Capital Allowances Act 2001 (c. 2)

(The document as of February, 2008)

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(f) the equipment lease is one which under normal accountancy practice falls (or would fall) to be treated in the accounts of the equipment lessor as an operating lease, and

(g) the equipment lease is not for the lease of the plant or machinery for use in a dwelling-house.

(2) For the purposes of applying subsection (1)(f), the equipment lessor is to be treated as being a company incorporated in a part of the United Kingdom.

180 Equipment lease is part of affordable warmth programme

(1) The conditions referred to in section 177(1)(a)(iii) are that--

(a) the plant or machinery which is the subject of the equipment lease consists of a boiler, heat exchanger, radiator or heating control that is installed in a building as part of a space or water heating system,

(b) the expenditure of the equipment lessor is incurred before 1st January 2008, and

(c) the equipment lease is approved for the purposes of this section as entered into as part of the affordable warmth programme.

(2) The approval mentioned in subsection (1)(c) may be given, with the consent of the Treasury--

(a) by the Secretary of State;

(b) in the case of buildings in Scotland, by the Scottish Ministers;

(d) in the case of buildings in Northern Ireland, by the Department for Social Development in Northern Ireland.

(3) If an approval is withdrawn, it is to be treated for the purposes of subsection (1)(c) as never having had effect.

181 Purchaser of land giving consideration for fixture

(1) If--

(a) after any plant or machinery has become a fixture, a person ("the purchaser") acquires an interest in the relevant land,

(b) that interest was in existence before the purchaser's acquisition of it, and

(c) the consideration which the purchaser gives for the interest is or includes a capital sum that, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture,

the purchaser is to be treated, on and after the time of the acquisition, as the owner of the fixture as a result of incurring that expenditure.

(2) Subsection (1) does not apply, and is to be treated as never having applied, if--

(a) immediately after the time of the acquisition, any person holds another interest in any land in which the whole or any part of the relevant land is comprised, and

(b) the person holding that other interest has a prior right in relation to the fixture.

(3) For the purposes of subsection (2)(b), the person holding the other interest has a prior right in relation to the fixture if he--

(a) is treated as the owner of the fixture immediately before the time referred to in subsection (2)(a) as a result of incurring expenditure on the provision of the fixture,

(b) is not so treated as a result of section 538 (contribution allowances for plant and machinery),

(d) makes or has made a claim in respect of that expenditure.

(4) Subsection (1) is subject to section 182.

182 Purchaser of land discharging obligations of equipment lessee

(1) If--

(a) after any plant or machinery has become a fixture, a person ("the purchaser") acquires an interest in the relevant land,

(b) that interest was in existence before the purchaser's acquisition of it,

(d) in connection with that acquisition, the purchaser pays a capital sum to discharge the obligations of the equipment lessee under the equipment lease,

the purchaser is to be treated, on and after the time of the acquisition, as the owner of the fixture as a result of incurring expenditure, consisting of that capital sum, on the provision of the fixture.

(2) Subsection (1) does not apply, and is to be treated as never having applied, if--

(a) immediately after the time of the acquisition, any person holds another interest in any land in which the whole or any part of the relevant land is comprised, and

(b) the person holding that other interest has a prior right in relation to the fixture.

(3) Section 181(3) (test for whether the person holding the other interest has a prior right) applies for the purposes of subsection (2)(b).

183 Incoming lessee where lessor entitled to allowances

(1) If--

(a) after any plant or machinery has become a fixture, a person ("the lessor") who has an interest in the relevant land grants a lease,

(b) the lessor is entitled to an allowance in respect of the fixture for the chargeable period in which the lease is granted or would be if he were within the charge to tax,

(c) the consideration which the lessee gives for the lease is or includes a capital sum that, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture,

(d) the lessor and the lessee are not connected persons, and

(e) the lessor and the lessee make an election under this section,

the lessee is to be treated, on and after the time when the lease is granted, as the owner of the fixture as a result of incurring that expenditure.

(2) An election under this section must be made by notice to the Inland Revenue within 2 years after the date on which the lease takes effect.

184 Incoming lessee where lessor not entitled to allowances

(1) If--

(a) after any plant or machinery has become a fixture, a person ("the lessor") who has an interest in the relevant land grants a lease,

(b) the lessor is not within section 183(1)(b),

(c) before the lease is granted, the fixture has not been used for the purposes of a qualifying activity carried on by the lessor or any person connected with the lessor, and

(d) the consideration which the lessee gives for the lease is or includes a capital sum that, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture,

the lessee is to be treated, on and after the time when the lease is granted, as the owner of the fixture as a result of incurring that expenditure.

(2) Subsection (1) does not apply, and is to be treated as never having applied, if--

(a) immediately after the time when the lease is granted, any person holds another interest in any land in which the whole or any part of the relevant land is comprised, and

(b) the person holding that other interest has a prior right in relation to the fixture.

