Capital Allowances Act 2001
2001 c.2
An Act to restate, with minor changes, certain enactments relating to capital allowances.
22nd March 2001
Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
(1) This section applies in relation to a chargeable period for which the profits of a trade, profession, vocation or property business (“the relevant activity”) carried on by a person are calculated on the cash basis.
(2) The person is not entitled to any allowance or liable to any charge under this Act except as provided by subsections (4) and (7).
(3) No disposal value is to be brought into account except as provided by subsections (5) and (8).
(4) If, apart from subsection (2), the person would be entitled to an allowance in respect of expenditure incurred on the provision of a car or liable to a charge in connection with such an allowance, the person is so entitled or (as the case may be) so liable.
(5) If, apart from subsection (3), a disposal value would be brought into account in respect of a car, the disposal value is brought into account in respect of the car.
(6) Subsections (7) and (8) apply if—
(a) a person carrying on a relevant activity incurs qualifying expenditure relating to an asset at a time when the profits of that activity are not calculated on the cash basis,
(b) after incurring the expenditure, the person enters the cash basis for a tax year, and
(c) no deduction would be allowed in respect of the expenditure in calculating the profits of the relevant activity on the cash basis for that tax year, on the assumption that the expenditure was paid in that tax year.
(7) If, apart from subsection (2), the person would be liable to a charge in connection with allowances in respect of the qualifying expenditure mentioned in subsection (6), the person is so liable.
(8) If, apart from subsection (3), a disposal value would be brought into account in respect of the asset mentioned in subsection (6), the disposal value is brought into account in respect of the asset.
(9) For the purposes of this section a person carrying on a trade, profession or vocation “enters the cash basis” for a tax year if—
(a) the cash basis applies in relation to the trade, profession or vocation for the tax year, and
(b) the cash basis did not apply in relation to the trade, profession or vocation for the previous tax year.
(10) For the purposes of this section a person carrying on a property business “enters the cash basis” for a tax year if the profits of the business are calculated—
(a) on the cash basis for the tax year (see section 271D of ITTOIA 2005), and
(b) in accordance with GAAP (see section 271B of that Act) for the previous tax year.
(11) In this section—
(za) references to a trade, profession or vocation in relation to which the cash basis applies are to a trade, profession or vocation the profits of which are required by virtue of section 24A(1) of ITTOIA 2005 to be calculated on the cash basis,
(a) references to calculating the profits of a trade, profession or vocation on the cash basis are to doing so in accordance with section 24A of ITTOIA 2005, and
(b) references to calculating the profits of a property business on the cash basis are to be construed in accordance with section 271D of that Act (calculation of profits of property businesses on the cash basis).
(12) In this section—
“car” has the same meaning as in Part 2 (see section 268A);
“disposal value” means—
a disposal value for the purposes of Part 2, 4A, 5, 6, 7, 8 or 10, or
proceeds from a balancing event for the purposes of Part 3 or 3A;
“qualifying expenditure” means qualifying expenditure within the meaning of any Part of this Act.
2 General means of giving effect to capital allowances
(1) Allowances and charges are to be given effect—
(a) for income tax purposes, in calculating income for a chargeable period, and
(b) for corporation tax purposes, in calculating profits for a chargeable period.
(2) For the meaning of “chargeable period”, see section 6.
(3) Subsection (1) needs to be read with the following provisions about giving effect to allowances and charges—
sections 247 to 262 (plant and machinery allowances);
sections 270HA to 270HI (structures and buildings allowances);
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
sections 360Z and 360Z1 (business premises renovation allowances)
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section 432 (mineral extraction allowances);
section 450 (research and development allowances);
section 463 (know-how allowances);
sections 478 to 480 (patent allowances);
section 489 (dredging allowances);
section 529 (assured tenancy allowances).
(4) In subsection (1)(b) “profits” has the same meaning as in Part 2 of CTA 2009 (see section 2(2) of that Act).
(1) No allowance is to be made under this Act... unless a claim for it is made.
(2) The claim must be included in a tax return.
(2ZZA) Any claim for a first-year allowance under section 45O (expenditure on plant and machinery for use in special tax sites) must include, or be accompanied by, such information as Her Majesty's Revenue and Customs may require.
(2ZA) Any claim for an allowance under Part 2A (structures and buildings allowances) —
(a) must be separately identified as such in the return, and
(b) where it relates to special tax site qualifying expenditure (as defined in section 270BNA), must include, or be accompanied by, such information as Her Majesty's Revenue and Customs may require.
