Finance Act 2001 (c. 9)

(The document as of February, 2008)

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2 (1) Section 62A of the Capital Allowances Act 1990 (c. 1) (special allowance for costs of demolition of offshore machinery or plant) is amended as follows.

(2) In subsection (1) (section applies to expenditure that would otherwise fall within section 62(1)(b)), after "section 62(1)(b)" insert "or 62AA(3)".

(3) In subsection (1)(c)--

(a) for "the demolition of" substitute "decommissioning"; and

(b) after "which is or forms part of" insert ", or when last in use for the purposes of the trade was or formed part of,".

(4) In subsection (3)(a), for "demolition" (in both places) substitute "decommissioning".

(5) After subsection (3) insert--

" (3A) In this section "decommissioning", in relation to any machinery or plant, means--

(a) demolishing the machinery or plant,

(b) preserving the machinery or plant pending its reuse or demolition,

(d) arranging for the reuse of the machinery or plant.

(3B) For the purposes of this section--

(a) in determining whether expenditure is incurred on preserving machinery or plant pending its reuse or demolition, it is immaterial whether the machinery or plant is reused, is demolished or is partly reused and partly demolished; and

(b) in determining whether expenditure is incurred on preparing machinery or plant for reuse, or on arranging for the reuse of machinery or plant, it is immaterial whether the machinery or plant is in fact reused. " .

(6) For subsection (4) (entitlement to special allowance) substitute--

" (4) If the person incurring any abandonment expenditure so elects, for the chargeable period in which that expenditure is incurred there shall be made to that person an allowance equal to so much of the abandonment expenditure to which the election relates as is incurred in that period.

(4A) If a person makes such an election, neither of sections 62(1)(b) and 62AA(3) applies.

(4B) If machinery or plant is demolished, the total of any allowances under subsection (4) above in respect of expenditure on the decommissioning of the machinery or plant is reduced by the amount of any moneys received for the remains of the machinery or plant.

(4C) Effect is given to subsection (4B) above by setting the amount (until wholly utilised)--

first, against any allowance under subsection (4) above for the chargeable period in which the amount is received (as previously reduced in giving effect to subsection (4B));
second, against allowances under that subsection for earlier chargeable periods (as so reduced and taking later such periods before earlier ones); and
third, against allowances under that subsection for later chargeable periods (as so reduced and taking earlier such periods before later ones). " .

(7) In subsection (5)(a) (election must specify amounts received for remains), for "subsection (4)(a)" substitute "subsection (4B)".

(8) In the sidenote, for "demolition" substitute "decommissioning".

Ring fence trades: allowances for post-cessation expenditure

3 (1) Section 62B of the Capital Allowances Act 1990 (c. 1) (abandonment expenditure incurred within 3 years of ceasing ring fence trade) is amended as follows.

(2) In subsection (1)(b) (section applies where expenditure incurred within 3 years of ceasing trade), for "the demolition of" substitute "decommissioning".

(3) In subsection (1)(c) (section applies where expenditure would have been abandonment expenditure under section 62A if incurred earlier), for "demolition" substitute "decommissioning".

(4) In subsection (2) (expenditure net of receipts for remains is eligible for allowances), for "the machinery or plant referred to in that paragraph" substitute "any of the machinery or plant referred to in that paragraph on whose demolition any of the post-cessation expenditure was incurred".

Commencement of Part 1

4 (1) The amendments made by this Part of this Schedule apply to expenditure that is incurred--

(a) on or after 7th August 2000, and

(b) in a relevant chargeable period.

(2) The amendments made by paragraph 1 also apply to expenditure incurred before 7th August 2000 if the expenditure--

(a) is incurred in a relevant chargeable period, and

(b) is within sub-paragraph (3) or (4).

(3) Expenditure is within this sub-paragraph if--

(a) it is decommissioning expenditure on UK infrastructure, and

(b) it is incurred in connection with an abandonment programme approved on or after 7th August 2000.

