Capital Allowances Act 2001

• (b) at any time in the chargeable period the patent rights, or other rights out of which they were granted, were, or were to be, used for the purposes of the trade.

• (3) The total writing-down allowances made in respect of an item of qualifying expenditure (whether to the same or to different persons) must not exceed the amount of that expenditure.

The writing-down period

95

• (1) The writing-down period for an item of qualifying expenditure—

• (a) begins at the beginning of the chargeable period in respect of which the expenditure is incurred, and

• (b) is of a length determined in accordance with the Table, which shows the basic rule, and the rules which apply instead of the basic rule in the cases described in items 2 and 3.

Rule	Length of writing-down period
1. Basic rule.	17 years.
2. Patent rights are purchased for a specified period.	Whichever is shorter—(a) 17 years;(b) the number of years comprised within the specified period.
3. Patent rights begin one complete year or more after the commencement of the patent, and item 2 does not apply.	17 years, less the number of complete years which, when the rights began, have elapsed since the commencement of the patent; orif 17 complete years have so elapsed, one year.

• (2) For the purpose of determining the writing-down period, expenditure incurred for the purposes of a trade by a person about to carry on the trade is treated as if incurred on the first day on which that person carries on that trade, unless that person has by then sold all the rights on which the expenditure was incurred.

• (3) “The commencement of the patent”, means, in relation to a patent, the date as from which the patent rights become effective.

Calculation of writing-down allowances

96

• (1) The basic rule for calculating a writing-down allowance for an item of qualifying expenditure is—

$$ExCW$where—E is the amount of the qualifying expenditure;C is the length of the part of the chargeable period falling within the writing-down period;W is the length of the writing-down period.$

• (2) The basic rule is subject to the rules about—

• (a) cessation of writing-down allowances (paragraph 97), and

• (b) reduced writing-down allowances (paragraph 98).

End of writing-down allowances

97

• (1) No writing-down allowance is to be made to a person for a chargeable period in respect of qualifying expenditure incurred on the purchase of patent rights if any of the following occur in that period—

• (a) the patent rights come to an end without being subsequently revived,

• (b) the person sells all of those rights, or so much of them as that person still owned at the beginning of the chargeable period, or

• (c) the person sells part of those rights, and the net proceeds of sale for that period (so far as they consist of capital sums) are not less than the amount of the unrelieved qualifying expenditure for that period.

• (2) If a writing-down allowance in respect of qualifying expenditure is prohibited by sub-paragraph (1) for a chargeable period, no writing-down allowance is to be made in respect of that expenditure for any subsequent chargeable period.

Reduced writing-down allowance

98

• (1) If a person sells part of any patent rights in a chargeable period, and for that period U is greater than N, the writing-down allowance for that period is—

$$U-NY$where—U is the unrelieved qualifying expenditure for the chargeable period,N is the net proceeds of any sales of the patent rights which take place in the chargeable period (so far as those proceeds consist of capital sums), andY is the number of complete years of the writing-down period remaining at the beginning of the chargeable period.$

• (2) If an amount is calculated under sub-paragraph (1) for a chargeable period, that amount is also the amount of the writing-down allowance for subsequent chargeable periods until another sale in a period for which U is greater than N causes a fresh calculation to be made under sub-paragraph (1).

• (3) If a chargeable period is more or less than a year, an allowance calculated under sub-paragraph (1) or (2) is proportionately increased or reduced.

Balancing allowance on sale or expiry of patent rights

99

• (1) A person is entitled to a balancing allowance for a chargeable period in respect of qualifying expenditure if there is unrelieved qualifying expenditure for that period and any of the following occur in that period—

• (a) the patent rights come to an end without subsequently being revived, or

• (b) the person sells all of those rights, or so much of them as that person still owned at the beginning of the period.

This is subject to sub-paragraph (2).

• (2) The person is not entitled to a balancing allowance unless—

• (a) a writing-down allowance has been given in respect of the expenditure, or

• (b) a writing-down allowance could, but for the rights coming to an end or being sold, have been given in respect of the expenditure.

• (3) The amount of the balancing allowance is—

• (a) in the case of a sale, equal to the unrelieved qualifying expenditure for the chargeable period, less the net proceeds of sales taking place in the chargeable period (so far as they consist of capital sums), and

• (b) in any other case, equal to the unrelieved qualifying expenditure for the chargeable period.