(2A) Any claim for an allowance under Part 3A (business premises renovation allowances) must be separately identified as such in the return.
(2B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) In this Act “tax return” means—
(a) for income tax purposes, a return required to be made under TMA 1970, and
(b) for corporation tax purposes, a company tax return required to be made under Schedule 18 to FA 1998 (company tax returns, assessments and related matters).
(4) Subsection (2) does not apply for income tax purposes to a claim for an allowance under—
(a) section 258 (claim for allowance in respect of special leasing of plant or machinery),
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) section 479 (claim for patent allowance in respect of non-trading expenditure),
which is instead subject to section 42 of TMA 1970 (procedure for making claims and claims not included in returns).
(5) Subsection (2) does not apply for corporation tax purposes to a claim for an allowance under—
(a) section 260(3)(b) (claim to carry back allowance in respect of special leasing of plant or machinery), or
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
which is instead subject to paragraphs 54 to 60 of Schedule 18 to FA 1998 (general provisions as to claims).
(6) This section is subject to section 42(6) and (7) of TMA 1970 (special provisions relating to partnerships).
(1) In this Act “capital expenditure” and “capital sums” are used in the sense given in this section.
(2) “Capital expenditure” and “capital sums” do not include, in relation to a person incurring the expenditure or paying the sums—
(a) any expenditure or sum that may be deducted in calculating the profits or gains of a trade, profession or vocation or property business carried on by the person, ...
(aa) any cash basis expenditure, other than expenditure incurred on the provision of a car, or
(b) any expenditure or sum that may be allowed as a deduction under a relevant provision from the taxable earnings from an employment or office held by the person.
(2ZA) In subsection (2)(aa)—
“cash basis expenditure” means any expenditure incurred—
in the case of a trade, profession or vocation, at a time when the cash basis applies in relation to the trade, profession or vocation (see section 24A of ITTOIA 2005), or
in the case of a property business, in a tax year for which the profits of the business are calculated on the cash basis (see section 271D of that Act); and
“car” has the same meaning as in Part 2 (see section 268A) .
(2A) In subsection (2)—
“relevant provision” means any of the following—
(a) section 262;
(b) section 232 of ITEPA 2003 (giving effect to mileage allowance relief);
(c) Chapters 2 to 6 of Part 5 of that Act (general deductions allowed from earnings); and
(d) sections 188 to 194of FA 2004 (contributions under registered pension schemes), and
“taxable earnings” has the meaning given by section 10 of ITEPA 2003.
(3) “Capital expenditure” and “capital sums” do not include, in relation to a recipient of the expenditure or sums—
(a) any amounts that are to be added in calculating the profits or gains of a trade, profession or vocation or property business carried on by the recipient, or
(b) any amounts that are earnings of an employment or office held by the recipient.
(4) “Capital expenditure” and “capital sums” do not include, in relation to—
(a) a person incurring the expenditure or paying the sums, or
(b) a recipient of the expenditure or sums,
any expenditure or sum in the case of which a deduction of income tax falls or may fall to be made under Chapter 6 of Part 15 of ITA 2007 (deduction from annual payments or patent royalties) or under section 906 of that Act (certain royalties etc where usual place of abode of owner is abroad).
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) For the purposes of this Act, the general rule is that an amount of capital expenditure is to be treated as incurred as soon as there is an unconditional obligation to pay it.
(2) The general rule applies even if the whole or a part of the expenditure is not required to be paid until a later date.
(3) There are the following exceptions to the general rule.
(4) If under an agreement—
(a) the capital expenditure is expenditure on the provision of an asset,
(b) an unconditional obligation to pay an amount of the expenditure comes into being as a result of the giving of a certificate or any other event,
(c) the giving of the certificate, or other event, occurs within the period of one month after the end of a chargeable period, and
(d) at or before the end of that chargeable period, the asset has become the property of, or is otherwise under the agreement attributed to, the person subject to the unconditional obligation to pay,
the expenditure is to be treated as incurred immediately before the end of that chargeable period.
(5) If under an agreement an amount of capital expenditure is not required to be paid until a date more than 4 months after the unconditional obligation to pay has come into being, the amount is to be treated as incurred on that date.
(6) If under an agreement—
(a) there is an unconditional obligation to pay an amount of capital expenditure on a date earlier than accords with normal commercial usage, and
(b) the sole or main benefit which might have been expected to be obtained thereby is that the amount would be treated, under the general rule, as incurred in an earlier chargeable period,
the amount is to be treated as incurred on the date on or before which it is required to be paid.
