Capital Allowances Act 2001 (c. 2)

(The document as of February, 2008)

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(8) Any first-year allowance under sub-paragraph (7) (when read with section 236) is to be made on the same basis and subject to the same apportionments (if any) as would be applicable in the case of a writing-down allowance under section 116(5).

Expenditure by small or medium-sized enterprises, 1997-98

48 (1) Expenditure is first-year qualifying expenditure under this paragraph if--

(a) it was incurred in the period beginning with 2nd July 1997 and ending with 1st July 1998;

(b) it was incurred by a small or medium-sized enterprise; and

(2) In determining whether expenditure is first-year qualifying expenditure under this paragraph, any effect of section 12 on the time at which it is to be treated as incurred is to be disregarded.

(3) Expenditure is not first-year qualifying expenditure under this paragraph if it is within any of the general exclusions given in section 46(2).

(4) In this paragraph, "small or medium-sized enterprise" is to be read in accordance with sections 47 to 49, read with paragraph 50.

Whether a company is a member of large or medium-sized group

49 (1) This paragraph applies in relation to any expenditure incurred before 12th May 1998, and for the purpose of determining--

(a) whether expenditure incurred under a contract entered into before that date is first-year qualifying expenditure under section 44, or

(b) whether expenditure is first-year qualifying expenditure under paragraph 46 or 48.

(2) Section 49 applies with the substitution in subsection (2) of "parent company" for "parent undertaking" and the omission of the words in brackets in subsection (5).

(3) In section 49 as it so applies "parent company"--

(a) except in the case of a company formed and registered in Northern Ireland, has the same meaning as in Part VII of the Companies Act 1985 (c. 6);

(b) in the case of such a company, has the same meaning as in Part VIII of the Companies (Northern Ireland) Order 1986 (S.I.1986/1032 (N.I.6)).

Expenditure which is not first-year qualifying expenditure

50 For the purposes of section 236(1)(a)--

(a) section 40 (expenditure for Northern Ireland purposes by small or medium-sized enterprises) does not apply if the expenditure was incurred before 12th May 1998;

(b) section 44 (expenditure by small or medium-sized enterprises) does not apply if the expenditure was incurred before 2nd July 1998;

(c) section 45 (ICT expenditure by small enterprises) does not apply if the expenditure was incurred before 1st April 2000.

Anti-avoidance

51 Sections 243(7) and 244 do not apply in relation to expenditure incurred before 2nd July 1998 if the relevant transaction--

(a) is a purchase under a contract entered into before 2nd July 1997;

(b) is itself a contract entered into before that date; or

Supplementary provisions

Successions by beneficiaries

52 Section 266(7) does not apply if the succession occurred before 27th July 1989.

53 Subsections (6) and (7) of section 268 do not apply if the election under that section was made before 6th April 1990.

General

Vehicles provided by employees in 1990-91

54 (1) This paragraph applies if--

(a) at the beginning of the tax year 1990-91 machinery consisting of a mechanically propelled road vehicle was provided by a person for use in the performance of the duties of an office or employment held by him, and

(b) the machinery was also provided by him at the end of the tax year 1989-90 for use in the performance of the duties of that office or employment but without that provision being necessary.

(2) Part 2 of this Act has effect as if the person had incurred capital expenditure on the provision of the machinery for the purposes of the office or employment in the tax year 1990-91--

(a) the amount of that expenditure being taken as the price which the machinery would have fetched if sold in the open market on 6th April 1990, and

(b) the person being treated as owning the machinery as a result of his having incurred that expenditure.

Certain expenditure incurred before 6th April 1976

55 Part 2 of this Act does not apply to capital expenditure--

(a) which was not eligible expenditure within the meaning of section 39 of FA 1976 (which brought expenditure previously not within Chapter I of Part III of FA 1971 within that Chapter but with certain exceptions), and

(b) which was incurred in a chargeable period ending before 6th April 1976.

Part 5 Industrial buildings allowances

Industrial buildings

Bridge undertakings

56 In section 274, item 8 of Table B (bridge undertakings) does not apply if the expenditure was treated as incurred before the end of the tax year 1956-57.

Building used by more than one licensee

57 Section 278 does not apply if the licence was granted before 10th March 1982.

Qualifying hotels

58 (1) Section 279 does not apply if the expenditure on the construction of the building was incurred before 12th April 1978.

(2) Expenditure is not to be treated for the purposes of sub-paragraph (1) as having been incurred after the date on which it was in fact incurred by reason only of section 10(1) of CAA 1990.

Non-industrial part of building disregarded

59 Section 283(2) applies with the substitution of "10%" for "25%" if the expenditure was incurred before 16th March 1983.

Qualifying expenditure

Purchase of used building from developer

60 Section 297 does not apply if the purchase price on the sale by the developer mentioned in subsection (1)(b) of that section became payable before 27th July 1989.

Qualifying enterprise zone expenditure

61 Sections 300 and 302 do not apply if--

(a) the purchase price payable on the sale of the relevant interest in the building before it was used, or

(b) if there was more than one such sale before the building was used, the purchase price payable on the last of those sales,

became payable before 16th December 1991.

62 Sections 301, 303 and 304 do not apply in relation to buildings first used before 16th December 1991.

63 If--

(a) the relevant interest in a building was sold on a date falling after the end of the period of two years beginning with the date on which the building or structure was first used; and

(b) that period ended, and the date on which the relevant interest was transferred fell, within the period beginning with 13th January 1994 and ending with 31st August 1994,

paragraphs (c) and (d) of sections 301(1) and 303(1) apply as if the period there referred to were the period beginning with the date on which the building or structure was first used and ending with 31st August 1994.

Initial allowances

Building occupied by qualifying licensee

64 Section 305(1)(b) does not apply if the licence was granted before 10th March 1982.

Grants affecting entitlement to initial allowances

65 Section 308(2)(c) applies as if the reference to a grant under section 101 of the Greater London Authority Act 1999 (c. 29) included a reference to a grant under section 12 of the London Regional Transport Act 1984 (c. 32) or section 3 of the Transport (London) Act 1969 (c. 35).

Writing-down allowances

Basic rule for calculating amount of allowance

66 Section 310(1)(b) applies with the substitution of "2%" for "4%" in the case of expenditure incurred before 6th November 1962.

Calculation of amount after relevant event

67 Section 311(1) applies with the substitution (in the definition of "B") of "50 years" for "25 years" in the case of expenditure incurred before 6th November 1962.

Balancing adjustments

When balancing adjustments are made

68 Section 314(4) applies with the substitution of "50 years" for "25 years" if the qualifying expenditure was incurred before 6th November 1962.

Net allowance given

69 (1) Section 324 applies in relation to a mills, factories or exceptional depreciation allowance as it applies in relation to an allowance of any kind mentioned in that section.

(2) In sub-paragraph (1) "mills, factories or exceptional depreciation allowance", in relation to any building or structure, means--

(a) any allowance granted for a tax year under section 15 of FA 1937 in respect of it or premises of which it forms part, including any amount which under that section was to be allowed as a deduction in computing profits or gains for that year, and

(b) any allowance granted under section 19 of FA 1941 in respect of it or premises of which it forms part.

(3) Where such an allowance as is mentioned in sub-paragraph (2) was granted in respect of premises which include several buildings or structures--

(a) the whole amount of the allowance is to be apportioned between the buildings and structures, and

(b) only that part of the allowance which is apportioned to the building or structure in question is to be taken into account.

70 For the purposes of section 324 an allowance is treated as having been made to a woman in relation to any qualifying expenditure if--

(a) it was made to her husband for a chargeable period ending before 6th April 1990 in respect of an interest of hers which was the relevant interest in relation to that expenditure,

(b) a balancing event occurs on or after that date, and

Balancing adjustment on realisation of capital value

71 Sections 328 to 331 do not apply if the capital expenditure referred to in section 327 was incurred under a contract which--

(a) was entered into before 13th January 1994, and

(b) was not a conditional contract which became unconditional on or after 26th February 1994.

Writing off qualifying expenditure

Writing off qualifying expenditure when building not an industrial building

72 For the purposes of section 336 a building is not treated as having been an industrial building--

(a) under item 5(b) or (c) or 6 of Table A in section 274 (working foreign plantations or fishing) for any tax year before 1953-54, or

(b) under item 7 of Table B in section 274 (tunnel undertakings) for any tax year before 1952-53.

Crown or other person not within the charge to tax entitled to the relevant interest

73 Section 339 does not apply by virtue of subsection (1)(b) if the interest was sold before 29th July 1988.

Highway undertakings

Special provisions relating to highway concessions

74 Sections 341(4)(a), 343 and 344 do not apply in relation to expenditure incurred before 6th April 1995.

Additional VAT liabilities and rebates

Additional VAT liabilities and initial allowances: 1992-93 cases

75 (1) This paragraph applies if--

(a) a person was entitled to an initial allowance in respect of 1992-93 qualifying expenditure,

(b) the person entitled to the relevant interest in relation to that expenditure incurs an additional VAT liability in respect of that expenditure, and

(i) occupied for the purposes of a trade carried on by the person entitled to the relevant interest or a qualifying lessee, or

(ii) used for the purposes of trade carried on by a qualifying licensee.

(2) If this paragraph applies, the person entitled to the relevant interest is entitled to an initial allowance on the amount of the additional VAT liability.

(3) The amount of the initial allowance is 20% of the additional VAT liability.

(4) The allowance is made for the chargeable period in which the additional VAT liability accrues.

(5) The persons mentioned in sub-paragraph (1)(a) and (b) need not be the same.

(6) In this paragraph "qualifying lessee" and "qualifying licensee" have the same meaning as in section 305.

Additional VAT liabilities and initial allowances: further case

76 (1) This paragraph applies if--

(a) a person was entitled to an initial allowance in respect of qualifying enterprise zone expenditure, and

(b) the person entitled to the relevant interest in relation to that expenditure incurs an additional VAT liability in respect of that expenditure,

but there is no entitlement to an initial allowance under section 346 because the condition in subsection (1)(d) of that section is not met.

(2) If in such a case--

(a) the conditions in paragraph 74(1) are met except for the condition that the original entitlement to an initial allowance was in respect of 1992-93 qualifying expenditure, and

(b) some or all of the qualifying enterprise zone expenditure would have been 1992-93 qualifying expenditure but for paragraph 76(2),

the person entitled to the relevant interest is entitled to an initial allowance under paragraph 74(3) on the appropriate part or on all of the additional VAT liability (as the case may be).

(3) The allowance is made for the chargeable period in which the additional VAT liability accrues.

1992-93 qualifying expenditure

77 (1) "1992-93 qualifying expenditure" means expenditure which is--

(a) qualifying expenditure which is within section 294 and is 1992-93 construction expenditure, or

(b) the 1992-93 element of qualifying expenditure which is within section 295 or 296.

(2) Qualifying enterprise zone expenditure is not to be taken into account as 1992-93 qualifying expenditure for the purposes of sub-paragraph (1).

(3) Expenditure is 1992-93 construction expenditure if it was incurred on the construction of a building under a contract which was entered into--

(a) in the period beginning with 1st November 1992 and ending with 31st October 1993, or

(b) for the purpose of securing compliance with obligations under a contract entered into in that period,

and which was not entered into for the purpose of securing compliance with obligations under a contract entered into before 1st November 1992.

(4) The 1992-93 element of qualifying expenditure within section 295 or 296 is--

---

where--

QE is the amount of qualifying expenditure,
E is the amount of 1992-93 construction expenditure, and
T is the amount of expenditure on the construction of the building.

(5) If the expenditure on the construction of the building was incurred by a person carrying on a trade as a developer who--

(a) was entitled to the relevant interest in the building before 1st November 1992, and

(b) sold that interest in the course of that trade under a contract entered into in the period beginning with 1st November 1992 and ending with 31st October 1993,

the 1992-93 construction expenditure for the purposes of sub-paragraph (4) includes any expenditure on the construction of the building incurred under a contract entered into before 1st November 1993 or for the purpose of securing compliance with obligations under such a contract.

Supplementary provisions

Arrangements having an artificial effect on pricing

78 Section 357 does not apply if the sale price fixed as mentioned in subsections (1) and (2)--

(a) became payable before 29th November 1994; or

(b) was fixed by a contract entered into before 29th November 1994 and became payable before 6th April 1995.

General

Expenditure on preparatory work on land where building used before 6th April 1956

79 (1) Sub-paragraph (2) applies where section 21(9) of CAA 1990 (expenditure on preparatory work on land where building used before 6th April 1956) applied to any expenditure immediately before the commencement of Part 3 of this Act, so that Part I of that Act (industrial buildings and structures) except for section 1 (initial allowances) applied to part of the expenditure separately from the remainder.

(2) Where this sub-paragraph applies, Part 3 of this Act, except for Chapter 5, similarly applies to the part of the expenditure separately from the remainder.

Part 6 Agricultural buildings allowances

Overall limit on balancing charge

80 For the purposes of section 387 an allowance is treated as having been made to a woman in relation to any qualifying expenditure if--

(a) it was made to her husband for a chargeable period ending before 6th April 1990 in respect of an interest of hers which was the relevant interest in relation to that expenditure,

(b) a balancing event occurs on or after that date, and

Meaning of "freehold interest in land" for purposes of Part 4

81 (1) Sub-paragraphs (2) and (3) apply if paragraph 51 of Schedule 12 to the Abolition of Feudal Tenure etc. (Scotland) Act 2000 has not come into force before the commencement of Part 4 of this Act.

(2) Section 393(1) has effect until the appointed day as if for paragraph (b) there were substituted--

" (b) in relation to Scotland, the estate or interest of the proprietor of the dominium utile (or, in the case of property other than feudal property, of the owner); " .

(3) Section 393(2) has effect until the appointed day as if for paragraph (b) there were substituted--

" (b) in relation to Scotland, an agreement to acquire the estate or interest mentioned in subsection (1)(b); " .

(4) In sub-paragraphs (2) and (3) "the appointed day" means such day as may be appointed by the Scottish Ministers under section 71 of the Abolition of Feudal Tenure etc. (Scotland) Act 2000 for the coming into force of the Act.

Exclusion of expenditure incurred before 1st April 1986

82 References in Part 4 of this Act to qualifying expenditure do not include--

(a) expenditure incurred before 1st April 1986; or

(b) payments made before 1st April 1987 under a contract entered into before 14th March 1984.

The writing-down period

83 (1) This paragraph applies where it is provided under Part 4 that writing-down allowances are to be made in respect of any expenditure during a writing-down period of any specified length.

(2) If allowances were made under paragraph 27(2) of Schedule 14 to FA 1965--

(a) for income tax purposes, for either of the tax years 1964-65 and 1965-66, and

(b) for accounting periods of a company falling wholly or partly within either of those years,

the periods for which allowances were made are added together in calculating the writing-down period, even though (according to the calendar) the same time is counted twice.

Part 7 Mineral extraction allowances

Qualifying expenditure on acquiring a mineral asset

Qualifying expenditure where buildings or structures cease to be used

84 In section 405(3) "A" does not include, in cases where the buildings or structures have permanently ceased to be used for any purpose before 27th July 1989, the amount of any agricultural buildings allowances.

Qualifying expenditure: second-hand assets

Claims before 26th November 1996 in respect of acquisition of mineral asset owned by previous trader

85 Section 407(4) does not apply in relation to claims made before 26th November 1996.

Acquisition of oil licence from non-trader before 13th September 1995

86 Section 408 does not apply to acquisitions occurring before 13th September 1995.

Restrictions on qualifying expenditure in case of UK oil licence and certain other assets inapplicable for expenditure pre-16th July 1985

87 (1) The sections listed in sub-paragraph (2) do not apply if--

(a) asset X is a mineral asset situated in the United Kingdom, and

(b) the capital expenditure incurred by the buyer consists of the payment of sums under a contract entered into by him before 16th July 1985.

(2) The sections are--

(a) section 407 (acquisition of mineral asset owned by previous trader),

(b) section 410 (UK oil licence: qualifying expenditure limited by reference to original licence payment), and

(c) section 411 (assets generally: qualifying expenditure limited by reference to previous trader's unrelieved qualifying expenditure).

(3) Sections 407 and 411 apply, in relation to a case where asset X is a mineral asset situated in the United Kingdom, as if the references to an earlier owner of the asset did not include a person who has not owned the asset at any time after 31st March 1986.