(4) Expenditure is within this sub-paragraph if--

(a) it is decommissioning expenditure,

(b) it is not decommissioning expenditure on UK infrastructure, and

(5) The amendments made by paragraphs 2 and 3 also apply to expenditure incurred before 7th August 2000 if the expenditure--

(a) is incurred in a relevant chargeable period, and

(b) is incurred in connection with an abandonment programme approved on or after 7th August 2000.

(6) In sub-paragraphs (3) and (4), "decommissioning expenditure" and "decommissioning expenditure on UK infrastructure" have the same meaning as in the section 62AA inserted by paragraph 1.

(7) In sub-paragraph (4)(c) "decommissioning activity" means an activity mentioned in any of paragraphs (a) to (d) of the section 62AB(1) inserted by paragraph 1.

(8) In this paragraph "relevant chargeable period" means--

(a) for income tax purposes, a chargeable period ending before 6th April 2001, and

(b) for corporation tax purposes, a chargeable period ending before 1st April 2001.

Part 2 Chargeable periods ending on or after 1st or 6th April 2001

Writing-down allowances: infrastructure from UK or non-UK oil fields

5 (1) In Chapter 13 of Part 2 of the Capital Allowances Act 2001 (c. 2) (plant and machinery allowances: provisions affecting mining and oil industries), after section 161 insert--

" Expenditure connected with reuse etc. of offshore oil infrastructure

161A Meaning of "offshore infrastructure"

(1) In sections 161C and 161D "offshore infrastructure" means--

(a) an offshore installation within the meaning given by section 44 of the Petroleum Act 1998 (c. 17) or a part of such an installation, or

(b) something that would be, or would be a part of, an offshore installation within that meaning if in subsection (3) of that section "relevant waters" meant waters in a foreign sector of the continental shelf and other foreign tidal waters, or

(c) a pipeline within the meaning of section 26 of that Act, or a part of such a pipeline, that is in, under or over waters in--

(i) the territorial sea adjacent to the United Kingdom, or

(ii) an area designated under section 1(7) of the Continental Shelf Act 1964 (c. 29), or

(d) a pipeline within the meaning of section 26 of the Petroleum Act 1998 (c. 17), or a part of such a pipeline, that is in, under or over waters in a foreign sector of the continental shelf.

(2) In subsection (1)(b) and (d)--

"foreign sector of the continental shelf" means an area within which rights are exercisable with respect to the sea bed and subsoil and their natural resources by a country or territory outside the United Kingdom;
"foreign tidal waters" means tidal waters in an area within which rights are exercisable with respect to the bed and subsoil of the body of water in question and their natural resources by a country or territory outside the United Kingdom.

161B Meaning of "decommissioning expenditure"

(1) In sections 161C and 161D "decommissioning expenditure" means expenditure in connection with--

(a) preserving plant or machinery pending its reuse or demolition,

(b) preparing plant or machinery for reuse, or

(2) It is immaterial for the purposes of subsection (1)(a) whether the plant or machinery is reused, is demolished or is partly reused and partly demolished.

(3) It is immaterial for the purposes of subsection (1)(b) and (c) whether the plant or machinery is in fact reused.

161C Expenditure related to reuse etc. qualifies for writing-down allowances

(1) This section applies where--

(a) a person carrying on a trade of oil extraction incurs decommissioning expenditure, and

(b) the plant or machinery concerned--

(i) has been brought into use for the purposes of the trade, and

(ii) is, or was when last in use for those purposes, offshore infrastructure.

(2) The decommissioning expenditure is allocated to the appropriate pool for the chargeable period in which it is incurred.

(3) Subsection (2) is subject to sections 161D and 164(4).

(4) In subsection (2) "the appropriate pool" means the pool to which the expenditure on the plant or machinery concerned has been or would be allocated in accordance with this Part.

161D Exceptions to section 161C(2)

(1) Subsection (2) of section 161C does not apply to decommissioning expenditure on UK infrastructure unless it is incurred in connection with measures taken, wholly or substantially, in order to comply with--

(a) an abandonment programme within the meaning given by section 29 of the Petroleum Act 1998 (c. 17), or

(b) any condition to which the approval of such a programme is subject.

(2) Subsection (2) of section 161C does not apply to expenditure in respect of which an allowance or deduction could be made apart from that subsection in taxing, or computing, the person's income for any tax purpose.

(3) For the purposes of subsection (1), decommissioning expenditure is "on UK infrastructure" if the plant or machinery concerned--

(a) is offshore infrastructure within section 161A(1)(a) or (c), or

(b) is not offshore infrastructure but was offshore infrastructure within section 161A(1)(a) or (c) when last in use for the purposes of the trade. " .

(2) In section 57(2) of the Capital Allowances Act 2001 (c. 2) (available qualifying expenditure in pool includes amounts allocated to pool under specified provisions), before the entry for section 165(3) insert--

" section 161C(2) (decommissioning expenditure incurred by person carrying on trade of oil extraction); " .

Ring fence trades: meaning of "abandonment expenditure"

6 (1) Section 163 of the Capital Allowances Act 2001 (c. 2) (meaning of "abandonment expenditure") is amended as follows.

(2) In subsection (2)(b), for "the demolition of" substitute "decommissioning".

(3) In subsection (2)(b)(ii), at the end insert "or which, when last in use for the purposes of a ring-fence trade, was, or formed part of, such an installation or pipeline.".

(4) In subsection (3), for "demolition" substitute "decommissioning".

(5) After subsection (4) insert--

" (4A) In this section "decommissioning", in relation to any plant or machinery, means--

(a) demolishing the plant or machinery,

(b) preserving the plant or machinery pending its reuse or demolition,

(d) arranging for the reuse of the plant or machinery.

(4B) In determining whether expenditure is incurred on preserving plant or machinery pending its reuse or demolition, it is immaterial whether the plant or machinery is reused, is demolished or is partly reused and partly demolished.

(4C) In determining whether expenditure is incurred on preparing plant or machinery for reuse, or on arranging for the reuse of plant or machinery, it is immaterial whether the plant or machinery is in fact reused. " .

Ring fence trades: special allowance for pre-cessation expenditure

7 (1) Section 164 of the Capital Allowances Act 2001 (c. 2) (abandonment expenditure incurred before cessation of ring fence trade) is amended as follows.

(2) In subsection (1) (person carrying on ring-fence trade may elect for special allowance if he incurs abandonment expenditure), after "incurs abandonment expenditure," insert "and the plant or machinery concerned has been brought into use for the purposes of that trade,".

(3) For paragraph (b) of subsection (3) (election must specify amounts received for remains of demolished plant or machinery) substitute--

" (b) where the plant or machinery concerned has been or is to be demolished, any amounts received for its remains. " .

(4) In subsection (4)(a) (entitlement to special allowance), the words ", of an amount equal to the net abandonment cost," are omitted.

(5) For paragraph (b) of subsection (4) (section 26(3) does not apply where election made) substitute--

" (b) neither of sections 26(3) and 161C(2) (net cost of demolition where plant or machinery not replaced, or cost of preparing for reuse, added to existing pool) applies. " .

(6) For subsection (5) (meaning of "net abandonment cost") substitute--

" (5) The amount of the special allowance for a chargeable period is equal to so much of the abandonment expenditure to which the election relates as is incurred in that period.

(6) If plant or machinery is demolished, the total of any special allowances in respect of expenditure on decommissioning the plant or machinery is reduced by any amount received for the remains of the plant or machinery.

Here "decommissioning" has the meaning given by section 163(4A).

(7) Effect is given to subsection (6) by setting the amount (until wholly utilised)--

first, against any special allowance for the chargeable period in which the amount is received (as previously reduced in giving effect to subsection (6));
second, against special allowances for earlier chargeable periods (as so reduced and taking later such periods before earlier ones); and
third, against special allowances for later chargeable periods (as so reduced and taking earlier such periods before later ones). "

Ring fence trades: allowances for post-cessation expenditure

8 (1) Section 165 of the Capital Allowances Act 2001 (c. 2) (abandonment expenditure incurred within 3 years of ceasing ring fence trade) is amended as follows.

(2) In subsection (1)(b) (section applies where abandonment expenditure incurred within 3 years of ceasing trade), the words "on the demolition of plant or machinery" are omitted.

(3) In subsection (3)(b) (amounts received for remains of plant or machinery are not taxable income), before "any amount received" insert "where any of the abandonment expenditure was incurred on the demolition of plant or machinery,".

(4) In subsection (4), in the definition of "the relevant abandonment cost", for "the plant or machinery" substitute "any plant or machinery on whose demolition any of the abandonment expenditure was incurred".

Commencement of Part 2

9 (1) The amendments made by this Part of this Schedule (but see sub-paragraph (9)) apply to expenditure that is incurred--

(a) on or after 7th August 2000, and

(b) in a relevant chargeable period.

(2) The amendments made by paragraph 5 also apply to expenditure incurred before 7th August 2000 if the expenditure--

(a) is incurred in a relevant chargeable period, and

(b) is within sub-paragraph (3) or (4).

(3) Expenditure is within this sub-paragraph if--

(a) it is decommissioning expenditure on UK infrastructure, and

(b) it is incurred in connection with an abandonment programme approved on or after 7th August 2000.

(4) Expenditure is within this sub-paragraph if--

(a) it is decommissioning expenditure,

(b) it is not decommissioning expenditure on UK infrastructure, and

(5) The amendments made by paragraphs 6 to 8 (but see sub-paragraph (9)) also apply to expenditure incurred before 7th August 2000 if the expenditure--

(a) is incurred in a relevant chargeable period, and

(b) is incurred in connection with an abandonment programme approved on or after 7th August 2000.

(6) In sub-paragraphs (3) and (4), "decommissioning expenditure" and "decommissioning expenditure on UK infrastructure" have the same meaning as in the sections 161C and 161D inserted by paragraph 5.

(7) In sub-paragraph (4)(c) "decommissioning activity" means an activity mentioned in any of paragraphs (a) to (c) of the section 161B(1) inserted by paragraph 5.

(8) In this paragraph "relevant chargeable period" means--

(a) for income tax purposes, a chargeable period ending on or after 6th April 2001, and

(b) for corporation tax purposes, a chargeable period ending on or after 1st April 2001.

(9) Sub-paragraphs (1) to (8) do not apply to the amendments made by paragraphs 7(2) and 8(2).

Those amendments shall be deemed always to have had effect.

Section 69.

SCHEDULE 21 Capital allowances: minor amendments

Thermal insulation of industrial buildings

1 In section 28(2) of the Capital Allowances Act 2001 (c. 2) (expenditure on thermal insulation of industrial buildings), after "ordinary Schedule A business" insert "or an overseas property business".

Fixtures: purchasers of land and incoming lessees

2 (1) In section 181 of that Act (purchaser of land giving consideration for fixture), for subsection (2) substitute--

" (2) Subsection (1) does not apply, and is to be treated as never having applied, if, immediately after the time of the acquisition, a person has a prior right in relation to the fixture. " .

(2) In section 181(3) of that Act--

(a) for "subsection (2)(b), the person holding the other interest" substitute "subsection (2), a person"; and

(b) for "subsection (2)(a)" substitute "subsection (2)".

(3) In section 182 of that Act (purchaser of land discharging obligations of equipment lessee), for subsections (2) and (3) substitute--

" (2) Subsection (1) does not apply, and is to be treated as never having applied, if, immediately after the time of the acquisition, a person has a prior right in relation to the fixture.

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

(4) In section 184 of that Act (incoming lessee where lessor not entitled to allowances), for subsections (2) and (3) substitute--

" (2) Subsection (1) does not apply, and is to be treated as never having applied, if, immediately after the time when the lease is granted, a person has a prior right in relation to the fixture.

