of mineral deposits. (2) That trade so far as carried on through one or more permanent establishments outside the United Kingdom is treated for the purposes of this Part as a trade— (a) separate from any other trade of the company, and (b) all the profits and gains from which are not, or (if there were any) would not be, chargeable to tax.

Propose a change

431B Disposal value: no allowance/no charge cases

(1) If— (a) an election under section 18A of CTA 2009 has effect in relation to a company, and (b) the operation of sections 431A and 421(1)(b)(ii) and (2) requires the company to bring the disposal value of an asset into account, the disposal value is such an amount as gives rise to neither a balancing allowance nor a balancing charge. (2) Subsection (1) does not apply if— (a) the company's qualifying expenditure in respect of the asset exceeds £5 million, (b) the company has claimed any capital allowance in respect of any of that expenditure, and (c) the company has, at any time in a relevant accounting period, used the asset otherwise than for the purposes of a permanent establishment outside the United Kingdom. (3) In subsection (2)(c) “relevant accounting period” means an accounting period ending before, but ending not more than 6 years before, “the relevant day” as defined by section 18F of CTA 2009.

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431C Notional allowances

(1) Subsection (2) applies if— (a) an election under section 18A of CTA 2009 has effect in relation to a company, and (b) but for section 18A of CTA 2009 and section 431A(2)(b), an allowance under this Part (“the notional allowance”) could be claimed under section 3(1) in respect of assets provided for the purposes of a permanent establishment outside the United Kingdom through which business is or has been carried on by the company. (2) The notional allowance (and any charge in connection with it which would have arisen if the allowance had been claimed) is to be made automatically and reflected in any calculation, for any relevant accounting period of the company, of the profits or losses attributable to business carried on by the company through such a permanent establishment. (3) Subsection (4) applies if, at the time an election under section 18A of CTA 2009 takes effect in relation to a company, the company is, by reason of sections 431A and 421(1)(b)(ii) and (2), required to bring into account the disposal value of any asset provided for the purposes of a foreign permanent establishment through which business is or has been carried on by the company. (4) For the purposes of subsections (1) and (2), the company is treated as having incurred at that time, for the purposes of the trade mentioned in section 431A(2), qualifying expenditure of an amount equal to that disposal value. (5) In subsection (2) “relevant accounting period”, in relation to a company by which an election under section 18A of CTA 2009 is made, means an accounting period of the company to which the election applies (as to which see section 18F of that Act).

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431D Persons leaving cash basis

(1) This section applies if— (a) a person carrying on a mineral extraction trade leaves the cash basis in a chargeable period, (b) the person has incurred expenditure at a time when the cash basis applies in relation to the trade, (c) some or all of the expenditure was brought into account in calculating the profits of the trade on the cash basis, and (d) the expenditure would have been qualifying expenditure if the cash basis had not applied at the time the expenditure was incurred. (2) In this section— (a) the “relieved portion” of the expenditure is the higher of the following— (i) the amount of that expenditure for which a deduction was allowed in calculating the profits of the trade, or (ii) the amount of that expenditure for which a deduction would have been so allowed if the expenditure had been incurred wholly and exclusively for the purposes of the trade; (b) the “unrelieved portion” of the expenditure is any remaining amount of the expenditure. (3) An amount of the expenditure equal to the amount (if any) by which the unrelieved portion of the expenditure exceeds the relieved portion of the expenditure is to be regarded as qualifying expenditure incurred by the person in the chargeable period. (4) For the purposes of this section a person carrying on a trade leaves the cash basis in a chargeable period if— (a) immediately before the beginning of the chargeable period the cash basis applied in relation to the trade, and (b) the cash basis does not apply in relation to the trade for the chargeable period. (4A) Subsection (11)(za) of section 1A (capital allowances and charges: cash basis) applies for the purposes of this section as it applies for the purposes of that section.

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432 Giving effect to allowances and charges

(1) An allowance or charge to which a person is entitled or liable under this Part is to be given effect in calculating the profits of that person’s mineral extraction trade, by treating— (a) the allowance as an expense of the trade, and (b) the charge as a receipt of the trade. (2) This section is subject to section 6E (giving effect to allowances and charges: NI rate activity cases).