Balancing charges

100

• (1) A balancing charge is made on a person for a chargeable period in respect of qualifying expenditure if in that period—

• (a) the person sells some or all of the patent rights, and

• (b) the net proceeds of sale (so far as they consist of capital sums) from the sales in that period exceed any unrelieved qualifying expenditure for that period.

The charge is calculated in accordance with sub-paragraphs (2) to (5).

• (2) If there is no unrelieved qualifying expenditure, the amount of the balancing charge is equal to the net proceeds of sale (so far as they consist of capital sums).

This is subject to sub-paragraphs (4) and (5).

• (3) If there is some unrelieved qualifying expenditure, the amount of the balancing charge is equal to the amount by which the net proceeds of sale (so far as they consist of capital sums) exceed the unrelieved qualifying expenditure.

This is subject to sub-paragraphs (4) and (5).

• (4) The total amount of the first balancing charge must not exceed the total writing-down allowances actually given in respect of the expenditure.

• (5) The total amount on which a second or further balancing charge is made must not exceed the total writing-down allowances actually made in respect of the expenditure, less the amount of any earlier charge.

Giving effect to allowances and charges

101

• (1) Sub-paragraph (2) applies if—

• (a) a person is entitled to a writing-down allowance or a balancing allowance or liable to a balancing charge in respect of qualifying expenditure, and

• (b) the trade use condition is met.

• (2) The allowance or charge is to be given effect in calculating the profits of that person’s trade, by treating—

• (a) the allowance as an expense of the trade, and

• (b) the charge as a receipt of the trade.

• (3) Sub-paragraph (4) applies if—

• (a) a person is entitled to a writing-down allowance or a balancing allowance or liable to a balancing charge in respect of qualifying expenditure, and

• (b) the trade use condition is not met.

• (4) Sections 479 and 480 apply in relation to giving effect to the allowance or charge referred to in sub-paragraph (3) as they apply in relation to giving effect to an allowance or charge under Chapter 3 of Part 8 in respect of qualifying non-trade expenditure.

• (5) For the purposes of Part 8 a person’s “income from patents” includes balancing charges to which the person is liable in respect of qualifying expenditure.

Supplementary provisions

Limit on qualifying expenditure

102

Section 481 does not apply to expenditure incurred before 1st April 1986, and subsections (5) and (6) of that section do not apply to expenditure incurred before 27th July 1989.

Part 10 — Dredging allowances

Writing-down allowances

103

• (1) Section 487(2) applies with the substitution of “ 50 years ” for “25 years” in the case of expenditure incurred before 6th November 1962.

• (2) Section 487(3) applies with the substitution of “ 2% ” for “4%” in the case of expenditure incurred before 6th November 1962.

Balancing allowances

104

The reference in section 488(1)(d) to allowances previously made in respect of the expenditure—

• (a) includes any initial allowance made in respect of it under section 17 of FA 1956 or section 67 of CAA 1968, and

• (b) except in relation to initial allowances, is to be construed as if section 17 of FA 1956 had always had effect (instead of having effect only for chargeable periods after the year 1955-56).

The writing-down period

105

• (1) This paragraph applies where it is provided under Part 9 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 11 — Contributions

Regional development grants

106

• (1) Section 534(1) applies as if a grant falling within that subsection included—

• (a) a grant made under Part II of the Industrial Development Act 1982 (c. 52) on an application made before 1st April 1988;

• (b) a grant made under Part I of the Industry Act 1972 (c. 63), or a grant made under Northern Ireland legislation and declared by the Treasury to correspond to a grant under that Part.

• (2) Section 534(2) does not apply if the expenditure was incurred, or the grant was paid, before 10th March 1982.

Contributions not made by public bodies and not eligible for tax relief

107

Section 536 applies with the omission of subsection (3)(b) in relation to contributions made before 27th July 1989.

Conditions for allowances

108

In section 536(5), as it applies for the purposes of section 537(2), paragraphs (a)(iv) and (b) do not apply in relation to contributions made before 27th July 1989.

Agricultural buildings

109

Section 538(2)(b)(ii) applies in relation to contributions made before 6th April 1990 with the omission of “or to allocate the expenditure to a pool under Part 2”.