(3) Section 181(3) (test for whether the person holding the other interest has a prior right) applies for the purposes of subsection (2)(b).

Restrictions on amount of qualifying expenditure

185 Fixture on which a plant and machinery allowance has been claimed

(1) This section applies if--

(a) a person ("the current owner") is treated as the owner of a fixture as a result of incurring capital expenditure ("new expenditure") on its provision,

(b) the plant or machinery is treated as having been owned at a relevant earlier time by any person ("the past owner") as a result of incurring other expenditure,

(c) the plant or machinery is within paragraph (b) otherwise than as a result of section 538 (contribution allowances for plant and machinery), and

(d) the past owner is or has been required to bring the disposal value of the plant or machinery into account (as a result of having made a claim in respect of that other expenditure).

(2) If the new expenditure exceeds the maximum allowable amount, the excess--

(a) is to be left out of account in determining the current owner's qualifying expenditure, or

(b) if the new expenditure has already been taken into account for this purpose, is to be treated as expenditure that should never have been taken into account.

(3) The maximum allowable amount is--

D + I

where--

D is the disposal value of the plant or machinery which the past owner has been or is required to bring into account, and
I is any of the new expenditure that is treated under section 25 (building alterations in connection with installation) as expenditure on the provision of the plant or machinery.

(4) If more than one disposal event has occurred requiring the past owner to bring the disposal value of the plant or machinery into account, the maximum allowable amount is calculated by reference only to the most recent of those events.

(5) For the purposes of this section, the current owner and the past owner may be the same person.

(6) In subsection (1)(b) "relevant earlier time" means (subject to subsection (7)) any time before the earliest time when the current owner is treated as owning the plant or machinery as a result of incurring the new expenditure.

(7) If, before the earliest time when the current owner is treated as owning the plant or machinery as a result of incurring the new expenditure--

(a) any person has ceased to own the plant or machinery as a result of a sale,

(b) the sale was not a sale of the plant or machinery as a fixture, and

the relevant earlier time does not include any time before the seller ceased to own the plant or machinery.

186 Fixture on which an industrial buildings allowance has been made

(1) This section applies if--

(a) a person ("the past owner") has at any time claimed an allowance to which he is entitled under Part 3 (industrial buildings allowances) in respect of expenditure which was or included expenditure on the provision of plant or machinery,

(b) the past owner has transferred the interest which is the relevant interest for the purposes of Part 3, and

(i) on the provision of the plant or machinery, and

(ii) at a time when it is a fixture in the building.

(2) If the new expenditure exceeds the maximum allowable amount, the excess is to be left out of account in determining the current owner's qualifying expenditure.

(3) The maximum allowable amount is--

---

where--

F is the part of the consideration for the transfer by the past owner that is attributable to the fixture,
T is the total consideration for that transfer, and
R is the residue of qualifying expenditure attributable to the relevant interest immediately after that transfer, calculated on the assumption that the transfer was a sale of the relevant interest.

(4) For the purposes of this section the current owner of the plant or machinery is--

(a) the person to whom the past owner transferred the relevant interest, or

(b) any person who is subsequently treated as the owner of the plant or machinery.

(5) In this section "building" and "residue of qualifying expenditure" have the same meaning as in Part 3.

187 Fixture on which a research and development allowance has been made

(1) This section applies if--

(a) a person has at any time claimed an allowance to which he is entitled under Part 6 (research and development allowances) in respect of qualifying expenditure under that Part ("Part 6 expenditure"),

(b) an asset representing the whole or part of the Part 6 expenditure ("the Part 6 asset") has ceased to be owned by that person ("the past owner"),

(d) the current owner makes a claim under this Part in respect of expenditure ("new expenditure") incurred--

(i) on the provision of the plant or machinery, and

(ii) at a time when it is a fixture.

(2) If the new expenditure exceeds the maximum allowable amount, the excess is to be left out of account in determining the current owner's qualifying expenditure.

(3) The maximum allowable amount is--

---

where--

F is the part of the consideration for the disposal of the Part 6 asset by the past owner that is attributable to the fixture,
T is the total consideration for that disposal, and
A is an amount equal to whichever is the smaller of--
- (a) the disposal value of the Part 6 asset when the past owner ceased to own it, and
- (b) so much of the Part 6 expenditure as related to the provision of the Part 6 asset.

(4) For the purposes of this section the current owner of the plant or machinery is--

(a) the person who acquired the Part 6 asset from the past owner, or

(b) any person who is subsequently treated as the owner of the plant or machinery.

Cessation of ownership of fixtures

188 Cessation of ownership when person ceases to have qualifying interest

(1) This section applies if a person is treated as the owner of a fixture under--

(a) section 176 (person with interest in land having fixture for purposes of qualifying activity),

(b) section 181 (purchaser of land giving consideration for fixture),

(d) section 183 (incoming lessee where lessor entitled to allowances), or

(e) section 184 (incoming lessee where lessor not entitled to allowances).

(2) If the person ceases at any time to have the qualifying interest, he is to be treated as ceasing to be the owner of the fixture at that time.

(3) In this Chapter "the qualifying interest" means--

(a) if section 176, 181 or 182 applies, the interest in the relevant land referred to in that section, and

(b) if section 183 or 184 applies, the lease referred to in that section.

(4) This section is subject to section 189.

189 Identifying the qualifying interest in special cases

(1) If--

(a) a person's qualifying interest is an agreement to acquire an interest in land, and

(b) that interest is subsequently transferred or granted to that person,

the interest transferred or granted is to be treated as the qualifying interest.

(2) If a person's qualifying interest ceases to exist as a result of its being merged in another interest acquired by that person, that other interest is to be treated as the qualifying interest.

(3) If--

(a) the qualifying interest is a lease, and

(b) on its termination, a new lease of the relevant land (with or without other land) is granted to the lessee,

the new lease is to be treated as the qualifying interest.

(4) If--

(a) the qualifying interest is a licence, and

(b) on its termination, a new licence to occupy the relevant land (with or without other land) is granted to the licensee,

the new licence is to be treated as the qualifying interest.

(5) If--

(a) the qualifying interest is a lease, and

(b) with the consent of the lessor, the lessee remains in possession of the relevant land after the termination of the lease without a new lease being granted to him,

the qualifying interest is to be treated as continuing so long as the lessee remains in possession of the relevant land.

190 Cessation of ownership of lessor where section 183 applies

(1) This section applies if a lessee is treated under section 183 (incoming lessee where lessor entitled to allowances) as the owner of a fixture.

(2) The lessor is to be treated as ceasing to be the owner of the fixture when the lessee begins to be treated as the owner.

191 Cessation of ownership on severance of fixture

If--

(a) a person is treated as the owner of the fixture as a result of any provision of this Chapter,

(b) the fixture is permanently severed from the relevant land (so that it ceases to be a fixture), and

that person is to be treated as ceasing to be the owner of the fixture when it is severed.

192 Cessation of ownership of equipment lessor

(1) This section applies if an equipment lessor is treated under section 177 as the owner of a fixture.

(2) If--

(a) the equipment lessor at any time assigns his rights under the equipment lease, or

(b) the financial obligations of the equipment lessee under an equipment lease are at any time discharged (on the payment of a capital sum or otherwise),

the equipment lessor is to be treated as ceasing to be the owner of the fixture at that time (or, as the case may be, at the earliest of those times).

(3) The reference in subsection (2)(b) to the equipment lessee is, in a case where the financial obligations of the equipment lessee have become vested in another person (by assignment, operation of law or otherwise), a reference to the person in whom the obligations are vested when the capital sum is paid.

Acquisition of ownership of fixture when another ceases to own it

193 Acquisition of ownership by lessor or licensor on termination of lease or licence

If, on the termination of a lease or licence, the outgoing lessee or licensee is treated under section 188 as ceasing to be the owner of a fixture, the lessor or licensor is to be treated, on and after the termination of the lease or licence, as the owner of the fixture.

194 Acquisition of ownership by assignee of equipment lessor

(1) If section 192(2)(a) applies (cessation of ownership of equipment lessor as a result of assignment), the assignee is to be treated, on and after the assignment--

(a) as having incurred expenditure, consisting of the consideration given by him for the assignment, on the provision of the fixture, and

(b) as being the owner of the fixture.

(2) For the purposes of section 192 (and subsection (1) and section 195) the assignee is to be treated as being an equipment lessor who owns the fixture under section 177.

195 Acquisition of ownership by equipment lessee

(1) If section 192(2)(b) applies (discharge of obligations of equipment lessee) because the equipment lessee has paid a capital sum, the equipment lessee is to be treated--

(a) as having incurred expenditure, consisting of the capital sum, on the provision of the fixture, and

(b) as being, on and after the time of payment, the owner of the fixture.

(2) Section 192(3) (assignee of equipment lessee) applies in relation to subsection (1).