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433 Treatment of demolition costs

(1) The net cost to a person of demolishing an asset which represents qualifying expenditure is added to that qualifying expenditure in determining the amount of any balancing allowance or balancing charge for the chargeable period in which the demolition occurs. (2) “The net cost of the demolition” means the amount, if any, by which the cost of the demolition exceeds any money received for the remains of the asset. (3) If this section applies, the net cost of the demolition is not treated as expenditure incurred on any other asset which replaces the demolished asset.

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434 Time when expenditure incurred

(1) For the purposes of this Part, expenditure incurred for the purposes of a mineral extraction trade by a person about to carry it on is treated as incurred by that person on the first day on which that person does carry it on. (2) Subsection (1) does not apply to pre-trading expenditure on mineral exploration and access (for which specific provision is made by section 400(4)).

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435 Shares in assets

(1) This Part applies in relation to a share in an asset as it applies (under section 571) in relation to a part of an asset. (2) For the purposes of those provisions, a share in an asset is treated as used for the purposes of a trade so long as, and only so long as, the asset is used for the purposes of the trade.

Propose a change

436 Meaning of “development” etc.

(1) In this Part— “development” “development order”, “general development order”, and “planning permission”, have the meaning given by the relevant planning enactment. (2) “The relevant planning enactment” means— (a) in relation to land in England or Wales, section 336(1) of the Town and Country Planning Act 1990 (c. 8); (b) in relation to land in Scotland, section 277(1) of the Town and Country Planning (Scotland) Act 1997 (c. 8); (c) in relation to land in Northern Ireland, section 250(1) of the Planning Act (Northern Ireland) 2011.

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437 Research and development allowances

(1) Allowances are available under this Part if a person incurs qualifying expenditure on research and development. (2) In this Part “research and development”— (a) means activities that fall to be treated as research and development in accordance with generally accepted accounting practice, and (b) includes oil and gas exploration and appraisal. (3) But— (a) activities that, as a result of regulations made under section 1006 of ITA 2007, are “research and development” for the purposes of that section are also “research and development” for the purposes of this Part, and (b) activities that, as a result of any such regulations, are not “research and development” for the purposes of that section are also not “research and development” for the purposes of this Part.

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438 Expenditure on research and development

(1) Expenditure on research and development includes all expenditure incurred for— (a) carrying out research and development, or (b) providing facilities for carrying out research and development. (2) But it does not include expenditure incurred in the acquisition of— (a) rights in research and development, or (b) rights arising out of research and development. (3) Nor does it include expenditure on the provision of a dwelling. (4) But if— (a) part of a building consists of a dwelling and the rest of the building is used for research and development, and (b) no more than 25% of the capital expenditure referable to the construction or acquisition of the whole building is referable to the construction or acquisition of the dwelling, the whole of the building is to be treated as used for research and development. (5) For the purposes of subsection (4)(b), the expenditure referable to the construction or acquisition of the building is to be apportioned in a just and reasonable manner. (6) Any additional VAT liability or rebate (as to which see Chapter 4) is to be disregarded in applying subsection (4)(b).

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439 Qualifying expenditure

(1) In this Part “qualifying expenditure” means capital expenditure incurred by a person on research and development directly undertaken by him or on his behalf if— (a) he is carrying on a trade when the expenditure is incurred and the research and development relates to that trade, or (b) after incurring the expenditure he sets up and commences a trade connected with the research and development. (2) The same expenditure may not be taken into account as qualifying expenditure in relation to more than one trade. (3) The trade by reference to which expenditure is qualifying expenditure is referred to in this Part as “the relevant trade” in relation to that expenditure. (4) If capital expenditure is partly within subsection (1) and partly not, the expenditure is to be apportioned in a just and reasonable manner. (5) References in this Chapter to research and development related to a trade include— (a) research and development which may lead to or facilitate an extension of that trade, and (b) research and development of a medical nature which has a special relation to the welfare of workers employed in that trade.

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439A Qualifying expenditure incurred for purposes of NI rate activity

(1) Subsection (2) applies if— (a) a company that does not have a Northern Ireland regional establishment incurs expenditure for the purposes of a trade, (b) the activities for the purposes of which the expenditure is incurred would, if the company were a NIRE company, be an NI rate activity treated as a separate trade, and (c) the company subsequently becomes a NIRE company. (2) The expenditure is to be treated as incurred on the first day of the first chargeable period in which the company is a NIRE company. (3) Subsection (4) applies if— (a) a partnership that does not have a Northern Ireland regional establishment incurs expenditure for the purposes of a trade, (b) the activities for the purposes of which the expenditure is incurred would, if the partnership were a Northern Ireland Chapter 7 firm, be an NI rate activity treated as a separate trade, and (c) the partnership subsequently becomes a Northern Ireland Chapter 7 firm. (4) The expenditure is to be treated as incurred on the first day of the first chargeable period in which the partnership is a Northern Ireland Chapter 7 firm. (5) In this section “Northern Ireland regional establishment” has the same meaning as in Part 8B of CTA 2010 (see Chapter 5 of that Part as read, in relation to a partnership, with section 357WA(4) of that Act).

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440 Excluded expenditure: land

(1) Expenditure on the acquisition of land, or rights in or over land, is not qualifying expenditure. (2) But that does not prevent such expenditure from being qualifying expenditure so far as it is referable to the acquisition of— (a) a building or structure already constructed on the land, (b) rights in or over such a building or structure, or (c) plant or machinery which forms part of such a building or structure. (3) For the purposes of subsection (2), the expenditure is to be apportioned in a just and reasonable manner.

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441 Allowances

(1) A person who incurs qualifying expenditure is entitled to an allowance in respect of that expenditure for the relevant chargeable period equal to— (a) the amount of the qualifying expenditure, or (b) if a disposal value is required to be brought into account for that period in respect of that expenditure, the amount (if any) by which that expenditure exceeds the disposal value. (2) The relevant chargeable period is— (a) the chargeable period in which the expenditure is incurred, or (b) if the expenditure was incurred before the chargeable period in which the relevant trade is set up and commenced, that chargeable period. (3) A person claiming an allowance under this section may require the allowance to be reduced to a specified amount.

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442 Balancing charges

(1) This section applies if— (a) an allowance is made to a person for a chargeable period in respect of qualifying expenditure, and (b) the person is required to bring a disposal value into account for a later chargeable period in respect of that expenditure. (2) The person is liable to a balancing charge for the later chargeable period in respect of the qualifying expenditure. (3) The amount of the balancing charge is— (a) the amount (if any) by which the disposal value to be brought into account for the period exceeds any unclaimed allowance, or (b) if less, the allowance made in respect of the qualifying expenditure. (4) “Unclaimed allowance” means any part of the allowance to which the person was entitled in respect of the qualifying expenditure but which has not been claimed. (5) This section is to be read with section 449 (effect on balancing charges of additional VAT rebates in earlier chargeable periods).

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443 Disposal values and disposal events

(1) A person is required to bring a disposal value into account in respect of qualifying expenditure incurred by him if— (a) he ceases to own an asset representing the expenditure, or (b) an asset representing the expenditure is demolished or destroyed at a time when he owns the asset. (2) Subsection (1) is to be read with section 555 (disposal of oil licence with exploitation value). (3) But a person is not required to bring a disposal value into account under subsection (1) if the disposal event gives rise to a balancing charge under Part 2 ... (plant and machinery allowances ...). (4) The disposal value to be brought into account under subsection (1) depends on the disposal event, as shown in the Table— Table Disposal values 1. Disposal event | 2. Disposal value 1. Sale of the asset at not less than market value. | The net proceeds of the sale. 2. Demolition or destruction of the asset. | The net amount received for the remains of the asset, together with— (a) any insurance money received in respect of the demolition or destruction, and (b) any other compensation of any description so received, so far as it consists of capital sums. 3. Any event not falling within item 1 or 2. | The market value of the asset at the time of the event. (5) Subsection (4) is subject to— section 445 (costs of demolition), section 553 (nil value in case of disposal of oil licence relating to undeveloped area), and section 555 (disposal of oil licence with exploitation value). (6) A person is also required to bring a disposal value into account by section 448 (additional VAT rebate generates disposal value). (7) In this Chapter “disposal event” means an event of a kind that requires a disposal value to be brought into account under subsection (1).