110

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 12 — Supplemental

Transfer of insurance company business

111

Section 560 applies with—

• (a) the substitution for subsection (1) of—

(1) This section applies if assets are transferred as part of, or in connection with, a transfer of the whole or part of the long term business of an insurance company to another company in accordance with a scheme sanctioned by a court under section 49 of the Insurance Companies Act 1982.

;

and

• (b) the omission of subsection (2),

in relation to transfers sanctioned or authorised before 1st July 1994.

Election regarding sale consideration

112

• (1) In relation to a transfer to which this paragraph applies, section 569(3) applies with the substitution for paragraph (a) of—

(a) any of the parties is not resident in the United Kingdom at the time of the transfer and the circumstances are not at that time such that a relevant allowance or charge falls or might fall to be made to or on that party as a result of the transfer;

.

• (2) This paragraph applies to—

• (a) a transfer before 16th March 1993;

• (b) a transfer in pursuance of a contract entered into before that date; and

• (c) a transfer in pursuance of a contract entered into for the purpose of securing that obligations under a contract entered into before that date are complied with.

Part 13 — Other enactments

113

• (1) Subsections (2) and (3) of section 578A of ICTA (expenditure on car hire) apply with the substitution of “ £8,000 ” for “£12,000” in relation to expenditure incurred under a contract entered into before 11th March 1992.

• (2) Subsection (4) of that section does not apply in relation to rebates made or transactions occurring before 29th April 1996.

114

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

115

The repeals made by CAA 1990 do not have effect in relation 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.

116

• (1) Sections 40A to 40D of F(No.2)A 1992 (films) apply with the necessary modifications in relation to—

• (a) expenditure on the production of a film—

• (i) completed before 21st March 2000, or

• (ii) completed on or after that date, if the first day of principal photography is before that date, unless the person incurring the expenditure elects that those modifications should not apply;

• (b) expenditure on the acquisition of a film, tape or disc incurred before 6th April 2000.

• (2) The necessary modifications are—

• (a) the substitution for section 40A(1) of—

(1) Expenditure which— (a) is incurred on the production or acquisition of a film, tape or disc, and (b) would, apart from this subsection, constitute capital expenditure on the provision of plant or machinery for the purposes of Part 2 of the Capital Allowances Act, is to be regarded for the purposes of the Tax Acts as expenditure of a revenue nature unless an election under section 40D below has effect with respect to it.

;

• (b) in section 40A(2), the substitution of “ the production or acquisition of a film, tape or disc ” for “the original master version of a film” and of “ of the film, tape or disc ” for “of the original master version”;

• (c) in section 40A(3), the substitution of “ a film, tape or disc ” for “the original master version of a film” and of “ the film, tape or disc ” for “the original master version” (in both places);

• (d) the insertion after section 40A(4) of—

(5) In this section and sections 40B to 40D below— (a) any reference to a film is a reference to an original master negative of the film and its soundtrack, if any; (b) any reference to a tape is a reference to an original master film tape or original master audio tape; and (c) any reference to a disc is a reference to an original master film disc or original master audio disc; and any reference to the acquisition of a film, tape or disc includes a a reference to the acquisition of any description of rights in a film, tape or disc.

;

• (e) in section 40B(1), the substitution of “ films, tapes or discs ” for “original master versions of films” and of “ a film, tape or disc ” for “the original master version of a film”;

• (f) in section 40B(4), the substitution of “ film, tape or disc ” for “original master version of the film” and of “ film, tape or disc ” for “original master version”;

• (g) in section 40B(5), the substitution of “ film, tape or disc ” for “original master version of the film”;

• (h) in section 40C(1), the substitution of “ film, tape or disc ” for “original master version of the film”;

• (i) in section 40C(2), the substitution of “ film, tape or disc ” for “original master version of the film”;

• (j) in section 40D(2), the substitution of “ films, tapes or discs ” for “original master versions of films”, of a “ film, tape or disc ” for “the original master version of a film” and of “ film, tape or disc ” for “original master version” (in both places);”

• (k) in section 40D(3), the substitution of “ film, tape or disc ” for “original master version”;

• (l) in section 40D(4), the substitution of “ film, tape or disc ” for “original master version of the film” (in both places);

• (m) in section 40D(6), the substitution of “ a film, tape or disc ” for “the original master version of a film” and of “ of the film, tape or disc ” for “of the original master version”; and

• (n) in section 40D(7), the substitution of “a film, tape or disc ” for “the original master version of a film”.