Disposal values

196 Disposal values in relation to fixtures: general

(1) The disposal value to be brought into account in relation to a fixture depends on the nature of the disposal event, as shown in the Table--

Table

Disposal values: fixtures

1. Disposal event	2. Disposal value
1. Cessation of ownership of the fixture under section 188 because of a sale of the qualifying interest except where item 2 applies.	The part of the sale price that-- (a) falls to be treated for the purposes of this Part as expenditure incurred by the purchaser on the provision of the fixture, or (b) would fall to be so treated if the purchaser were entitled to an allowance.
2. Cessation of ownership of the fixture under section 188 because of a sale of the qualifying interest where-- (a) the sale is at less than market value, and (b) the condition in subsection (2) is met by the purchaser.	The part of the price that would be treated for the purposes of this Part as expenditure by the purchaser on the provision of the fixture if-- (a) the qualifying interest were sold at market value, (b) that sale took place immediately before the event which causes the former owner to be treated as ceasing to be the owner of the fixture, and (c) that event were disregarded in determining that market value.
3. Cessation of ownership of the fixture under section 188 where-- (a) neither item 1 nor 2 applies, but (b) the qualifying interest continues in existence after that time or would so continue but for its becoming merged in another interest.	The disposal value given for item 2.
4. Cessation of ownership of the fixture under section 188 because of the expiry of the qualifying interest.	If the person receives a capital sum, by way of compensation or otherwise, by reference to the fixture, the amount of the capital sum. In any other case, nil.
5. Cessation of ownership of the fixture under section 190 because the lessee has become the owner under section 183.	The part of the capital sum given by the lessee for the lease referred to in section 183 that falls to be treated for the purposes of this Part as the lessee's expenditure on the provision of the fixture.
6. Cessation of ownership of the fixture under section 191 (severance).	The market value of the fixture at the time of the severance.
7. Cessation of ownership of the fixture because section 192(2)(a) (assignment of rights) applies.	The consideration given by the assignee for the assignment.
8. Cessation of ownership of the fixture because section 192(2)(b) (discharge of equipment lessee's obligations) applies on the payment of a capital sum.	The capital sum paid to discharge the financial obligations of the equipment lessee.
9. Permanent discontinuance of the qualifying activity followed by the sale of the qualifying interest.	The part of the sale price that-- (a) falls to be treated as expenditure incurred by the purchaser on the provision of the fixture, or (b) would fall to be so treated if the purchaser were entitled to an allowance.
10. Permanent discontinuance of the qualifying activity followed by the demolition or destruction of the fixture.	The net amount received for the remains of the fixture, together with-- (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.
11. Permanent discontinuance of the qualifying activity followed by the permanent loss of the fixture otherwise than as a result of its demolition or destruction.	Any insurance money received in respect of the loss and, so far as it consists of capital sums, any other compensation of any description so received.
12. The fixture begins to be used wholly or partly for purposes other than those of the qualifying activity.	The part of the price that would fall to be treated for the purposes of this Part as expenditure incurred by the purchaser on the provision of the fixture if the qualifying interest were sold at market value.

(2) The condition referred to in item 2 of the Table is met by the purchaser if--

(a) the purchaser's expenditure on the provision of the fixture cannot be qualifying expenditure under this Part or Part 6 (research and development allowances), or

(b) the purchaser is a dual resident investing company which is connected with the former owner.

(3) Items 1 and 5 of the Table are subject to sections 198 and 199 (election to fix apportionment on sale of qualifying interest or grant of lease).

(4) Section 192(3) (assignee of equipment lessee) applies in relation to item 8 of the Table.

(5) Nothing in sections 188 to 192 or this section prevents a disposal value having to be brought into account under Chapter 5 because of a disposal event not dealt with in these sections.

(6) This section is subject to section 197.

197 Disposal values in avoidance cases

(1) This section applies if--

(a) a person ("the taxpayer") is treated under this Chapter as the owner of any plant or machinery as a result of incurring any expenditure,

(b) any disposal event occurs in relation to the plant or machinery,

(c) the disposal value to be brought into account by the taxpayer would (but for this section) be less than the notional written-down value of the plant or machinery, and

(d) the disposal event is part of, or occurs as a result of, a scheme or arrangement the main purpose or one of the main purposes of which is the obtaining by the taxpayer of a tax advantage under this Part.

(2) The disposal value that the taxpayer must bring into account is the notional written-down value of the plant or machinery.

(3) The notional written-down value is--

QE - A

where--

QE is the taxpayer's expenditure on the plant or machinery that is qualifying expenditure,
A is the total of all allowances which could have been made to the taxpayer in respect of that expenditure if--
- (a) that expenditure had been the only expenditure that had ever been taken into account in determining his available qualifying expenditure, and
- (b) all allowances had been made in full.

Election to fix apportionment

198 Election to apportion sale price on sale of qualifying interest

(1) This section applies if the disposal value of a fixture is required to be brought into account in accordance with item 1 of the Table in section 196 (sale of qualifying interest at not less than market value, etc.).

(2) The seller and the purchaser may jointly, by an election, fix the amount that is to be treated--

(a) for the purposes of item 1 of the Table, and

(b) for the other purposes of this Part,

as the part of the sale price that is expenditure incurred by the purchaser on the provision of the fixture.

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