(7) This section—
(a) is subject to any provision of this Act which has the effect that expenditure is to be treated as incurred on a date later than would result from the application of this section, and
(b) does not apply to expenditure treated as incurred as a result of a person incurring an additional VAT liability.
(1) In this Act “chargeable period” means—
(a) for income tax purposes, a period of account, or
(b) for corporation tax purposes, an accounting period of a company.
(2) “Period of account” means—
(a) in the case of a person entitled to an allowance or liable to a charge in calculating the profits of his trade, profession or vocation, a period for which accounts are drawn up for the purposes of the trade, profession or vocation, and
(b) in the case of any other person entitled to an allowance or liable to a charge, a tax year.
(3) Subsection (2)(a) is subject to subsections (4) to (6).
(4) If—
(a) two periods of account overlap, or
(b) one period of account includes another,
the period common to both is to be treated as part of the first period of account only.
(5) If there is a gap between two periods of account, the gap is to be treated as part of the first period of account.
(6) If a period of account would (apart from this subsection) be longer than 18 months, that period must be treated as divided into separate periods of account—
(a) the first beginning with the start date of the original period, and
(b) each subsequent one beginning with an anniversary of that date,
so as to ensure that none of the periods of account is longer than 12 months.
6A “NIRE company” and “SME (Northern Ireland employer) company”
In this Act—
“NIRE company” means a company that is a Northern Ireland company for the purposes of Part 8B of CTA 2010 by virtue of the SME (election) condition or the large company condition in section 357KA of that Act;
“SME (Northern Ireland employer) company” means a company that is a Northern Ireland company for the purposes of Part 8B of CTA 2010 by virtue of the SME (Northern Ireland employer) condition in section 357KA of that Act.
(1) This section has effect for the purposes of this Act.
(2) “Northern Ireland firm” has the meaning given by section 357WA of CTA 2010.
(3) If section 357WC of CTA 2010 (Northern Ireland profits etc of firm determined under Chapter 6 of Part 8B of that Act) applies to a Northern Ireland firm for a chargeable period, the partnership is a “Northern Ireland Chapter 6 firm” for any purpose for which that section applies.
(4) If section 357WD of CTA 2010 (Northern Ireland profits etc of firm determined under Chapter 7 of Part 8B of that Act) applies to a Northern Ireland firm for a chargeable period, the partnership is a “Northern Ireland Chapter 7 firm” for any purpose for which that section applies.
(1) In this Act “NI rate activity” means—
(a) a qualifying trade carried on by an SME (Northern Ireland employer) company, except to the extent that it is an excluded activity,
(b) a qualifying trade, other than an excluded financial trade, carried on by a NIRE company, to the extent that the trade—
(i) is carried on through a Northern Ireland regional establishment of the company, and
(ii) does not consist of an excluded activity,
(c) the back-office activities of an excluded financial trade carried on by an SME (Northern Ireland employer) company which has made an election for the purposes of section 357KB(2) of CTA 2010,
(d) the back-office activities of an excluded financial trade carried on by a NIRE company which has made an election for the purposes of section 357KB(2) of CTA 2010, to the extent that those activities are carried on through the Northern Ireland regional establishment of the company,
(e) a qualifying partnership trade carried on by a Northern Ireland Chapter 6 firm, except to the extent that it is an excluded activity,
(f) a qualifying partnership trade, other than an excluded financial trade, carried on by a Northern Ireland Chapter 7 firm, to the extent that the trade—
(i) is carried on through a Northern Ireland regional establishment of the partnership, and
(ii) does not consist of an excluded activity,
(g) the back-office activities of an excluded financial trade carried on by a Northern Ireland Chapter 6 firm which has made an election for the purposes of section 357WB(2) of CTA 2010, or
(h) the back-office activities of an excluded financial trade carried on by a Northern Ireland Chapter 7 firm which has made an election for the purposes of section 357WB(2) of CTA 2010, to the extent that those activities are carried on through the Northern Ireland regional establishment of the partnership.
(2) In subsection (1)—
“back-office activities” has the same meaning as in Part 8B of CTA 2010 (see section 357XI of that Act);
“excluded financial trade” means a trade that is an excluded trade for the purposes of Part 8B of CTA 2010 merely because it falls within one or more of the following provisions of that Act—
section 357XB (lending and investment),
section 357XC (investment management), or
section 357XE (re-insurance trade);
“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);
“qualifying partnership trade” has the same meaning as in Part 8B of CTA 2010 (see section 357WB of that Act);
“qualifying trade” has the same meaning as in Part 8B of CTA 2010 (see section 357KB of that Act).