• (3) An election under sub-paragraph (1)(a) is irrevocable.

• (4) For the purposes of sub-paragraph (1)(a) a film is completed at the time when it is first in a form in which it can reasonably be regarded as ready for copies of it to be made and distributed for presentation to the general public.

• (5) In sub-paragraph (1)(b)—

• (a) “film” means an original master negative of the film and its soundtrack, if any;

• (b) “tape” means an original master film tape or original master audio tape; and

• (c) “disc” means an original master film disc or original master audio disc;

and the acquisition of a film, tape or disc includes the acquisition of any description of rights in a film, tape or disc.

117

Section 40D of F(No.2)A 1992 (election relating to tax treatment of films expenditure) applies with the omission of—

• (a) paragraph (a) of subsection (1); and

• (b) subsections (3) to (7),

if the film, tape or disc of the film was completed before 10th March 1992.

Schedule 4

Capital allowances

Claims for capital allowances

No double relief through pooling under Part 2 (plant and machinery allowances)

Expenditure incurred before qualifying activity carried on

Ordinary Schedule A businesses

Structures, assets and works

First-year allowances available for certain types of qualifying expenditure only

Exclusion where sums payable in respect of depreciation

45A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Energy-saving components of plant or machinery

45C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expenditure on cars with low carbon dioxide emissions

45D

• (1) Expenditure is first-year qualifying expenditure if—

• (a) it is incurred in the relevant period,

• (b) it is expenditure on a car which is first registered on or after 17th April 2002 and which is unused and not second-hand,

• (c) the car—

• (i) is electrically-propelled, or

• (ii) has low CO₂ emissions, and

• (d) the expenditure is not excluded by section 46 (general exclusions).

• (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (1B) The “relevant period” is the period beginning with 17 April 2002 and ending with—

• (a) in the case of expenditure incurred by a company within the charge to corporation tax, 31 March 2027, and

• (b) in the case of expenditure incurred by a person within the charge to income tax, 5 April 2027.

• (1C) The Treasury may by regulations amend subsection (1B) so as to extend the relevant period.

• (2) For the purposes of this section a car has low CO₂ emissions if it satisfies the conditions in subsections (3) and (4).

• (3) The first condition is that, when the car is first registered, it is so registered on the basis of a qualifying emissions certificate.

• (4) The second condition is that the applicable CO ₂ emissions figure in relation to the car does not exceed 0 grams per kilometre driven.

• (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (7) The Treasury may by order amend the amount from time to time specified in subsection (4).

• (8) In this section any reference to a car is to a car within the meaning of section 268A, except that it—

• (a) includes a reference to a mechanically propelled road vehicle of a type commonly used as a hackney carriage, ...

• (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (11) In this section—

• “applicable CO₂ emissions figure” and “qualifying emissions certificate” have the meanings given in section 268C;

• “electrically-propelled” has the meaning given in section 268B.

Expenditure on plant or machinery for gas refuelling station

45E

• (1) Expenditure is first-year qualifying expenditure if—

• (a) it is incurred in the period beginning with 17th April 2002 and ending with 31st March 2025,

• (b) it is expenditure on plant or machinery for a gas refuelling station where the plant or machinery is unused and not second-hand, and

• (c) it is not excluded by section 46 (general exclusions).

• (1A) The Treasury may by order amend subsection (1)(a) so as to extend the period specified.

• (2) For the purposes of this section expenditure on plant or machinery for a gas refuelling station is expenditure on plant or machinery installed at a gas refuelling station for use solely for or in connection with refuelling vehicles with natural gas, biogas or hydrogen fuel.

• (3) For the purposes of subsection (2) the plant or machinery which is for use for or in connection with refuelling vehicles with natural gas, biogas or hydrogen fuel includes—

• (a) any storage tank for natural gas , biogas or hydrogen fuel,

• (b) any compressor, pump, control or meter used for or in connection with refuelling vehicles with natural gas, biogas or hydrogen fuel, and

• (c) any equipment for dispensing natural gas, biogas or hydrogen fuel to the fuel tank of a vehicle.