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

Meaning of "sale and finance leaseback"

3 In section 221(1) of that Act (meaning of "sale and finance leaseback"), in paragraph (b)(iii), for "any person" substitute "S or by a person (other than B) who is connected with S".

Effect of partnership changes

4 (1) In section 263 of that Act (effect of partnership changes for the purpose of plant and machinery allowances), in subsection (1), for paragraph (c) substitute--

" (c) the change does not result in the qualifying activity being treated as permanently discontinued under section 113(1) or 337(1) of ICTA (changes in persons carrying on a trade etc. and effect of company ceasing to trade etc.). " .

(2) In section 558 of that Act (effect of partnership changes for the purpose of other allowances), in subsection (1), for paragraph (c) substitute--

" (c) the change does not result in the relevant activity being treated as permanently discontinued under section 113(1) or 337(1) of ICTA (changes in persons carrying on a trade etc. and effect of company ceasing to trade etc.). "

Enterprise zones

5 In section 298(3) of that Act (meaning of "enterprise zone"), after "Secretary of State" insert ", the Scottish Ministers or the National Assembly for Wales,".

Highway concessions

6 (1) In section 341(4) of that Act (meaning of "highway concession"), for "the Secretary of State or from the Department for Regional Development in Northern Ireland" substitute "the relevant authority".

(2) After that subsection add--

" (5) In subsection (4) "the relevant authority" means--

(a) the Secretary of State,

(b) the Scottish Ministers,

(d) the Department for Regional Development in Northern Ireland. " .

Section 70.

SCHEDULE 22 Remediation of contaminated land

Part 1 Deduction for capital expenditure

Deduction for capital expenditure

1 (1) This paragraph applies if--

(a) land in the United Kingdom is, or has been, acquired by a company for the purposes of a trade carried on by the company,

(b) at the time of acquisition all or part of the land is or was in a contaminated state (see paragraph 3), and

(c) the company incurs capital expenditure which is qualifying land remediation expenditure in respect of the land (see paragraph 2).

(2) For the purposes of corporation tax such capital expenditure as is qualifying land remediation expenditure shall (if the company so elects) be allowed as a deduction in computing the profits of the trade for the accounting period in which that expenditure is incurred.

(3) For the purposes of sub-paragraph (2) any capital expenditure incurred for the purposes of a trade by a company about to carry it on shall be treated as if it had been incurred by that company on the first day on which it does carry it on and in the course of doing so.

(4) Sub-paragraph (2) shall not apply to so much of the qualifying land remediation expenditure as--

(a) represents expenditure which has been allowed as a deduction in computing the profits arising from the trade for any accounting period preceding the period in which the expenditure is incurred, or

(b) represents capital expenditure in respect of which an allowance has been, or may be, made under the enactments relating to capital allowances.

(5) A company is not entitled to a deduction under this paragraph in respect of expenditure on land all or part of which is in a contaminated state, if the land is in that state wholly or partly as a result of any thing done or omitted to be done at any time by the company or a person with a relevant connection to the company.

(6) An election under this paragraph must specify the accounting period in respect of which it is made.

(7) The election must be made by notice in writing to the Inland Revenue.

(8) The notice must be given before the end of the period of two years beginning with the end of the company's accounting period to which the election relates.

Qualifying land remediation expenditure

2 (1) For the purposes of this Schedule "qualifying land remediation expenditure" of a company means expenditure of the company that meets the conditions in sub-paragraphs (2) to (6).

(2) The first condition is that it is expenditure on land all or part of which is in a contaminated state (see paragraph 3).

(3) The second condition is that the expenditure is expenditure on relevant land remediation directly undertaken by the company or on its behalf (see paragraph 4).

(4) The third condition is that the expenditure is incurred--

(a) on employee costs (see paragraph 5), or

(b) on materials (see paragraph 6),

or is qualifying expenditure on sub-contracted land remediation (see paragraphs 9 to 11).