(1) For the purposes of this Act, the NI rate activity carried on by an SME (Northern Ireland employer) company or a NIRE company is to be treated as a separate trade, distinct from any other activities carried on by the company as part of the trade.
(2) For the purposes of the corporate partner calculation, the NI rate activity carried on by a Northern Ireland firm is to be treated as a separate trade, distinct from any other activities carried on by the firm as part of the trade.
(3) In this Act “the corporate partner calculation”, in relation to a trade carried on by a Northern Ireland firm, means the determination of the allowances and charges to which effect is to be given under this Act in determining under subsection (3) or (4) of section 1259 of CTA 2009 (calculation of firm's profits and losses) the amount of the profits of the trade chargeable to corporation tax.
6E Giving effect to allowances and charges: NI rate activity cases
(1) This section applies if an SME (Northern Ireland employer) company or a NIRE company is entitled or liable to—
(a) an allowance or charge under Part 2 (plant and machinery allowances) where the qualifying activity is a trade,
(aa) an allowance under Part 2A (structures and buildings allowances),
(b) an allowance or charge under Part 3A (business premises renovation allowances),
(c) an allowance or charge under Part 5 (mineral extraction allowances),
(d) an allowance or charge under Part 6 (research and development), or
(e) an allowance under Part 9 (dredging allowances).
(2) For the purposes of the corporate partner calculation, this section also applies if a Northern Ireland firm is entitled or liable to an allowance or charge falling within any of subsection (1)(a) to (e).
(3) The allowance or charge is to be given effect in calculating the profits of the trade, by treating—
(a) the allowance as an expense of the trade, and
(b) the charge as a receipt of the trade.
(4) If the allowance or charge relates to an NI rate activity, it is treated for the purposes of Part 8B of CTA 2010 (trading profits taxable at the Northern Ireland rate) as forming part of the Northern Ireland profits or Northern Ireland losses of the trade.
(5) If the allowance or charge relates to a main rate activity, it is treated for the purposes of Part 8B of CTA 2010 as forming part of the mainstream profits or mainstream losses of the trade.
(6) In this section—
(a) “the trade” means the trade carried on by the company or partnership (disregarding for this purpose section 6D), and
(b) “main rate activity” means so much of the trade as is not an NI rate activity.
(1) If an allowance is made under any Part of this Act to a person in respect of capital expenditure, no allowance is to be made to him under any other Part in respect of—
(a) that expenditure, or
(b) the provision of any asset to which that expenditure related.
(1A) In subsection (1), the reference to capital expenditure includes a reference to expenditure that is treated as capital expenditure for the purposes of section 270BJ(1) (structures and buildings allowances: expenditure on renovation, conversion and incidental repairs).
(2) This section does not apply in relation to Parts 7 and 8 (know-how and patent allowances).
8 No double relief through pooling under Part 2 (plant and machinery allowances)
(1) Subsection (2) applies if, under Part 2—
(a) any capital expenditure has been allocated to a pool, and
(b) an allowance or charge has been made to or on any person in respect of the pool.
(2) The person to or on whom the allowance or charge has been made is not entitled to an allowance under any Part other than Part 2 in respect of—
(a) the expenditure allocated to the pool, or
(b) the provision of any asset to which the allocated expenditure related.
(3) Subsection (4) applies if under any Part other than Part 2 an allowance has been made to a person in respect of any capital expenditure.
(4) The person to whom the allowance has been made is not entitled to allocate to any pool—
(a) that expenditure, or
(b) any expenditure on the provision of any asset to which the expenditure mentioned in paragraph (a) related.
(5) This section does not apply in relation to Parts 7 and 8 (know-how and patent allowances).
9 Interaction between fixtures claims and other claims
(1) A person is not entitled to make a fixtures claim in respect of any capital expenditure relating to an asset if—
(a) any person entitled to do so has at any previous time claimed an allowance under any Part other than Part 2, and
(b) the claim was for an allowance in respect of capital expenditure relating, in whole or part, to the asset.
(2) Subsection (1) does not prevent a person making a fixtures claim in respect of capital expenditure if—
(a) the only previous claim was under Part 3, 3A or 6 (industrial buildings and research and development allowances), and
(b) section 186(2), 186A(2) or 187(2) (limit on amount of expenditure that may be taken into account) applies to that expenditure.
(3) If a person entitled to do so has made a fixtures claim in respect of capital expenditure relating to an asset, no one is entitled to an allowance on a later claim under any Part other than Part 2 in respect of any capital expenditure relating to the asset.