• (4) For the purposes of this section—

• “biogas” means gas produced by the anaerobic conversion of organic matter and used for propelling vehicles;

• “gas refuelling station” means any premises, or that part of any premises, where vehicles are refuelled with natural gas, biogas or hydrogen fuel;

• “hydrogen fuel” means a fuel consisting of gaseous or cryogenic liquid hydrogen which is used for propelling vehicles;

• “vehicle” means a mechanically propelled road vehicle.

Plant or machinery used for less than five years in a ring fence trade

45F

• (1) Expenditure is first-year qualifying expenditure if—

• (a) it is incurred on or after 17th April 2002,

• (b) it is incurred by a company,

• (c) it is incurred on the provision of plant or machinery for use wholly for the purposes of a ring fence trade, and

• (d) it is not excluded by section 46 (general exclusions).

• (2) This section is subject to section 45G (plant or machinery used for less than five years in a ring fence trade).

• (3) In this section “ ring fence trade ” means a ring fence trade in respect of which tax is chargeable under section 330(1) of CTA 2010 (supplementary charge in respect of ring fence trades).

45G

• (1) Expenditure incurred by a company on the provision of plant or machinery is to be treated as never having been first-year qualifying expenditure under section 45F if the plant or machinery—

• (a) is at no time in the relevant period used in a ring fence trade carried on by the company or a company connected with it, or

• (b) is at any time in the relevant period used for a purpose other than that of a ring fence trade carried on by the company or a company connected with it.

• (2) For the purposes of this section “ the relevant period ” means whichever of the following periods, beginning with the incurring of the expenditure, first ends, namely—

• (a) the period ending with the fifth anniversary of the incurring of the expenditure, or

• (b) the period ending with the day preceding the first occasion on which the plant or machinery, after becoming owned by the company which incurred the expenditure, is not owned by a company which is either that company or a company connected with it.

• (3) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (1).

• (4) If a person who has made a return becomes aware that, after making it, anything in it has become incorrect because of the operation of this section, he must give notice to an officer of Revenue and Customs specifying how the return needs to be amended.

• (5) The notice must be given within 3 months beginning with the day on which the person first became aware that anything in the return had become incorrect because of the operation of this section.

• (6) In this section “ ring fence trade ” has the same meaning as in section 45F.

Reduction of annual investment allowance and first-year allowances

Apportionment of proceeds of disposal of relevant plant and machinery

Person with interest in relevant land having fixture for purposes of qualifying activity

Person with interest in relevant land having fixture for purposes of qualifying activity

Expenditure on plant and machinery for use wholly in a ring fence trade

Disposal values

Cases in which short-life asset treatment is ruled out

Meaning of “long-life asset”

Expenditure on plant and machinery for use wholly in a ring fence trade

Expenditure which is not to be allocated to single ship pool

Purchaser of land discharging obligations of equipment lessee

Mines, transport undertakings etc.

Expenditure connected with reuse etc. of offshore oil infrastructure

161A

• (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

• (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

• (c) arranging for the reuse of plant or machinery.

• (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

• (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, 164(4) and 165A to 165E.

• (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

• (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.

Purchaser of land discharging obligations of client under energy services agreement

Purchaser of land discharging obligations of client under energy services agreement

175A

• (1) In this Chapter “ energy services agreement ” means an agreement entered into by an energy services provider (“ the energy services provider ”) and another person (“ the client ”) that makes provision, with a view to saving energy or using energy more efficiently, for—

• (a) the design of plant or machinery, or one or more systems incorporating plant or machinery,

• (b) obtaining and installing the plant or machinery,

• (c) the operation of the plant or machinery,

• (d) the maintenance of the plant or machinery, and

• (e) the amount of any payments in respect of the operation of the plant or machinery to be linked (wholly or in part) to energy savings or increases in energy efficiency resulting from the provision or operation of the plant or machinery.

• (2) In this Chapter “ energy services provider ” means a person carrying on a qualifying activity consisting wholly or mainly in the provision of energy management services.