(4) In the case of a mineral asset which consists of or includes an interest in or right over mineral deposits or land, the asset is not to be regarded for the purposes of this paragraph as situated in the United Kingdom unless the deposits or land are or is so situated.

(5) Expressions used in this paragraph and Chapter 4 of Part 5 have the same meaning in this paragraph as they have in that Chapter.

Expenditure incurred pre-1st April 1986

88 (1) Part 5 of this Act does not apply in relation to expenditure incurred before 1st April 1986 ("old expenditure") except as provided by the following provisions of this paragraph.

(2) Sections 401 and 402 apply to old expenditure if--

(a) that expenditure was incurred on mineral exploration and access,

(b) immediately before 1st April 1986, no allowance had been made under Chapter III of Part I of CAA 1968 in respect of it, and

(c) after that day and before mineral exploration and access ceases at the source in question, the person by whom the expenditure was incurred began or begins to carry on a trade of mineral extraction.

In this sub-paragraph "source" has the same meaning as it had in Schedule 14 to FA 1986.

(3) For the purposes of Part 5--

(a) expenditure which by virtue of any provision of section 119 of CAA 1990 (read with any provision of Schedule 14 to FA 1986) was treated immediately before the coming into force of this Act as expenditure incurred on 1st April 1986 for any purpose or purposes is to continue to be so treated;

(b) any allowances treated as having been made under Schedule 13 to FA 1986 is to continue to be so treated;

(d) in relation to any expenditure to which paragraph 6(4)(a) of Schedule 14 to FA 1986 applied, section 424 does not apply (so that no deduction is to be made from the amount of any disposal receipt by reference to the undeveloped market value of the land in question).

(4) In the case of expenditure incurred in the acquisition of a mineral asset, nothing in sub-paragraph (3)(c) affects the time as at which under section 404 the undeveloped market value of an interest is to be determined.

(5) In a case where--

(a) by virtue of any provision of this paragraph, the whole or any part of the outstanding balance (within the meaning of paragraph 1 of Schedule 14 to FA 1986) of an item of old expenditure is treated for the purposes of Part 5 as qualifying expenditure, and

(b) a balancing charge falls to be made under Chapter 6 of that Part in respect of the expenditure,

then, in determining the amount on which that charge falls to be made, subsection (4) of section 418 has effect (subject to sub-paragraph (6)) as if paragraph (b) of that subsection included a reference to allowances made in respect of the item under Chapter III of Part I of CAA 1968.

(6) Where the qualifying expenditure in respect of which a balancing charge falls to be made represents part only of the outstanding balance of an item of old expenditure, the reference in sub-paragraph (5) to allowances made in respect of that item is to be construed as a reference to such part of those allowances as it is just and reasonable to apportion to that part of the balance (having regard to any apportionment made under paragraph 3(2) of Schedule 14 to FA 1986).

Part 8 Research and development allowances

Expenditure incurred partly on research and development

89 Section 439(4) does not apply to expenditure incurred before 27th July 1989.

References to research and development in relation to new trades

90 (1) Where--

(a) a trade is set up and commenced in the year of assessment 1999-00, and

(b) its first period of account ends after 6th April 2001,

Part 6 of this Act has effect in relation to that year as if references to research and development were references to scientific research.

(2) In this paragraph "scientific research" means any activities in the fields of natural or applied science for the extension of knowledge.

Disposal of oil licences

91 (1) Sub-paragraphs (2) and (3) apply where--

(a) a person ("the transferor") disposes of any interest in an oil licence to another ("the transferee") during the transitional period,

(b) part of the value of the interest is attributable to allowable exploration expenditure incurred by the transferor, and

(c) an election is made in accordance with this paragraph specifying an amount as the amount to be treated as so attributable.

(2) Chapter 3 of Part 6 has effect in relation to the disposal as if--

(a) the disposal were a disposal by which an asset representing the allowable exploration expenditure ceases to belong to the transferor, and

(b) the disposal value of that asset were an amount equal to the amount specified in the election.

(3) For the purposes of Part 5 of this Act, the amount of any expenditure incurred--

(a) by the transferee in acquiring the interest from the transferor, or

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