(4) A person makes a fixtures claim in respect of expenditure if he makes a claim (in the sense given in section 202(3)) under Chapter 14 of Part 2 in respect of the expenditure as expenditure on the provision of a fixture.
(1) In this Chapter “capital expenditure” includes any contribution to capital expenditure.
(2) For the purposes of this Chapter—
(a) expenditure relates to an asset only if it relates to its provision, and
(b) the provision of an asset includes its construction or acquisition.
11 General conditions as to availability of plant and machinery allowances
(1) Allowances are available under this Part if a person carries on a qualifying activity and incurs qualifying expenditure.
(2) “Qualifying activity” has the meaning given by Chapter 2.
(3) Allowances under this Part must be calculated separately for each qualifying activity which a person carries on.
(4) The general rule is that expenditure is qualifying expenditure if—
(a) it is capital expenditure on the provision of plant or machinery wholly or partly for the purposes of the qualifying activity carried on by the person incurring the expenditure, and
(b) the person incurring the expenditure owns the plant or machinery as a result of incurring it.
(5) But the general rule is affected by other provisions of this Act, and in particular by Chapter 3.
12 Expenditure incurred before qualifying activity carried on
(1) For the purposes of this Part, expenditure incurred for the purposes of a qualifying activity by a person about to carry on the activity is to be treated as if it had been incurred by him on the first day on which he carries on the activity.
(2) Subsection (3) 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.
(3) 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.
(4) Subsection (5) 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.
(5) The expenditure is to be treated for the purposes of this Part so far as relating to the corporate partner calculation as incurred on the first day of the first chargeable period in which the partnership is a Northern Ireland Chapter 7 firm.
(6) 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).
13 Use for qualifying activity of plant or machinery provided for other purposes
(1) This section applies if a person—
(a) brings plant or machinery into use for the purposes of a qualifying activity carried on by him, and
(b) on the date when he does so, owns the plant or machinery as a result of having incurred capital expenditure (“actual expenditure”) on its provision for purposes other than those of that qualifying activity.
(2) The person is to be treated—
(a) as having incurred capital expenditure (“notional expenditure”) on the provision of the plant or machinery for the purposes of the qualifying activity on the date on which it is brought into use for those purposes, and
(b) as owning the plant or machinery as a result as having incurred that expenditure.
(3) Subject to subsection (4), the amount of the notional expenditure is the market value of the plant or machinery on the date when it is brought into use for the purposes of the qualifying activity.
(4) If the market value is greater than the actual expenditure, the amount of the notional expenditure is the amount of the actual expenditure, less any amount required to be deducted under subsection (5).
(5) The amount to be deducted is any amount that under section 218... would have been left out of account in determining the person’s available qualifying expenditure if the actual expenditure had been incurred on the provision of the plant or machinery for the purposes of the qualifying activity.
(6) The question whether the provision of the plant or machinery is to be treated as wholly or only partly for the purposes of the qualifying activity is to be determined according to whether the use referred to in subsection (1)(a) is wholly or only partly for those purposes.
(7) This section is subject to section 161 (pre-trading expenditure on mineral exploration and access).
13A Use for other purposes of plant or machinery previously used for long funding leasing
(1) This section applies if a person who has been using plant or machinery for the purpose of leasing it under a long funding lease (see Chapter 6A)—
(a) ceases to use the plant or machinery for that purpose without ceasing to use it for the purposes of a qualifying activity carried on by him, and
(b) on the date of the cessation, owns the plant or machinery as a result of having incurred capital expenditure on its provision for the purposes of the qualifying activity.
(2) The person is to be treated—
(a) as having incurred capital expenditure (“notional expenditure”) on the provision of the plant or machinery for the purposes of the qualifying activity on the day after the cessation,
(b) as owning the plant or machinery as a result of having incurred that expenditure, and
(c) as if the plant or machinery on and after that day were different plant or machinery from the plant or machinery before that day.
(3) The amount of the notional expenditure is an amount equal to the termination amount, determined in accordance with section 70YG, in the case of the long funding lease under which the plant or machinery was last leased before the cessation.
14 Use for qualifying activity of plant or machinery which is a gift
(1) This section applies if a person—
(a) is the owner of plant or machinery as a result of a gift, and
(b) brings the plant or machinery into use for the purposes of a qualifying activity carried on by him.
(2) The person is to be treated—
(a) as having incurred capital expenditure on the provision of the plant or machinery for the purposes of the qualifying activity on the date on which it is brought into use for those purposes, and
(b) as owning the plant or machinery as a result of having incurred that expenditure.