180A

• (1) If—

• (a) an energy services agreement is entered into,

• (b) the energy services provider incurs capital expenditure under the agreement on the provision of plant or machinery,

• (c) the plant or machinery becomes a fixture,

• (d) at the time the plant or machinery becomes a fixture—

• (i) the client has an interest in the relevant land, and

• (ii) the energy services provider does not,

• (e) the plant or machinery—

• (i) is not provided for leasing, and

• (ii) is not provided for use in a dwelling-house,

• (f) the operation of the plant or machinery is carried out wholly or substantially by the energy services provider or a person connected with him,

• (g) the energy services provider and the client are not connected persons, and

• (h) they elect that this section should apply,

the energy services provider is to be treated, on and after the time at which he incurs the expenditure, as the owner of the fixture as a result of incurring the expenditure.

• (2) But if the client would not have been entitled to a section 176 allowance in respect of the expenditure if he had incurred it, subsection (1) does not apply unless the plant or machinery belongs to a class of plant or machinery specified by Treasury order.

• (3) In subsection (2) a “ section 176 allowance ” means an allowance to which a person is entitled as a result of section 176.

• (4) If an election is made under this section, the client is not to be treated under section 176 as the owner of the fixture.

• (5) An election under this section must be made by notice to an officer of Revenue and Customs—

• (a) for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;

• (b) for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.

• (6) The “ relevant chargeable period ” means the chargeable period in which the capital expenditure was incurred.

182A

• (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,

• (c) before that acquisition, the plant or machinery was provided under an energy services agreement, and

• (d) in connection with that acquisition, the purchaser pays a capital sum to discharge the obligations of the client under the energy services agreement,

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, 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).

Application of section 303 where developer involved

192A

• (1) This section applies if an energy services provider is treated under section 180A as the owner of a fixture.

• (2) If—

• (a) the energy services provider at any time assigns his rights under the energy services agreement, or

• (b) the financial obligations of the client in respect of the fixture under an energy services agreement are at any time discharged (on the payment of a capital sum or otherwise),

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

• (3) The reference in subsection (2)(b) to the client is, in a case where the financial obligations of the client 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.

195A

• (1) If section 192A(2)(a) applies (cessation of ownership of energy services provider 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 192A (and subsection (1) and section 195B) the assignee is to be treated as being an energy services provider who owns the fixture under section 180A.

195B

• (1) If section 192A(2)(b) applies (discharge of obligations of client) because the client has paid a capital sum, the client 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 192A(3)(assignee of client) applies in relation to subsection (1).

Single ship pool

Incoming lessee where lessor not entitled to allowances

Incoming lessee where lessor entitled to allowances

Fixture on which a plant and machinery allowance has been claimed

Fixture on which a plant and machinery allowance has been claimed

Writing off initial allowances

Fixture on which a research and development allowance has been made

Meaning of “qualifying building”

Election to apportion sale price on sale of qualifying interest

Meaning of “qualifying building”

Application of sections 228B and 228C

Lessor’s income or profits: termination of leaseback

Sections 228A to 228G: supplementary

Sections 228A to 228G: supplementary

Expenditure of small or medium-sized enterprises: businesses

Interest acquired on completion of conversion

Unrelieved qualifying expenditure

Meaning of “ the residue of qualifying expenditure ”

Part 4A — FLAT CONVERSION ALLOWANCES

Chapter 1 — INTRODUCTION

Meaning of “qualifying expenditure”

393A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 2 — QUALIFYING EXPENDITURE

Case in which no disposal value need be brought into account

393B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 3 — QUALIFYING BUILDINGS AND QUALIFYING FLATS

General limit on amount of disposal value

393C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Determining the net present value of the rentals for purposes of s.228K

393D

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Calculation of present value

393E

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 4 — THE RELEVANT INTEREST IN THE FLAT

“Long funding lease”

393F

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

393G

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 5 — INITIAL ALLOWANCES

393H

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

393I

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 6 — WRITING-DOWN ALLOWANCES

Introduction

393J

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Buildings temporarily out of use

393K

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

393L

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 7 — BALANCING ADJUSTMENTS

393M

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

393N

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “offshore infrastructure”

393O

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “qualifying building”

393P

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 8 — WRITING OFF QUALIFYING EXPENDITURE

393Q

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

393R

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

393S

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 9 — SUPPLEMENTARY PROVISIONS

Effect of disposal to connected person on overseas leasing pool

393T

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

393U

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

393V

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

393W

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proceeds from balancing events

Grants affecting entitlement to allowances

Introduction

Additional VAT rebates and writing off qualifying expenditure

Grants affecting entitlement to allowances

Chapter 5A — First-year qualifying expenditure

General

Proceeds from balancing events

416A

A first-year allowance is not available unless the qualifying expenditure is first-year qualifying expenditure under section 416B (expenditure incurred wholly for purposes of a ring fence trade).

Types of expenditure which may qualify for first year allowances

416B

• (1) Expenditure is first-year qualifying expenditure if—

• (a) it is incurred on or after 17th April 2002,

• (b) it is incurred by a company,

• (c) it is incurred wholly for the purposes of a ring fence trade, and

• (d) it is not excluded by—

• (i) subsection (2) (acquisition of mineral asset), or

• (ii) subsection (3) (acquisition of asset representing expenditure of connected company).

• (2) Expenditure is not first-year qualifying expenditure under this section if it is expenditure on acquiring a mineral asset (within the meaning of section 403).

• (3) Expenditure is not first-year qualifying expenditure under this section if it is expenditure incurred by a company on the acquisition of an asset representing expenditure incurred by a company connected with that company.

• (4) To the extent that references in this section to an asset representing expenditure incurred by a company include a reference to an asset representing expenditure on mineral exploration and access, they also include a reference to any results obtained from any search, exploration or inquiry on which any such expenditure was incurred.

• (5) In this section “ ring fence trade ” means a ring fence trade in respect of which tax is chargeable under section 330(1) of CTA 2010 (supplementary charge in respect of ring fence trades).

Supplementary

416C

• (1) In determining whether expenditure is first-year qualifying expenditure under this Chapter, any effect of the provisions specified in subsection (2) on the time at which the expenditure is to be treated as incurred is to be disregarded.

• (2) The provisions are—

• (a) section 400(4) (which treats certain pre-trading expenditure as incurred on the first day of trading), and

• (b) section 434 (which treats certain other expenditure incurred for the purposes of a trade about to be carried on as incurred on that day).

First-year allowances

Introduction

416D

• (1) A person is entitled to a first-year allowance in respect of first-year qualifying expenditure if the expenditure is incurred in a chargeable period to which this Act applies.

• (2) Any first-year allowance is made for the chargeable period in which the first-year qualifying expenditure is incurred.

• (3) The amount of the allowance is a percentage of the first-year qualifying expenditure in respect of which the allowance is made, as shown in the Table—

Type of first-year qualifying expenditure	Amount
Expenditure qualifying under section 416B (expenditure incurred wholly for the purposes of a ring fence trade)	100%

• (4) A person who is entitled to a first-year allowance may claim the allowance in respect of the whole or a part of the first-year qualifying expenditure.

• (5) This section is subject to section 416E (artificially inflated claims for first-year allowances).

Giving effect to allowances and charges: lessors and licensees

416E

• (1) To the extent that a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it shall be disregarded in determining for a chargeable period the amount of any first-year allowance to which a person is entitled.

• (2) For the purposes of this section, arrangements are entered into wholly or mainly for a “ disqualifying purpose ” if their main object, or one of their main objects, is to enable a person to obtain—

• (a) a first-year allowance to which he would not otherwise be entitled, or

• (b) a first-year allowance of a greater amount than that to which he would otherwise be entitled.

• (3) In this section “ arrangements ” includes any scheme, agreement or understanding, whether or not legally enforceable.

Additional VAT rebates and writing off qualifying expenditure

Calculation of balancing adjustments

Acquisition of mineral asset owned by previous trader

Introduction

Giving up exploration, search or inquiry

Ring fence trade a separate qualifying activity

Abandonment expenditure incurred before cessation of ring fence trade

Additional VAT liabilities and initial allowances

Additional VAT liabilities and initial allowances

Additional VAT liabilities and initial allowances

Meaning of “husbandry”

Meaning of “qualifying expenditure”

Sections 228A to 228G: supplementary

UK property businesses

Additional VAT liabilities and initial allowances

Meaning of “freehold interest”, “lease”, etc.

First-year allowances

Additional VAT liabilities and writing-down allowances

Additional VAT liabilities and writing-down allowances

Additional VAT liabilities and writing-down allowances

Entitlement to writing-down allowance

Incoming lessee where lessor entitled to allowances

Additional VAT liabilities and writing-down allowances

Additional VAT liabilities and writing off initial allowances

Amount of allowances and charges

Meaning of “oil licence” and “interest in an oil licence”

Additional VAT liabilities and writing off initial allowances

Additional VAT rebates and balancing adjustments

Additional VAT liabilities and writing off initial allowances

Additional VAT rebates and balancing adjustments

Additional VAT rebates and writing off qualifying expenditure

Additional VAT rebates and writing off qualifying expenditure

Meaning of “disposal receipt”

Special leasing: corporation tax (general)

Meaning of “oil licence” and “interest in an oil licence”

Giving effect to allowances and charges: trades

Use of asset otherwise than for permitted development etc.

Expenditure on research and development

Ring fence trade a separate qualifying activity

Time when additional VAT liability or rebate is incurred or made

Meaning of “qualifying expenditure”

Apportionment of sums partly referable to non-qualifying assets

Agricultural buildings allowances

Agricultural buildings allowances

UK property businesses

Trades

Time when expenditure is incurred

Time when expenditure is incurred

Transfer or division of UK business

Apportionment where property sold together

Determination of entitlement or liability

Section 397 (restriction of relief in case of farming and market gardening)

Apportionment of sums partly referable to non-qualifying assets

Sales treated as being for alternative amount: introductory

Section 492 (treatment of oil extraction activities etc. for tax purposes)

Use of asset otherwise than for permitted development etc.

Ceasing to work mineral deposits

Sales treated as being at market value

Research and development allowances

Effect of election: relaxation of restriction on B’s qualifying expenditure, etc.

“Additional VAT liability” and “additional VAT rebate”

“Additional VAT liability” and “additional VAT rebate”

Apportionment of sums partly referable to non-qualifying assets

Purchase of building within 2 years of first use

Elections: supplementary

Capital value provisions: application of provisions

Lessor’s income or profits

Sales treated as being at market value

Disposal of plant or machinery subject to lease where income retained

Election to treat sale as being for alternative amount

Successions by beneficiaries

Introduction

Schedule 5 (transitional provisions and savings)

Avoidance affecting proceeds of balancing event

Transfers of trade without a change of ownership

Transfers of trade without a change of ownership

Transfers of trade without a change of ownership

Schedule 2 (taxation)

Lease and finance leaseback

Apportionment where property sold together

Section 43E (interposed lease: exceptions, etc.)

Sections 228A to 228G: supplementary

Tax agreements for income tax purposes

Transfer of asset by reason of cross-border merger

Application of Act to parts of assets

Schedule 28AA (provision not at arms’ length)

Section 126 (pools payments for football ground improvements)

Section 575: supplementary

Proceeds from balancing events

Section 575: supplementary

Sales treated as being at market value

“Additional VAT liability” and “additional VAT rebate”

Sections 434D and 434E (capital allowances: management assets; investment assets)

Introduction

Avoidance affecting proceeds of balancing event

Schedule 12 (building societies: change of status)

Meaning of “control”

Proceeds from balancing events

Schedule 11 (taxation provisions)

Section 195 (allowance of certain drilling expenditure)

Schedule 2 (levy of Class 4 contributions with income tax)

Meaning of “freehold interest”, “lease”, etc.

Schedule 17 (Northern Ireland electricity)

Schedule 17 (Northern Ireland electricity)

Meaning of “control”

Meaning of “control”

Meaning of “qualifying flat”

Section 48 (films: relief for production or acquisition expenditure)

Meaning of “qualifying expenditure”

Meaning of “connected” persons

Amount of allowance

Schedule 2 (levy of Class 4 contributions with income tax)

Equipment lease is part of affordable warmth programme

Section 117 (company tax returns, assessments and related matters)

Schedule 33 (taxation)

Schedule 33 (taxation)

Section 397 (restriction of relief in case of farming and market gardening)

Schedule 12 (leasing arrangements: finance leases and loans)

Section 117 (company tax returns, assessments and related matters)

Schedule 18 (company tax returns, assessments and related matters)

Schedule 25 (Northern Ireland Airports Limited)

Editorial notes