(5) The fourth condition is that the expenditure would not have been incurred had the land not been in a contaminated state (see paragraph 7).

(6) The fifth condition is that the expenditure is not subsidised (see paragraph 8).

Land in a contaminated state

3 (1) For the purposes of this Schedule land is in a contaminated state if, and only if, it is in such a condition, by reason of substances in, on or under the land, that--

(a) harm is being caused or there is a possibility of harm being caused; or

(b) pollution of controlled waters is being, or is likely to be, caused.

(2) For the purposes of this Schedule, a nuclear site is not land in a contaminated state.

(3) In this paragraph a "nuclear site" means--

(a) any site in respect of which a nuclear site licence is for the time being in force, or

(b) any site in respect of which, after the revocation or surrender of a nuclear site licence, the period of responsibility of the licensee has not yet come to an end;

and "nuclear site licence", "licensee" and "period of responsibility" have the same meaning as in the Nuclear Installations Act 1965 (c. 57).

Relevant land remediation

4 (1) For the purposes of this Schedule relevant land remediation, in relation to land acquired by a company, means--

(a) activities falling within sub-paragraph (2), and

(b) if there are such activities, preparatory activity falling within sub-paragraph (4) which satisfies the condition in sub-paragraph (5).

(2) The activities referred to in sub-paragraph (1)(a) are the doing of any works, the carrying out of any operations or the taking of any steps in relation to--

(a) the land in question,

(b) any controlled waters affected by that land, or

for the purpose described in sub-paragraph (3).

(3) The purpose referred to in sub-paragraph (2) is that of--

(a) preventing or minimising, or remedying or mitigating the effects of, any harm, or any pollution of controlled waters, by reason of which the land is in a contaminated state; or

(b) restoring the land or waters to their former state.

(4) The preparatory activity referred to in sub-paragraph (1)(b) is the doing of anything for the purpose of assessing the condition of--

(a) the land in question,

(b) any controlled waters affected by that land, or

(5) Preparatory activity satisfies the condition referred to in sub-paragraph (1)(b) if it is activity connected to such activities falling within sub-paragraph (2) as are undertaken by the company (whether directly or on its behalf).

(6) For the purposes of this paragraph, controlled waters are "affected by" land in a contaminated state if, and only if, the land in question is in such a condition, by reason of substances in, on or under the land, that pollution of those waters is being, or is likely to be, caused.

Employee costs

5 (1) For the purposes of this Schedule the employee costs of a company are--

(a) the emoluments paid by the company to directors or employees of the company, including all salaries, wages, perquisites and profits whatsoever other than benefits in kind;

(b) the secondary Class 1 national insurance contributions paid by the company; and

(c) the contributions paid by the company to any pension fund (within the meaning of section 231A(4) of the Taxes Act 1988) operated for the benefit of directors or employees of the company.

(2) The employee costs of a company attributable to relevant land remediation are those paid to, or in respect of, directors or employees directly and actively engaged in that relevant land remediation.

(3) In the case of a director or employee partly engaged directly and actively in relevant land remediation the following rules apply--

(a) if the time he spends so engaged is less than 20% of his total working time, none of the employee costs relating to him are treated as attributable to relevant land remediation;

(b) if the time he spends so engaged is more than 80% of his total working time, the whole of the employee costs relating to him are treated as attributable to relevant land remediation;

(c) in any other case, an appropriate proportion of the employee costs relating to him are treated as attributable to relevant land remediation.

(4) For the purpose of sub-paragraphs (2) and (3) persons who provide services, such as secretarial or administrative services, in support of activities carried on by others, are not, by virtue of providing those services, to be treated as themselves directly and actively engaged in those activities.

Expenditure on materials

6 For the purposes of this Schedule expenditure on materials is attributable to relevant land remediation if the materials are employed directly in that relevant land remediation.

Expenditure incurred because of contamination

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