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444 Disposal events: chargeable period for which disposal value is to be brought into account

(1) The chargeable period for which a disposal value is to be brought into account under section 443(1) in respect of qualifying expenditure is given by this section. (2) Subsection (3) applies if the disposal event occurs in or after the chargeable period for which the allowance in respect of the expenditure is made. (3) The disposal value is to be brought into account for— (a) the chargeable period in which the event occurs, or (b) if the event occurs after the chargeable period in which the relevant trade is permanently discontinued, that chargeable period. (4) If the disposal event occurs before the chargeable period for which the allowance in respect of the expenditure is made, the disposal value is to be brought into account for that chargeable period.

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445 Costs of demolition

(1) This section applies if— (a) an asset representing qualifying expenditure incurred by a person is demolished at a time when the person owns the asset, and (b) the person incurred costs of demolition. (2) The disposal value which the person is required to bring into account in respect of the qualifying expenditure is to be reduced by the cost to the person of the demolition. (3) If the amount of the disposal value is reduced to nil (or less than nil) under subsection (2), the person is not required to bring a disposal value into account. (4) If— (a) the cost to the person of the demolition exceeds the disposal value, and (b) before its demolition the asset had not begun to be used for purposes other than research and development related to the relevant trade, the person is to be treated as incurring qualifying expenditure equal to the excess. (5) That qualifying expenditure is to be treated as incurred— (a) when the demolition occurs, or (b) if that is on or after the date on which the relevant trade is permanently discontinued, immediately before the discontinuance. (6) If this section applies, the cost to the person of the demolition is not to be treated for the purposes of this Act as expenditure on any property that replaces the demolished asset.

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446 Introduction

For the purposes of this Chapter— (a) “additional VAT liability” and “additional VAT rebate” have the meaning given by section 547, (b) the time when— (i) a person incurs an additional VAT liability, or (ii) an additional VAT rebate is made to a person, is given by section 548, and (c) the chargeable period in which, and the time when, an additional VAT liability or an additional VAT rebate accrues are given by section 549.

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447 Additional VAT liability treated as additional expenditure etc.

(1) If a person— (a) has incurred qualifying expenditure (“the original expenditure”), and (b) incurs an additional VAT liability in respect of that expenditure, the liability is to be treated as capital expenditure incurred on the same research and development as the original expenditure. (2) But subsection (1) does not apply if by the time the liability is incurred— (a) the person who incurred the original expenditure has ceased to own the asset representing that expenditure, or (b) that asset has been demolished or destroyed. (3) Any allowance arising as a result of this section is available for— (a) the chargeable period in which the liability accrues, or (b) if the liability accrued before the chargeable period in which the relevant trade is set up and commenced, that chargeable period, rather than for the relevant chargeable period specified in section 441(2).

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448 Additional VAT rebate generates disposal value

(1) This section applies if— (a) a person has incurred qualifying expenditure, and (b) an additional VAT rebate is made to the person in respect of that expenditure. (2) But this section does not apply if by the time the rebate is made— (a) the person has ceased to own the asset representing that expenditure, or (b) that asset has been demolished or destroyed. (3) And this section does not apply if the rebate falls to be brought into account for the purpose of making allowances and charges under Part 2 ... (plant and machinery allowances ...). (4) The person must bring the amount of the rebate into account— (a) as a disposal value in respect of the qualifying expenditure for the appropriate chargeable period, or (b) if the person would have to bring a disposal value into account under section 443(1) in respect of that expenditure for that chargeable period, as an addition to that disposal value. (5) “Appropriate chargeable period” means— (a) the chargeable period in which the rebate accrues, or (b) if the rebate accrued before the chargeable period in which the relevant trade is set up and commenced, that chargeable period.

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449 Effect on balancing charges of additional VAT rebates in earlier chargeable periods

(1) Section 442 (balancing charges) has effect subject to this section if— (a) an allowance is made to a person for a chargeable period (“the original period”) in respect of qualifying expenditure, (b) the person is required to bring a disposal value into account for a later chargeable period in respect of that expenditure, and (c) the person has been required by section 448(4)(a) to bring one or more disposal values (“VAT disposal values”) into account in respect of that expenditure for one or more chargeable periods after the original period but before the later chargeable period. (2) In relation to the later chargeable period, subsection (3)(a) of section 442 applies as if the unclaimed allowance were reduced by— DV - BC where— DV is the total amount of the VAT disposal values, and BC is the total amount of any balancing charges to which the person is liable under that section as a result of bringing into account the VAT disposal values. (3) In relation to the later chargeable period, subsection (3)(b) of section 442 applies as if the allowance made in respect of the qualifying expenditure were reduced by BC.

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450 Giving effect to allowances and charges

(1) An allowance or charge to which a person is entitled or liable under this Part for a chargeable period is to be given effect in calculating the profits of the relevant trade, by treating— (a) the allowance as an expense of the trade, and (b) the charge as a receipt of the trade. (2) This section is subject to section 6E (giving effect to allowances and charges: NI rate activity cases).

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451 Sales: time of cessation of ownership

Any reference in this Part to the time when a person ceases to own an asset is to be read, in the case of a sale, as a reference to whichever is the earlier of— (a) the time of completion, and (b) the time when possession is given.

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452 Know-how allowances

(1) Allowances are available under this Part if a person incurs qualifying expenditure on the acquisition of know-how. (2) In this Part “know-how” means any industrial information or techniques likely to assist in— (a) manufacturing or processing goods or materials, (b) working a source of mineral deposits (including searching for, discovering or testing mineral deposits or obtaining access to them), or (c) carrying out any agricultural, forestry or fishing operations. (3) In subsection (2)(b)— (a) “mineral deposits” includes any natural deposits capable of being lifted or extracted from the earth and for this purpose geothermal energy is to be treated as a natural deposit, and (b) “source of mineral deposits” includes a mine, an oil well and a source of geothermal energy.

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453 Know-how as property

(1) Know-how is to be treated as property for the purposes of this Act. (2) References in this Act to the purchase or sale of property include the acquisition or disposal of know-how.

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454 Qualifying expenditure

(1) In this Part “qualifying expenditure” means, subject to section 455, capital expenditure incurred on the acquisition of know-how by a person if— (a) the person is carrying on a trade at the time of the acquisition and the know-how is acquired for use in that trade, (b) the person acquires the know-how and subsequently sets up and commences a trade in which it is used, (c) the person acquires the know-how together with the trade or part of a trade in which it was used and the parties to the acquisition make an election under section 194 of ITTOIA 2005 or under section 178 of CTA 2009 (consideration for know-how on disposal of trade to be treated as payment for goodwill unless parties otherwise elect), or (d) the person acquires the know-how together with the trade or part of a trade in which it was used and the trade in question was, before the acquisition, carried on wholly outside the United Kingdom. (2) The same expenditure may not be taken into account as qualifying expenditure in relation to more than one trade. (3) Qualifying expenditure incurred before the setting up and commencement of the relevant trade is to be treated for the purposes of this Part as incurred when the trade is set up and commenced. (4) “Relevant trade” means the trade by reference to which expenditure is qualifying expenditure.

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455 Excluded expenditure

(1) Expenditure on the acquisition of know-how is not qualifying expenditure to the extent that it is otherwise deducted for tax purposes. (2) Expenditure on the acquisition of know-how is not qualifying expenditure if— (a) the buyer is a body of persons over whom the seller has control, (b) the seller is a body of persons over whom the buyer has control, or (c) the buyer and the seller are both bodies of persons and another person has control over both of them. (3) In subsection (2) “body of persons” includes a partnership. (4) Expenditure on the acquisition of know-how is not qualifying expenditure if it is treated as a payment for goodwill under section 194(3) of ITTOIA 2005 or under section 178(3) of CTA 2009 (consideration for know-how on disposal of trade to be treated as payment for goodwill, unless parties otherwise elect etc.).

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456 Pooling of expenditure

(1) Qualifying expenditure has to be pooled for the purpose of determining a person’s entitlement to writing-down allowances and balancing allowances and liability to balancing charges. (2) There is a separate pool for each trade in respect of which the person has qualifying expenditure.

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457 Determination of entitlement or liability

(1) Whether a person is entitled to a writing-down allowance or a balancing allowance, or liable to a balancing charge, for a chargeable period is determined separately for each pool of qualifying expenditure and depends on— (a) the available qualifying expenditure in that pool for that period (“AQE”), and (b) the total of any disposal values to be brought into account in that pool for that period (“TDV”). (2) If AQE exceeds TDV, the person is entitled to a writing-down allowance or a balancing allowance for the period. (3) If TDV exceeds AQE, the person is liable to a balancing charge for the period. (4) The entitlement under subsection (2) is to a writing-down allowance except for the final chargeable period when it is to a balancing allowance. (5) The final chargeable period is the chargeable period in which the trade is permanently discontinued.

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458 Amount of allowances and charges

(1) The amount of the writing-down allowance to which a person is entitled for a chargeable period is 25% of the amount by which AQE exceeds TDV. (2) If the chargeable period is more or less than a year, the amount is proportionately increased or reduced. (3) If the trade has been carried on for part only of the chargeable period, the amount is proportionately reduced. (4) A person claiming a writing-down allowance may require the allowance to be reduced to a specified amount. (5) The amount of the balancing charge to which a person is liable for a chargeable period is the amount by which TDV exceeds AQE. (6) The amount of the balancing allowance to which a person is entitled for the final chargeable period is the amount by which AQE exceeds TDV.

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459 Available qualifying expenditure

A person’s available qualifying expenditure in a pool for a chargeable period consists of— (a) any qualifying expenditure allocated to the pool for that period in accordance with section 460, and (b) any unrelieved qualifying expenditure carried forward in the pool from the previous chargeable period under section 461.

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460 Allocation of qualifying expenditure to pools

(1) The following rules apply to the allocation of a person’s qualifying expenditure to a pool. (2) An amount of qualifying expenditure is not to be allocated to the pool for a chargeable period if that amount has been taken into account in determining the person’s available qualifying expenditure for an earlier chargeable period. (3) Qualifying expenditure is not to be allocated to the pool for a chargeable period before that in which the expenditure is incurred.

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461 Unrelieved qualifying expenditure

(1) A person has unrelieved qualifying expenditure to carry forward from a chargeable period if for that period AQE exceeds TDV. (2) The amount of the unrelieved qualifying expenditure is— (a) the excess less the writing-down allowance made for the period, or (b) if no writing-down allowance is claimed for the period, the excess. (3) No amount may be carried forward as unrelieved qualifying expenditure from the final chargeable period.

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461A Unrelieved qualifying expenditure: entry to cash basis

(1) If a person carrying on a trade enters the cash basis for a tax year, any cash basis deductible amount may not be carried forward as unrelieved qualifying expenditure in the pool for the trade from the chargeable period ending in the previous tax year (or, if there is more than one such period, the latest of them). (2) A “cash basis deductible amount” means any amount of unrelieved qualifying expenditure for which a deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the tax year for which the person enters the cash basis. (3) Any cash basis deductible amount is to be determined on such basis as is just and reasonable in all the circumstances. (4) Subsections (9) and (11) of section 1A (capital allowances and charges: cash basis) apply for the purposes of this section as they apply for the purposes of that section.

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462 Disposal values

(1) A person is required to bring a disposal value into account for the chargeable period in which he sells know-how on which he has incurred qualifying expenditure. (2) The disposal value to be brought into account is the net proceeds of the sale, so far as they consist of capital sums. (3) But no disposal value need be brought into account if the consideration received for the sale is treated as a payment for goodwill under section 194(2) of ITTOIA 2005 or under section 178(2) of CTA 2009 (consideration for know-how on disposal of trade to be treated as payment for goodwill, unless parties otherwise elect).

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