(3) The amount of that capital expenditure is to be treated as being the market value of the plant or machinery on the date when it was brought into use for the purposes of the qualifying activity.
(4) The question whether the provision of the plant or machinery is to be treated as wholly or only partly for the purposes of the qualifying activity is to be determined according to whether the use referred to in subsection (1)(b) is wholly or only partly for those purposes.
(5) This section is subject to section 161 (pre-trading expenditure on mineral exploration and access).
(1) Each of the following is a qualifying activity for the purposes of this Part—
(a) a trade,
(b) a UK property business,
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) an ... overseas property business,
(da) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(e) a profession or vocation,
(f) a concern listed in section 12(4) of ITTOIA 2005 or section 39(4) of CTA 2009 (mines, transport undertakings etc.),
(g) managing the investments of a company with investment business,
(h) special leasing of plant or machinery, and
(i) an employment or office,
but to the extent only that the profits or gains from the activity are, or (if there were any) would be, chargeable to tax.
(2) Subsection (1) is subject to the following provisions of this Part.
(2ZA) Where an activity of a company is treated by subsection (1) of section 6D (NI rate activity treated as separate trade) as a separate trade, that activity is an activity separate from any other activity of the company.
(2ZB) Where an activity of a Northern Ireland firm is treated by subsection (2) of section 6D as a separate trade for the purposes of the corporate partner calculation, that activity is for the purposes of this Part, so far as relating to the corporate partner calculation, an activity separate from every other activity of the Northern Ireland firm.
(2A) A business carried on through one or more permanent establishments outside the United Kingdom by a company in relation to which an election under section 18A of CTA 2009 has effect—
(a) is an activity separate from any other activity of the company, and
(b) is to be regarded as an activity all the profits and gains from which are not, or (if there were any) would not be, chargeable to tax.
(2B) Subsection (2A) does not apply to the business so far as it consists of a plant or machinery lease under which the company is a lessor if any profits or losses arising from the lease are to be left out of account as mentioned in section 18C(3) of CTA 2009.
(3) This section, in so far as it provides for—
(a) a UK property business,
(b) an ... overseas property business, or
(c) special leasing of plant or machinery,
to be a qualifying activity, needs to be read with section 35 (expenditure on plant or machinery for use in a dwelling-house not qualifying expenditure in certain cases).
(4) Also, subsection (1)(i) needs to be read with sections 36 (restriction on qualifying expenditure in case of employment or office) and 80 (vehicles provided for purposes of employment or office).
18 Managing the investments of a company with investment business
(1) For the purposes of this Part, managing the investments of a company with investment business consists of pursuing those purposes expenditure on which would be treated as expenses of management within section 1219 of CTA 2009.
(2) In this Part “company with investment business” has the meaning given by section 1218B of CTA 2009.
(1) In this Part “special leasing”, in relation to plant or machinery, means hiring out the plant or machinery otherwise than in the course of any other qualifying activity (and references to a lessor or lessee in the context of special leasing are to be read accordingly).
(2) A qualifying activity consisting of special leasing of plant or machinery begins when the plant or machinery is first hired out in the circumstances given in subsection (1).
(3) A qualifying activity consisting of special leasing of plant or machinery is permanently discontinued if the lessor permanently ceases to hire out the plant or machinery otherwise than in the course of any other qualifying activity.
(4) A person who has more than one item of plant or machinery that is the subject of special leasing has a separate qualifying activity in relation to each item.
(5) If a company carrying on any long-term business—
(a) hires out plant or machinery which is an investment asset (as defined by section 545(2)), and
(b) does not do so in the course of a property business,
the company is to be treated for the purposes of subsection (1) as hiring out the plant or machinery otherwise than in the course of a qualifying activity.
(1) In section 15(1)(i) “employment” does not include an employment the performance of the duties of which is treated as the carrying on of a trade under section 15 of ITTOIA 2005 (divers and diving supervisors in the North Sea etc.).
(2) Subsection (3) applies if the earnings for any duties of an employment or office fall within section 22 or 26 of ITEPA 2003.
(3) This Part applies in relation to—
(a) those earnings , or
(b) any other taxable earnings (as defined by section 10 of ITEPA 2003) of the employment or office,
as if the performance of the duties did not belong to that employment or office.
(1) For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on the provision of a building.
(2) The provision of a building includes its construction or acquisition.
(3) In this section, “building” includes an asset which—
(a) is incorporated in the building,
(b) although not incorporated in the building (whether because the asset is moveable or for any other reason), is in the building and is of a kind normally incorporated in a building, or
(c) is in, or connected with, the building and is in list A.
List A
Assets treated as buildings
1. | Walls, floors, ceilings, doors, gates, shutters, windows and stairs.
2. | Mains services, and systems, for water, electricity and gas.
3. | Waste disposal systems.
4. | Sewerage and drainage systems.
5. | Shafts or other structures in which lifts, hoists, escalators and moving walkways are installed.
6. | Fire safety systems.
(4) This section is subject to section 23 (but any reference in list C in subsection (4) of that section to “plant” does not include anything where expenditure on its provision is excluded by this section).
(1) For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on—
(a) the provision of a structure or other asset in list B, or
(b) any works involving the alteration of land.
List B
Excluded structures and other assets
1. | A tunnel, bridge, viaduct, aqueduct, embankment or cutting.
2. | A way, hard standing (such as a pavement), road, railway, tramway, a park for vehicles or containers, or an airstrip or runway.
3. | An inland navigation, including a canal or basin or a navigable river.
4. | A dam, reservoir or barrage, including any sluices, gates, generators and other equipment associated with the dam, reservoir or barrage.
5. | A dock, harbour, wharf, pier, marina or jetty or any other structure in or at which vessels may be kept, or merchandise or passengers may be shipped or unshipped.
6. | A dike, sea wall, weir or drainage ditch.
7. | Any structure not within items 1 to 6 other than— a structure (but not a building) within Chapter 2 of Part 3 (meaning of “industrial building”), a structure in use for the purposes of an undertaking for the extraction, production, processing or distribution of gas, and a structure in use for the purposes of a trade which consists in the provision of telecommunication, television or radio services.
(2) The provision of a structure or other asset includes its construction or acquisition.
(3) In this section—
(a) “structure” means a fixed structure of any kind, other than a building (as defined by section 21(3)), and
(b) “land” does not include buildings or other structures, but otherwise has the meaning given in Schedule 1 to the Interpretation Act 1978 (c. 30).
(4) This section is subject to section 23 (but any reference in list C in subsection (4) of that section to “plant” does not include anything where expenditure on its provision is excluded by this section).
(1) Sections 21 and 22 do not apply to any expenditure to which any of the provisions listed in subsection (2) applies.
(2) The provisions are—
section 28 (thermal insulation of ...buildings);
...
...
...
...
section 33 (personal security);
section 33A (integral features);
section 71 (software and rights to software);
section 143 of ITTOIA 2005 or section 40D of F(No.2)A 1992 (election relating to tax treatment of films expenditure).
(3) Sections 21 and 22 also do not affect the question whether expenditure on any item described in list C is, for the purposes of this Act, expenditure on the provision of plant or machinery.
(4) But items 1 to 16 of list C do not include any asset whose principal purpose is to insulate or enclose the interior of a building or to provide an interior wall, floor or ceiling which (in each case) is intended to remain permanently in place.
List C
Expenditure unaffected by sections 21 and 22
1. | Machinery (including devices for providing motive power) not within any other item in this list.
2. | ...Gas and sewerage systems provided mainly— to meet the particular requirements of the qualifying activity, or to serve particular plant or machinery used for the purposes of the qualifying activity.
3. | . . .
4. | Manufacturing or processing equipment; storage equipment (including cold rooms); display equipment; and counters, checkouts and similar equipment.
5. | Cookers, washing machines, dishwashers, refrigerators and similar equipment; washbasins, sinks, baths, showers, sanitary ware and similar equipment; and furniture and furnishings.
6. | Hoists.
7. | Sound insulation provided mainly to meet the particular requirements of the qualifying activity.
8. | Computer, telecommunication and surveillance systems (including their wiring or other links).
9. | Refrigeration or cooling equipment.
10. | Fire alarm systems; sprinkler and other equipment for extinguishing or containing fires.
11. | Burglar alarm systems.
12. | Strong rooms in bank or building society premises; safes.
13. | Partition walls, where moveable and intended to be moved in the course of the qualifying activity.
14. | Decorative assets provided for the enjoyment of the public in hotel, restaurant or similar trades.
15. | Advertising hoardings; signs, displays and similar assets.
16. | Swimming pools (including diving boards, slides and structures on which such boards or slides are mounted).
17. | Any glasshouse constructed so that the required environment (namely, air, heat, light, irrigation and temperature) for the growing of plants is provided automatically by means of devices forming an integral part of its structure.
18. | Cold stores.
19. | Caravans provided mainly for holiday lettings.
20. | Buildings provided for testing aircraft engines run within the buildings.
21. | Moveable buildings intended to be moved in the course of the qualifying activity.
22. | The alteration of land for the purpose only of installing plant or machinery.
23. | The provision of dry docks.
24. | The provision of any jetty or similar structure provided mainly to carry plant or machinery.
25. | The provision of pipelines or underground ducts or tunnels with a primary purpose of carrying utility conduits.
26. | The provision of towers to support floodlights.
27. | The provision of— any reservoir incorporated into a water treatment works, or any service reservoir of treated water for supply within any housing estate or other particular locality.
28. | The provision of— silos provided for temporary storage, or storage tanks.
29. | The provision of slurry pits or silage clamps.
30. | The provision of fish tanks or fish ponds.
31. | The provision of rails, sleepers and ballast for a railway or tramway.
32. | The provision of structures and other assets for providing the setting for any ride at an amusement park or exhibition.
33. | The provision of fixed zoo cages.
(5) In item 19 of list C, “caravan” includes, in relation to a holiday caravan site, anything that is treated as a caravan for the purposes of—
(a) the Caravan Sites and Control of Development Act 1960 (c. 62), or
(b) the Caravans Act (Northern Ireland) 1963 (c. 17 (N.I.)).
(1) For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on the acquisition of an interest in land.
(2) In this section “land” does not include—
(a) buildings or other structures, or
(b) any asset which is so installed or otherwise fixed to any description of land as to become, in law, part of the land,
but otherwise has the meaning given in Schedule 1 to the Interpretation Act 1978 (c. 30).
(3) Subject to subsection (2), “interest in land” has the meaning given by section 175 (definitions in connection with provisions about fixtures).
25 Building alterations connected with installation of plant or machinery
If a person carrying on a qualifying activity incurs capital expenditure on alterations to an existing building incidental to the installation of plant or machinery for the purposes of the qualifying activity, this Part applies as if—
(a) the expenditure were expenditure on the provision of the plant or machinery, and
(b) the works representing the expenditure formed part of the plant or machinery.
(1) This section applies if—
(a) plant or machinery is demolished, and
(b) the last use of the plant or machinery was for the purposes of a qualifying activity.
(2) If the person carrying on the qualifying activity replaces the plant or machinery with other plant or machinery then, for the purposes of this Part, the net cost of the demolition to that person is treated as expenditure incurred on the provision of the other plant or machinery.
(3) If the person carrying on the qualifying activity does not replace the plant or machinery, the net cost of the demolition to that person is allocated to the appropriate pool for the chargeable period in which the demolition takes place.
(4) In subsection (3)—
“the appropriate pool” means the pool to which the expenditure on the demolished plant or machinery has been or would be allocated in accordance with this Part, and
“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 plant or machinery.
(5) Subsection (3) is subject to section 164(4) (general decommissioning expenditure before cessation of ring fence trade: election for special allowance) and sections 165A to 165E (restrictions on allowances: anti-avoidance).
27 Application of Part to thermal insulation and personal security
(1) Subsection (2) has effect in relation to expenditure if—
(a) it is expenditure to which section 28 or 33 applies, and
(b) an allowance under Part 2 or a deduction in respect of the expenditure could not, in the absence of this section, be made in calculating the income from the qualifying activity in question.
(2) This Part (including in particular section 11(4)) applies as if—
(a) the expenditure were capital expenditure on the provision of plant or machinery for the purposes of the qualifying activity in question, and
(b) the person who incurred the expenditure owned plant or machinery as a result of incurring it.
(1) This section applies to expenditure if a person carrying on a qualifying activity other than a UK property business or an overseas property business has incurred it in adding insulation against loss of heat to a building occupied by him for the purposes of the qualifying activity.
(2) This section also applies to expenditure if a person carrying on a qualifying activity consisting of a UK property business or an overseas property business has incurred it in adding insulation against loss of heat to a building let by him in the course of the business.
(2A) Subsection (2) is subject to section 35 (expenditure on plant or machinery for use in dwelling-house not qualifying expenditure).
(2B) This section does not apply to expenditure within subsection (2) if a deduction for that expenditure is allowable—
(a) under section 251 of CTA 2009, or
(b) under section 312 of ITTOIA 2005,
(deductions for expenditure on energy-saving items).
(2C) For the purposes of subsection (2B), whether such a deduction is allowable is to be determined without regard to subsection (1)(e) of the section in question.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .