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Capital Allowances Act 2001

Type Public General Act

Publication 2001-03-22

Last updated 2026-03-18

State In force

Department Statute Law Database

Source legislation.gov.uk

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(1) Plant or machinery is used for a qualifying purpose at any time when any of the persons listed in subsection (2) uses it for short-term leasing (as defined by section 121).

(2) The persons are—

(a) the person (“X”) who incurred expenditure on the provision of the plant or machinery;

(b) a person who is connected with X;

(c) a person who acquired the plant or machinery from X as a result of a disposal on the occasion of which, or two or more disposals on the occasion of each of which there was a change in the persons carrying on the qualifying activity in relation to which Condition A or B was met.

(d) a person to whom the plant or machinery is leased and who is resident in the United Kingdom;

(e) a person to whom the plant or machinery is leased, who is carrying on a qualifying activity in the United Kingdom and who uses the plant or machinery for the short-term leasing in the course of that activity.

(2A) Condition A is that—

(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and

(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.

(2B) Condition B is that—

(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,

(b) a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ships and aircraft

123

(1) A ship is used for a qualifying purpose at any time when it is let on charter in the course of a trade which consists of or includes operating ships by a person who is—

(a) resident in the United Kingdom or carries on the trade there, and

(b) responsible for navigating and managing the ship throughout the period of the charter and for defraying—

(i) all expenses in connection with the ship throughout that period, or

(ii) substantially all such expenses other than those directly incidental to a particular voyage or to the employment of the ship during that period.

(2) Subsection (1) applies, with the necessary modifications, in relation to aircraft as it applies in relation to ships.

(3) For the purposes of subsection (1)(b) a person is responsible for something if he—

(a) is responsible as principal, or

(b) appoints another person to be responsible in his place.

(4) Subsections (1) and (2) do not apply if the main object, or one of the main objects—

(a) of the letting of the ship or aircraft on charter,

(b) of a series of transactions of which the letting of the ship or aircraft on charter was one, or

was to obtain a writing-down allowance determined without regard to section 109 (writing-down allowances at 10%) in respect of expenditure incurred by any person on the provision of the ship or aircraft.

Transport containers

124

(1) A transport container is used for a qualifying purpose at any time when it is leased in the course of a trade which is carried on by a person who—

(a) is resident in the United Kingdom, or

(b) carries on the trade there,

and either of the conditions given below is met.

(2) The first condition is that—

(a) the person’s trade consists of or includes the operation of ships or aircraft, and

(b) the container is at other times used by that person in connection with the operation of the ships or aircraft.

(3) The second condition is that the container is leased under a succession of leases to different persons who are not, or most of whom are not, connected with each other.

Other qualifying purposes

125

(1) Plant or machinery is used for a qualifying purpose at any time when subsection (2) or (4) applies.

(2) This subsection applies if any of the persons listed in subsection (3) uses the plant or machinery for the purpose of a qualifying activity without leasing it.

(3) The persons are—

(a) the person (“X”) who incurred expenditure on the provision of the plant or machinery;

(b) a person who is connected with X;

(c) a person who acquired the plant or machinery from X as a result of a disposal on the occasion of which, or two or more disposals on the occasion of each of which there was a change in the persons carrying on the qualifying activity in relation to which Condition A or B was met.

(3A) Condition A is that—

(a) at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and

(b) at least one person who carried on the qualifying activity before the change continued to carry it on after the change.

(3B) Condition B is that—

(a) the qualifying activity was carried on in partnership both immediately before and immediately after the change,

(b) a company which was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and

(4) This subsection applies if—

(a) a lessee uses the plant or machinery for the purposes of a qualifying activity without leasing it, and

(b) if he had incurred expenditure on the provision of the plant or machinery at that time, the expenditure would have fallen to be included, in whole or in part, in his available qualifying expenditure for a chargeable period.

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

Minor definitions

126

(1) In this Chapter “normal writing-down allowance” means a writing-down allowance of an amount determined without regard to sections 102 and 109 (reduced rates).

(2) In this Chapter any reference, in relation to any person, to expenditure having qualified for a normal writing-down allowance is to—

(a) the expenditure, or part of it, having fallen to be included in that person’s available qualifying expenditure for any chargeable period, and

(b) that available qualifying expenditure being expenditure which is not subject to section 102 or 109.

(3) Any reference in this Chapter to a person’s expenditure having qualified for a first-year allowance is to such an allowance having fallen to be made in respect of the whole or any part of the expenditure.

Chapter 12 — Ships

Pooling and postponement of allowances

Single ship pool

127

(1) Qualifying expenditure incurred on the provision of a ship for the purposes of a qualifying activity, if allocated to a pool, must be allocated to a single asset pool (a “single ship pool”).

(2) Subsection (1) is subject to the exceptions given in section 128 and any election under section 129 to use the appropriate non-ship pool.

(3) In this Chapter “the appropriate non-ship pool”, in relation to a ship, means the pool to which the expenditure incurred on the provision of the ship would be allocated, or would have been allocated, apart from this Chapter.

Expenditure which is not to be allocated to single ship pool

128

(1) The expenditure is not to be allocated to a single ship pool if the ship is provided for leasing unless—

(a) the ship is not used for overseas leasing at any time in the designated period, or if it is, is used only for protected leasing, and

(b) it appears that the ship will be used for a qualifying purpose in the designated period and will not be used for any other purpose at any time in that period.

(2) The expenditure is not to be allocated to a single ship pool if the qualifying activity for the purposes of which the ship is provided is special leasing of plant or machinery.

(3) In subsection (1) “leasing”, “overseas leasing”, “protected leasing”, “qualifying purpose” and “designated period” have the same meaning as in Chapter 11 (overseas leasing).

Election to use the appropriate non-ship pool

129

(1) A person who has incurred qualifying expenditure on the provision of a ship may, by an election made for a chargeable period, allocate to the appropriate non-ship pool—

(a) all or a part of any qualifying expenditure that would otherwise be allocated to a single ship pool, or

(b) all or a part of the available qualifying expenditure in a single ship pool.

(2) An election under this section must be made by notice given 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.

(3) “The relevant chargeable period” means the chargeable period for which the election is made.

Notice postponing first-year or writing-down allowance

130

(1) A person who is entitled to a first-year allowance for a chargeable period in respect of qualifying expenditure on the provision of a ship may, by notice, postpone all or part of the allowance.

(2) A person who is entitled to a writing-down allowance for a chargeable period in respect of qualifying expenditure allocated to a single ship pool may, by notice, postpone all or part of the allowance.

(3) A notice under this section must specify the amount postponed.

(4) A notice under this section must be given 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.

(5) “The relevant chargeable period” means the chargeable period for which the person is entitled to the allowance.

(6) If a person entitled to a first-year allowance in respect of qualifying expenditure on the provision of a ship claims the allowance in respect of part of the expenditure, subsection (1) applies to the allowance claimed.

(7) If a person entitled to a writing-down allowance in respect of qualifying expenditure allocated to a single ship pool requires the allowance to be reduced to a specified amount, subsection (2) applies to the allowance as so reduced.

Effect of postponement

131

(1) If a person gives notice in respect of a chargeable period under section 130—

(a) the allowance is withheld or withdrawn to the extent that it is postponed, but

(b) sections 57 to 59 (calculation of available qualifying expenditure) apply as if the allowance had been made to the person without any postponement.

(2) On making a claim, the person is entitled to have all or part of a postponed first-year allowance made to him as a first-year allowance for one or more subsequent chargeable periods in which he is carrying on the qualifying activity.

(3) On making a claim, the person is entitled to have all or part of a postponed writing-down allowance made to him as a writing-down allowance for one or more subsequent chargeable periods in which he is carrying on the qualifying activity.

(4) The total amount of any first-year allowances made under subsection (2) or writing-down allowances made under subsection (3) must not exceed the amount of the postponed allowance in question.

(5) A writing-down allowance made under subsection (3) is ignored for the purposes of section 59 (unrelieved qualifying expenditure).

(6) The fact that a postponed writing-down allowance is claimed for a chargeable period does not affect entitlement to, or the amount of, any other writing-down allowance to which the person is otherwise entitled for that chargeable period.

(7) A postponed allowance is not, merely because of the postponement, included in the reference in section 101(3) of CTA 2010 (group relief: meaning of “capital allowance excess”) to an allowance or amount brought forward from an earlier period.

Disposal events and single ship pool

132

(1) A person is required to bring a disposal value into account in a single ship pool if the ship—

(a) is provided for leasing, and

(b) begins to be used otherwise than for a qualifying purpose within the first 4 years of the designated period.

(2) If any disposal event (including one under subsection (1)) occurs in relation to a single ship pool—

(a) the available qualifying expenditure in the single ship pool is allocated, for the chargeable period in which the event occurs, to the appropriate non-ship pool,

(b) the disposal value must be brought into account as a disposal value for that chargeable period in the appropriate non-ship pool, and

(3) Subsections (1) and (2) apply even if, as a result of an election under section 129, some of the qualifying expenditure on the provision of the ship has been allocated to the appropriate non-ship pool.

(4) In subsection (1) “leasing”, “qualifying purpose” and “designated period” have the same meaning as in Chapter 11 (overseas leasing).

Ship not used

133

(1) This section applies if—

(a) a person has incurred qualifying expenditure on the provision of a ship for the purposes of a qualifying activity, and

(b) the ship ceases to be owned by the person without having been brought into use for the purposes of the qualifying activity.

(2) Any writing-down allowances that have previously been made in respect of qualifying expenditure in the single ship pool (or which have been postponed) must be withdrawn.

(3) The amount of any writing-down allowances withdrawn under subsection (2) is allocated, for the chargeable period in which the person ceases to own the ship, to the appropriate non-ship pool.

(4) Any adjustments required by this section are in addition to any adjustments required under section 132 (disposal events and single ship pool).

Deferment of balancing charges

Deferment of balancing charges: introduction

134

(1) Sections 135 to 156 enable a balancing charge that arises when there is a disposal event in respect of a ship to be deferred and attributed to qualifying expenditure on another ship.

(2) In this Chapter “the deferment rules” means sections 135 to 156.

Claim for deferment

135

(1) A person (“the shipowner”) who is liable to a balancing charge for a chargeable period may claim deferment of all or part of the charge if—

(a) in the chargeable period there is a disposal event (“the relevant disposal event”) in respect of a ship (“the old ship”),

(b) the old ship—

(i) was provided for the purposes of a qualifying activity carried on by the shipowner, and

(ii) was owned by the shipowner at some time in the chargeable period, and

(2) The amount which may be deferred is subject to the limit in section 138.

(3) For income tax purposes, a claim for deferment must be made on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends.

(4) “The relevant chargeable period” means the chargeable period for which the shipowner is liable to the balancing charge.

(5) For corporation tax purposes, Part IX of Schedule 18 to FA 1998 applies in relation to the making of a claim for deferment as it applies in relation to the making of a claim for an allowance.

Further conditions for deferment

136

The conditions referred to in section 135(1)(c) are that—

(a) the relevant disposal event is of a kind mentioned in section 61(1)(a) to (d) (cessation of ownership, loss, abandonment, destruction etc. of ship),

(b) the old ship was a qualifying ship immediately before the relevant disposal event,

(c) the shipowner has not incurred a loss in respect of the qualifying activity for the chargeable period for which he is liable to the balancing charge, and

(d) no amount in respect of the old ship has been allocated to—

(i) the overseas leasing pool,

(ii) a single asset pool under section 206 (plant or machinery provided or used partly for purposes other than those of the qualifying activity),

(iii) a single asset pool under section 211 (payment of partial depreciation subsidy), or

(iv) a pool for a qualifying activity consisting of special leasing.

Effect of deferment

137

A claim for deferment is given effect by allocating the amount deferred, for the chargeable period in respect of which the claim is made, to the appropriate non-ship pool.

Limit on amount deferred

138

(1) The amount deferred must not exceed the smallest of the following amounts—

(a) the amount of any balancing charge which, if the claim for deferment had not been made, would have been made for the chargeable period for which deferment is claimed in the appropriate non-ship pool;

(b) the amount given by section 139 (amount taken into account in respect of the old ship);

(i) by the shipowner or, if the shipowner is a company, by another company which is a member of the same group at the time when the expenditure is incurred, and

(ii) within the period of 6 years beginning with the relevant disposal event;

(d) the amount of the shipowner’s profits or income from the qualifying activity for the chargeable period for which deferment is claimed.

(2) In determining profits or income for the purposes of subsection (1)(d)—

(a) any other amounts deferred under section 135 are to be taken into account, and

(b) any amounts brought forward under section 83 of ITA 2007 or section 45, 45A or 45B of CTA 2010 (losses) are to be disregarded.

Amount taken into account in respect of old ship

139

(1) The amount taken into account in respect of the old ship for the purposes of section 138(1)(b) is—

(a) amount A, if no election has been made under section 129 (election to use appropriate non-ship pool) in respect of any of the qualifying expenditure incurred on the provision of the ship, or

(b) amount B, in any other case.

(2) Amount A is the amount which falls to be brought into account as a disposal value in the appropriate non-ship pool under section 132(2)(b) as a result of the relevant disposal event, less the available qualifying expenditure allocated to the appropriate non-ship pool under section 132(2)(a).

(3) Amount B is—

$$DV-(QE-WDA-FYA)$where—DV is the amount of the disposal value required to be brought into account in respect of the old ship,QE is all the qualifying expenditure incurred in respect of the old ship,WDA is the maximum amount of any writing-down allowances which (on the assumptions in subsection (4)) could have been made in respect of that qualifying expenditure for chargeable periods up to (but not including) the one in respect of which the claim for deferment is made, andFYA is the total of any first-year allowances actually made or postponed in respect of the old ship.$

(4) The assumptions are that—

(a) all the qualifying expenditure in respect of the old ship is (and has always been) allocated to the appropriate non-ship pool, and

(b) no other qualifying expenditure has been allocated to that pool.

(5) If an election is made under section 129 (election to use appropriate non-ship pool) after the determination under this section of the amount taken into account in respect of the old ship, the amount is, and is treated as always having been, amount B and not amount A.

Attribution of deferred amounts

Notice attributing deferred amounts to new expenditure

140

(1) The shipowner may, by notice to an officer of Revenue and Customs, attribute all or part of an amount deferred under section 135 to expenditure on new shipping.

(2) An amount attributed under this section is attributed to an equal amount of the expenditure on new shipping.

(3) Subsection (1) is subject to subsections (4) and (5) and section 141 (deferred amounts attributed to earlier expenditure first).

(4) Subsection (1) applies only if the expenditure on new shipping is incurred—

(a) by the shipowner or, if the shipowner is a company, by another company which is a member of the same group at the time when the expenditure is incurred, and

(b) within the period of 6 years beginning with the relevant disposal event.

(5) An amount may be attributed to expenditure on new shipping only to the extent that amounts have not already been attributed to it under this section.

(6) A notice given in respect of expenditure incurred by another company does not have effect unless the other company joins the shipowner in giving it.

Deferred amounts attributed to earlier expenditure first

141

(1) No part of an amount deferred under section 135 is to be attributed to the whole or a part of any expenditure on new shipping (“the current expenditure”) if there is other expenditure (“the earlier expenditure”) which—

(a) was incurred before the current expenditure but at the same time as or after the relevant disposal event,

(b) was incurred by the shipowner or, if the shipowner is a company, by another company which was a member of the same group at the time the earlier expenditure was incurred, and

(c) is expenditure on new shipping, or would be treated as such but for an election under section 129 (election to use appropriate non-ship pool),

unless the condition in subsection (2) is met in relation to the earlier expenditure.

(2) The condition is that—

(a) amounts have been attributed to all the earlier expenditure under section 140, and

(b) the attributions have been made in the case of the amount deferred and any other amounts deferred under section 135 as a result of disposal events occurring at the same time as or before the relevant disposal event.

Variation of attribution

142

(1) The shipowner may, by notice, vary an attribution under section 140 (notice attributing deferred amounts to new expenditure).

(2) The notice must be given to an officer of Revenue and Customs on or before the time limit for the shipowner to make a claim for deferment in respect of the relevant chargeable period.

(3) For the time limit for making a claim for deferment, see section 135(3) to (5).

(4) For the purposes of subsection (2), it is to be assumed that—

(a) the shipowner is liable to a balancing charge for the relevant chargeable period, and

(b) a claim for deferment of that balancing charge can be made for the relevant chargeable period.

(5) “The relevant chargeable period” means the earliest chargeable period in which expenditure to which the variation relates is incurred.

(6) If the person to whose expenditure the notice relates is not the shipowner, a notice under subsection (1) does not have effect unless the person joins the shipowner in giving it.

Effect of attribution

143

(1) This section applies if a notice is given under section 140 attributing an amount to expenditure on new shipping.

(2) The amount must be brought into account as a disposal value—

(a) for the chargeable period in which the expenditure is incurred, and

(b) in the single ship pool to which the expenditure is allocated.

Amounts which cease to be attributable

144

(1) This section applies if—

(a) an amount has been deferred under section 135, and

(b) circumstances arise in which any part of the amount ceases (otherwise than by being attributed) to be attributable.

(2) The shipowner is assumed not to have been entitled to defer so much of the amount as ceases to be attributable.

(3) For the purposes of this section an amount is attributable if it may be attributed to expenditure on new shipping in accordance with section 140.

Requirement to notify where no entitlement to defer amounts

145

(1) This section applies if—

(a) an amount has been deferred under section 135, and

(b) circumstances arise that require the shipowner to be treated as if he was not entitled to defer all or part of the amount.

(2) The shipowner must give notice of the fact to an officer of Revenue and Customs, specifying the circumstances.

(3) The notice must be given no later than 3 months after the end of the chargeable period in which the circumstances first arise.

(4) An assessment to tax chargeable as a result of the circumstances may be made at any time in the period which—

(a) begins when those circumstances arise, and

(b) ends 12 months after the shipowner gives notice of them to an officer of Revenue and Customs.

(5) Subsection (4) applies in spite of any limitation on the time for making assessments.

Expenditure on new shipping

Basic meaning of expenditure on new shipping

146

(1) For the purposes of the deferment rules, expenditure on the provision of a ship is expenditure on new shipping if the conditions in subsection (3) are met.

(2) Subsection (1) is subject to sections 147 to 150.

(3) The conditions are that—

(a) the expenditure is qualifying expenditure incurred by a person wholly and exclusively for the purposes of a qualifying activity carried on by him,

(b) when the expenditure is incurred, it appears that the ship will—

(i) be brought into use for the purposes of the qualifying activity as a qualifying ship, and

(ii) continue to be a qualifying ship for at least 3 years after that, and

Exclusions: ship previously owned

147

(1) Expenditure on the provision of a ship is not expenditure on new shipping if the person who incurred the expenditure—

(a) has already owned the ship in the period of 6 years ending with the time when he first owns it as a result of incurring the expenditure, or

(b) was connected at a material time with a person who owned the ship at any time during that period.

(2) For this purpose a material time is—

(a) the time when the expenditure was incurred, or

(b) any earlier time in the 6 year period beginning with the relevant disposal event.

Exclusions: object to secure deferment

148

Expenditure on the provision of a ship is not expenditure on new shipping if the object, or one of the main objects, of—

(a) the transaction by which the ship was provided for the purposes of a qualifying activity carried on by the person who incurred the expenditure,

(b) any series of transactions of which that transaction was one, or

was to secure the deferment of a balancing charge under section 135.

Exclusions: later events

149

(1) Expenditure on the provision of a ship is not, and is treated as never having been, expenditure on new shipping if—

(a) at a time during the period mentioned in subsection (2), the ship is not a qualifying ship,

(b) the expenditure is allocated to a pool as a result of an election under section 129 (election to use appropriate non-ship pool), or

(2) The period referred to in subsection (1)(a) is—

(a) the period of 3 years beginning with the time when the ship is first brought into use for the purposes of a qualifying activity carried on—

(i) by the person (“A”) who incurred the expenditure, or

(ii) if earlier, by a person connected with A, or

(b) if shorter, the period beginning with that time and ending when neither A nor a person connected with A owns the ship.

Exclusions where expenditure not incurred by shipowner

150

(1) Expenditure on the provision of a ship is not, and is treated as never having been, expenditure on new shipping if—

(a) it is incurred by a company which is a member of the same group as the shipowner at the time when the expenditure is incurred, and

(b) subsection (2) or (4) applies.

(2) This subsection applies (subject to subsection (3)) if—

(a) the ship ceases to be owned by the company before it has been brought into use for the purposes of a qualifying activity carried on by the company, or

(b) a disposal event occurs in respect of the ship within 3 years of its first being brought into use for the purposes of a qualifying activity carried on by the company.

(3) But subsection (2) does not apply if the event which would otherwise result in that subsection applying is, or is the result of, the total loss of the ship or irreparable damage to it.

(4) This subsection applies if—

(a) after the expenditure is incurred, there is a time when the company and the shipowner are not members of the same group, and

(b) if the ship is brought into use for the purposes of a qualifying activity carried on by the company, that time is within 3 years of the ship first being so brought into use.

(5) A time falling after the total loss of the ship or irreparable damage to it is to be disregarded for the purposes of subsection (4).

(6) In this section “irreparable damage”, in relation to a ship, means damage that puts it in a condition in which it is impossible, or not commercially worthwhile, to undertake the repairs required for restoring it to its previous use.

Qualifying ships

Basic meaning of qualifying ship

151

(1) For the purposes of the deferment rules, a ship is a qualifying ship if it is—

(a) of a sea-going kind, and

(b) registered as a ship with a gross tonnage of 100 tons or more in a register of shipping established and maintained under the law of any country or territory.

(2) This is subject to sections 152 to 154.

Ships under 100 tons

152

(1) This section applies if the relevant disposal event is, or results from—

(a) the total loss of the old ship, or

(b) damage to the old ship that puts it in a condition in which it is impossible, or not commercially worthwhile, to undertake the repairs required for restoring it to its previous use.

(2) A registered ship may be a qualifying ship for the purposes of—

(a) section 136(b) (further conditions for deferment), or

(b) sections 146(3)(b) and 149(1)(a) (expenditure on new shipping),

even if it is not registered as a ship with a gross tonnage of 100 tons or more.

(3) In subsection (2) “registered ship” means a ship registered in a register of shipping established and maintained under the law of any country or territory.

Ships which are not qualifying ships

153

(1) A ship is not a qualifying ship if the primary use to which ships of the same kind as that ship are put—

(a) by the persons who own them, or

(b) by others to whom they are made available,

is use for sport or recreation.

(2) A ship is not a qualifying ship at any time when it is an offshore installation.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Further registration requirement

154

(1) If—

(a) a person (“A”) has incurred expenditure on the provision of a ship, and

(b) there is a time in the qualifying period, but more than 3 months after the beginning of that period, when the ship is not registered in a relevant register,

the ship is not a qualifying ship after that time.

(2) The qualifying period is—

(a) the period of 3 years beginning with the time when the ship is first brought into use for the purposes of a qualifying activity carried on—

(i) by A, or

(ii) if earlier, by a person connected with A, or

(b) if shorter, the period beginning with that time and ending when neither A nor a person connected with A owns the ship.

(3) In determining the qualifying period for the old ship, a qualifying activity carried on at any time by a person (“B”) is taken to be carried on at that time by a person connected with A if—

(a) it is subsequently carried on by A or a person connected with A, and

(b) the only changes in the persons carrying it on between the time that B does so and the time that A or a person connected with A does so are changes—

(i) which do not involve all of the persons carrying it on before the changes permanently ceasing to carry it on, or

(ii) in respect of which the qualifying activity is treated as continuing under section 948 of CTA 2010.

(4) In this section “relevant register” means a register of shipping established and maintained—

(a) under the laws of any part of the British Islands, or

(b) under the laws of any country or territory which, at a time in the qualifying period for the ship, is an EEA State or a colony.

(5) “EEA State” means a State which is a contracting party to the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 as adjusted by the Protocol signed at Brussels on 17th March 1993 (except that for the period before the Agreement came into force in relation to Liechtenstein it does not include the State of Liechtenstein).

Deferment of balancing charges: supplementary provisions

Change in the persons carrying on the qualifying activity

155

(1) This section applies if—

(a) a person is carrying on the qualifying activity previously carried on by the shipowner, and

(b) the only changes in the persons carrying on the qualifying activity since the shipowner carried it on are changes—

(i) which do not involve all of the persons carrying it on before the changes permanently ceasing to carry it on, or

(ii) in respect of which the qualifying activity is treated as continuing under section 948 of CTA 2010.

(2) For the purposes of the deferment rules—

(a) expenditure incurred by a person mentioned in subsection (1)(a) for the purposes of the qualifying activity is to be treated as incurred by the shipowner, and

(b) in relation to the giving of any notice, a reference to the shipowner is to be read as a reference to the person carrying on the qualifying activity when the notice is given or is required to be given.

Connected persons

156

(1) For the purposes of the deferment rules a person (“B”) is connected with another person (“A”) at any time if, at that time—

(a) B is connected (in the sense given in section 575) with A,

(b) B is carrying on a qualifying activity previously carried on by A and the condition in subsection (2) is met, or

(c) B is connected (in the sense given in section 575) with a person who is carrying on a qualifying activity previously carried on by A and the condition in subsection (2) is met.

(2) The condition is that the only changes in the persons carrying on the qualifying activity since A carried it on are changes—

(a) which do not involve all of the persons carrying it on before the changes permanently ceasing to carry it on, or

(b) in respect of which the qualifying activity is treated as continuing under section 948 of CTA 2010.

(3) If expenditure is incurred by a person who is not the shipowner, the persons connected with him at any time include any person connected with the shipowner at that time as a result of subsection (1).

Further provisions

Adjustment of assessments etc.

157

(1) All such assessments and adjustments of assessments are to be made as are necessary to give effect to this Chapter.

(2) Subsection (1) does not apply for the purposes of section 145 (see instead section 145(4) and (5)).

Members of same group

158

For the purposes of this Chapter two companies are members of the same group at any time if they would be treated as members of the same group of companies at that time for the purposes of Part 5 of CTA 2010 (group relief).

Chapter 13 — Provisions affecting mining and oil industries

Expenditure connected with mineral extraction trades

Meaning of “mineral extraction trade” etc.

159

In this Chapter—

Expenditure treated as incurred for purposes of mineral extraction trade

160

(1) For the purposes of this Part, expenditure incurred by a person—

(a) on the provision of plant or machinery for mineral exploration and access, and

(b) in connection with a mineral extraction trade carried on by him,

is to be treated as incurred for the purposes of that trade.

(2) Subsection (1) does not apply to expenditure if—

(a) when it is incurred, the person is carrying on the trade but the trade is not at that time a mineral extraction trade, or

(b) when it is incurred, the person has not begun to carry on the trade and, when the person begins to carry on the trade, the trade is not a mineral extraction trade.

(3) Section 577(2) (references to commencement etc of a trade) does not apply to subsection (2).

Pre-trading expenditure on mineral exploration and access

161

(1) This section applies if a person—

(a) incurs pre-trading expenditure on the provision of plant or machinery for the purposes of mineral exploration and access, and

(b) owns the plant or machinery on the first day of trading.

But this is subject to subsection (5).

(2) The person is to be treated for the purposes of this Part as if he had—

(a) sold the plant or machinery immediately before the first day of trading, and

(b) on that first day incurred capital expenditure on the provision of the plant or machinery for the purposes of the trade.

(3) The amount of the capital expenditure that the person is to be treated as having incurred is an amount equal to—

(a) the pre-trading expenditure, or

(b) if there has been an actual sale and re-acquisition before the first day of trading, the amount last incurred on the provision of the plant or machinery.

(4) In this section—

(a) “pre-trading expenditure” means capital expenditure incurred before the day on which a person begins to carry on a trade that is a mineral extraction trade, but only if there is no prior time when the person carried on that trade and the trade was not a mineral extraction trade,

(b) “the first day of trading”, in relation to a person’s pre-trading expenditure, means the day on which that person begins to carry on the mineral extraction trade.

(4A) Section 577(2) (references to commencement etc of a trade) does not apply to subsection (4)(a).

(5) This section does not apply if the plant or machinery on which the pre-trading expenditure was incurred is sold, demolished, destroyed or abandoned before the first day of trading (but see section 402 (mineral extraction allowances: pre-trading expenditure on plant or machinery)).

Provisions relating to ring fence trades

Ring fence trade a separate qualifying activity

162

(1) If a person carries on a ring fence trade, it is a separate qualifying activity for the purposes of this Part.

(2) In this Chapter “ring fence trade” means activities which—

(a) fall within the definition of “oil-related activities” in section 16(2) of ITTOIA 2005 or section 274 of CTA 2010, and

(b) constitute a separate trade (whether as a result of section 16(1) of ITTOIA 2005 or section 16(1) of ITTOIA 2005 or section 279 of CTA 2010 or otherwise).

Meaning of “abandonment expenditure”

163

(1) Expenditure is “general decommissioning expenditure” for the purposes of sections 164 and 165 if

(a) the conditions in subsections (3), (3A) and (4) are met, ...

(aa) the condition in subsection (3AB) is met, or

(b) the conditions in subsections (3B) and (4) are met.

(2) But paragraphs (a) and (b) of subsection (1) are subject to subsections (4ZA) to (4ZC).

(3) The expenditure must have been incurred on decommissioning plant or machinery—

(a) which has been brought into use wholly or partly for the purposes of a ring fence trade, and

(b) which—

(i) is, or forms part of, an offshore installation or a submarine pipeline, or

(ii) when last in use for the purposes of a ring fence trade, was, or formed part of, such an installation or pipeline.

(3A) The expenditure must have been incurred wholly or substantially ...—

(a) in complying with an approved abandonment programme,

(b) in complying with a condition to which the approval of an abandonment programme is subject, ...

(i) before the approval of an abandonment programme, and

(ii) in relation to the decommissioning of the plant or machinery, or

(d) otherwise in anticipation of a decommissioning measure.

(3AA) For the purposes of subsection (3A)(d), expenditure is incurred otherwise in anticipation of a decommissioning measure if it is incurred—

(a) in preserving plant or machinery, the reuse or demolition of which it is reasonable to anticipate will be authorised or required by an approved abandonment programme, a condition to which the approval of such a programme will be subject or a condition or agreement described in subsection (3A)(c), or

(b) in doing something else which it is reasonable to anticipate will be authorised or required by an approved abandonment programme, a condition to which the approval of such a programme will be subject or a condition or agreement described in subsection (3A)(c).

(3AB) The condition in this subsection is met if—

(a) the expenditure was incurred—

(i) in preparing an abandonment programme for approval, or

(ii) in preparing for the imposition of a condition by, or the making of an agreement with, the Secretary of State before the approval of an abandonment programme, and

(b) it is reasonable to anticipate that the approved abandonment programme, the condition imposed or the agreement made, as the case may be, will wholly or mainly relate to the decommissioning of plant or machinery to which subsection (3) applies.

(3B) The expenditure must have been incurred on decommissioning plant or machinery—

(a) which has been brought into use wholly or partly for the purposes of a ring fence trade, and

(b) which—

(i) is, or forms part of, a relevant onshore installation, or

(ii) when last in use for the purposes of a ring fence trade, was, or formed part of, such an installation.

(3C) In subsection (3B) “relevant onshore installation” means any building or structure which—

(a) falls within any of sub-paragraphs (ii) to (iv) of section 3(4)(c) of OTA 1975,

(b) is not an offshore installation, and

(i) the boundaries of the territorial sea of the United Kingdom, or

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

(4) The plant or machinery must not be replaced.

(4ZA) An amount of general decommissioning expenditure determined in accordance with subsection (1)(a) or (b) is to be reduced under subsection (4ZB) if it appears that the decommissioned plant and machinery—

(a) was not brought into use wholly for qualifying purposes, or

(b) has, at any time since it was brought into use, not been used wholly for qualifying purposes.

(4ZB) The amount determined in accordance with subsection (1)(a) or (b) is to be reduced to an amount which is just and reasonable having regard to the relevant circumstances.

(4ZC) The relevant circumstances include, in particular, the extent to which the decommissioned plant and machinery has not been used for qualifying purposes.

(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.

(4D) In this section a reference to use for qualifying purposes is a reference to—

(a) use for the purposes of any ring fence trade of any person, or

(b) other use in—

(i) the United Kingdom,

(ii) the territorial sea of the United Kingdom, or

(iii) an area designated under section 1(7) of the Continental Shelf Act 1964,

except use wholly or partly in connection with an oil field (within the meaning given by section 12(2) of the Oil Taxation Act 1975).

(5) In this section—

(a) “oil” and “oil field” have the same meaning as in Part I of OTA 1975, and

(b) “abandonment programme”, “approval” and “approved” (in relation to an abandonment programme), ... “offshore installation” and “submarine pipeline” have the same meaning as in Part IV of the Petroleum Act 1998 (c. 17).

Abandonment expenditure incurred before cessation of ring fence trade

164

(1) A person (“R”) carrying on a ring fence trade may elect to have a special allowance made to R for a chargeable period (the “relevant chargeable period”) if conditions A and B are met.

(1A) Condition A is that one or more of these paragraphs applies—

(a) R incurs general decommissioning expenditure in the relevant chargeable period in respect of decommissioning carried out in that period;

(b) R incurs general decommissioning expenditure in the relevant chargeable period in respect of decommissioning carried out in a previous chargeable period;

(c) R incurred general decommissioning expenditure in a previous chargeable period in respect of decommissioning that has not been carried out until the relevant chargeable period.

(1B) Condition B is that the plant or machinery concerned has been brought into use for the purposes of the ring fence trade.

(1C) If the plant or machinery concerned is incidentally-acquired redundant plant or machinery (see subsection (1D)), it is to be regarded for the purposes of this section as having been brought into use for the purposes of the ring fence trade.

(1D) Plant or machinery is “incidentally-acquired redundant plant or machinery” if—

(a) it has not been brought into use for the purposes of the ring fence trade,

(b) it forms part of a relevant installation (see subsection (1E)) which has been brought into use for the purposes of the ring fence trade,

(c) at the time R acquired an interest in the relevant installation, the plant or machinery was not being used for any purposes, and

(d) the acquisition of the interest in the plant or machinery was merely incidental to the acquisition of the interest in the relevant installation.

(1E) For the purposes of subsection (1D)—

“relevant installation” means—an offshore installation,a submarine pipeline, ora relevant onshore installation;

“offshore installation” and “submarine pipeline” have the same meaning as in Part 4 of the Petroleum Act 1998;

“relevant onshore installation” has the meaning given by section 163(3C).

(2) The election—

(a) must be made by notice to an officer of Revenue and Customs no later than 2 years after the end of the relevant chargeable period, and

(b) is irrevocable.

(3) The election must specify—

(a) the general decommissioning expenditure to which it relates, ...

(aa) the chargeable period in which the expenditure was incurred,

(ab) the decommissioning to which the expenditure relates,

(ac) the chargeable period in which the decommissioning was carried out, and

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

(4) If a person makes an election under this section—

(a) he is entitled to a special allowance ... for the relevant chargeable period, and

(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.

(5) The amount of the special allowance for the relevant chargeable period is equal to the amount of the general decommissioning expenditure to which the election relates.

(5A) But subsection (5) is subject to subsections (5B) and (6) and sections 165A to 165E.

(5B) If an amount of general decommissioning expenditure to which the election relates is disproportionate to the relevant decommissioning carried out in the specified decommissioning period then, for the purposes of this section, the election is to be taken to specify only the allowable expenditure.

(5C) The application of subsection (5B) to an amount of general decommissioning expenditure does not prevent a person from making an election under this section for a subsequent chargeable period specifying the non-allowable expenditure.

(5D) In subsections (5B) and (5C)—

“allowable expenditure”, in relation to general decommissioning expenditure, means the amount of the expenditure that is proportionate to the relevant decommissioning carried out in the specified decommissioning period;

“non-allowable expenditure”, in relation to general decommissioning expenditure, means so much of that expenditure as is not allowable expenditure;

“relevant decommissioning”, in relation to general decommissioning expenditure, means the decommissioning to which the expenditure relates;

“specified decommissioning period”, in relation to relevant decommissioning, means the chargeable period specified in the election as the period in which the decommissioning was carried out;

“specified expenditure period”, in relation to general decommissioning expenditure, means the chargeable period specified in the election as the period in which the expenditure was incurred.

(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).

Abandonment expenditure within 3 years of ceasing ring fence trade

165

(1) This section applies if—

(a) a person (“the former trader”) has ceased to carry on a ring fence trade,

(b) the decommissioning condition is met in relation to a notional accounting period, and

(c) the general decommissioning expenditure is not otherwise deductible in calculating the income of the former trader for any tax purpose.

(1A) The decommissioning condition is met in relation to a notional accounting period (the “relevant period”) if one or more of these paragraphs applies—

(a) the former trader incurs general decommissioning expenditure in the relevant period in respect of decommissioning carried out in that period,

(b) the former trader incurs general decommissioning expenditure in the relevant period in respect of decommissioning carried out in—

(i) a previous notional accounting period, or

(ii) a chargeable period falling before the first notional accounting period, and

(i) a previous notional accounting period, or

(ii) a chargeable period falling before the first notional accounting period,

in respect of decommissioning that has not been carried out until the relevant period.

(1B) “Notional accounting period” means each of the following periods—

(a) the period that—

(i) begins with the day following the last day on which the former trader carried on the ring fence trade, and

(ii) ends with the day on which the first termination event subsequently occurs, and

(b) each period that—

(i) begins with the day following the last day of a period determined under paragraph (a) or this paragraph, and

(ii) ends with the day on which the first termination event subsequently occurs;

but there are to be no notional accounting periods after the end of the post-cessation period.

(1C) “Termination event”, in relation to a notional accounting period, means each of the following—

(a) the end of the period of 12 months beginning with the first day of the notional accounting period,

(b) the occurrence of an accounting date of the former trader or, if there is a period for which the former trader does not make up accounts, the end of that period (but see subsections (6A) and (6B)), and

(2) “The post-cessation period” means the period that—

(a) begins with the day following the last day on which the former trader carried on the ring fence trade, and

(b) ends with the day on which condition A and condition B are both met (or, if they are met on different days, the later of those days).

(2A) Condition A is met if each approved abandonment programme that relates wholly or partly to relevant plant and machinery has ceased to have effect.

(2B) Condition B is met if the Secretary of State is satisfied that no other abandonment programmes that relate wholly or partly to relevant plant and machinery will be approved.

(2C) For the purposes of condition A, an approved abandonment programme ceases to have effect if and when—

(a) the programme has been carried out to the satisfaction of the Secretary of State, or

(b) approval of the programme has been withdrawn.

(3) If this section applies in relation to a notional accounting period—

(a) an amount equal to the relevant decommissioning cost for that period, or the aggregate of all the relevant decommissioning costs for that period, is allocated to the appropriate pool for the chargeable period in which the former trader ceased to carry on the ring fence trade, and

(b) where any of the general decommissioning expenditure was incurred on the demolition of plant or machinery,any amount received within the post-cessation period for the remains of the plant or machinery does not constitute income of the former trader for any tax purpose.

(3A) Subsection (3) is subject to sections 165A to 165E.

(4) In subsection (3)—

“the appropriate pool” means the pool to which the expenditure on the demolished plant or machinery has been allocated, and

“relevant decommissioning cost”, for a notional accounting period, means the amount by which general decommissioning expenditure falling within paragraph (a), (b) or (c) of subsection (1A) in relation to that period exceeds any amounts received before or during that period for the remains of any plant or machinery on whose demolition any of the general decommissioning expenditure was incurred.

(4A) General decommissioning expenditure is to be disregarded for the purposes of this section if the expenditure is incurred in decommissioning plant and machinery at a time—

(a) after an abandonment programme relating wholly or partly to the plant and machinery has had its approval withdrawn, and

(b) when no other abandonment programme relating wholly or partly to the plant and machinery is approved.

(4B) If an amount of general decommissioning expenditure is disproportionate to the relevant decommissioning carried out in the decommissioning period then, for the purposes of this section, only the allowable expenditure is to be taken to have been incurred in the expenditure period.

(4C) The application of subsection (4B) to an amount of general decommissioning expenditure does not prevent the non-allowable expenditure from being taken into account under this section in relation to a subsequent notional accounting period.

(4D) In subsections (4B) and (4C)—

“allowable expenditure”, in relation to general decommissioning expenditure, means the amount of the expenditure that is proportionate to the relevant decommissioning carried out in the decommissioning period;

“decommissioning period”, in relation to relevant decommissioning, means the notional accounting period or chargeable period in which the decommissioning was carried out;

“expenditure period”, in relation to general decommissioning expenditure, means the notional accounting period or chargeable period in which the expenditure was incurred;

“non-allowable expenditure”, in relation to general decommissioning expenditure, means so much of that expenditure as is not allowable expenditure;

“relevant decommissioning”, in relation to general decommissioning expenditure, means the decommissioning to which the expenditure relates.

(5) All such adjustments, by discharge or repayment of tax or otherwise, are to be made as are necessary to give effect to this section.

(6) For the purposes of this section, it does not matter if approval of an abandonment programme that relates to relevant plant and machinery (including approval of the first such programme) is given before or after the start of the post-cessation period.

(6A) If the former trader—

(a) carries on more than one trade,

(b) makes up accounts of any of them to different dates, and

subsection (1C)(b) applies with reference to the accounting date of such one of the trades as the former trader may determine.

(6B) If the Commissioners for Her Majesty's Revenue and Customs are of the opinion, on reasonable grounds, that a date determined by the former trader for the purposes of subsection (6A) is inappropriate, the Commissioners may by notice direct that the accounting date of such other of the trades referred to in that subsection as appears to the Commissioners to be appropriate is to be used instead.

(7) In this section—

“abandonment programme” means an abandonment programme under Part 4 of the Petroleum Act 1998;

“approved”, in relation to an abandonment programme, means approved or revised under Part 4 of the Petroleum Act 1998 (and “approval” is to be construed accordingly);

“relevant plant and machinery” means plant and machinery—which has been brought into use for the purposes of the ring fence trade that has ceased, andwhich, when last in use for the purposes of that ring fence trade, was, or formed part of, an offshore installation or submarine pipeline;and for this purpose “offshore installation” and “submarine pipeline” have the same meaning as in Part 4 of the Petroleum Act 1998;

“withdrawn”, in relation to approval of an abandonment programme, means withdrawn under Part 4 of the Petroleum Act 1998.

Transfers of interests in oil fields: anti-avoidance

166

(1) This section applies if—

(a) there is, for the purposes of Schedule 17 to FA 1980, a transfer by a participator in an oil field of the whole or part of his interest in the field, and

(b) as part of the transfer, the old participator disposes of, and the new participator acquires—

(i) plant or machinery used, or expected to be used, in connection with the field, or

(ii) a share in such plant or machinery.

(2) The amount, if any, by which the new participator’s expenditure exceeds the old participator’s disposal value is to be left out of account in determining the new participator’s available qualifying expenditure.

(3) In subsection (2)—

(a) “the new participator’s expenditure” means the expenditure incurred by the new participator on the acquisition of the plant or machinery, and

(b) “the old participator’s disposal value” means the disposal value to be brought into account by the old participator as a result of the disposal of the plant or machinery to the new participator.

(4) In this section—

(a) “oil field” and “participator” have the same meaning as in Part I of OTA 1975,

(b) “the old participator” means the participator whose interest in the oil field is wholly or partly transferred, and

(5) Nothing in this section affects the operation of Chapter 17 (anti-avoidance).

167

(1) Sections 168 to 170 apply if—

(a) a person (“the contractor”) is entitled to an interest in a contract made with, or with the authorised representative of, the government of a country or territory in which oil is or may be produced, and

(b) the contract provides (among other things) for any plant or machinery of a description specified in the contract which—

(i) is provided by the contractor, and

(ii) has an oil-related use under the contract,

to be transferred (immediately or later) to the government or representative.

(2) For the purposes of this section and sections 168 to 170, plant or machinery has an oil-related use if it is used—

(a) to explore for, win access to or extract oil,

(b) for the initial storage or treatment of oil, or

(3) In this section and sections 168 to 170 “oil” has the meaning given by section 556(3).

Expenditure on plant or machinery incurred by contractor

168

(1) This section applies if—

(a) the contractor incurs capital expenditure on the provision of plant or machinery of a description specified in the contract,

(b) the plant or machinery is to have an oil-related use under the contract, for the purposes of a trade of oil extraction carried on by the contractor,

(d) the plant or machinery is transferred to the government or representative in accordance with the contract.

(2) Despite the transfer, the plant or machinery is to be treated for the purposes of this Part as owned by the contractor (and not by any other person) until—

(a) it ceases to be owned by the government or representative, or

(b) it ceases to be used, or held for use, by any person under the contract.

This is subject to section 170(2).

Expenditure on plant or machinery incurred by participator

169

(1) This section applies if—

(a) a person (“the participator”) acquires an interest in the contract from—

(i) the contractor, or

(ii) another person who has acquired it (directly or indirectly) from the contractor,

(b) the participator incurs capital expenditure on the provision of plant or machinery,

(c) the plant or machinery is to have an oil-related use under the contract, for the purposes of a trade of oil extraction carried on by the participator,

(d) the amount of the expenditure is commensurate with the value of the participator’s interest under the contract, and

(e) the plant or machinery is transferred to the government or representative in accordance with the contract.

(2) Despite the transfer, the plant or machinery is to be treated for the purposes of this Part as owned by the participator (and not by any other person) until—

(a) it ceases to be owned by the government or representative, or

(b) it ceases to be used, or held for use, by any person under the contract.

This is subject to section 170(2).

Participator’s expenditure attributable to plant or machinery

170

(1) This section applies if—

(a) a person (“the relevant participator”) acquires an interest in the contract from—

(i) the contractor, or

(ii) another person who has acquired it (directly or indirectly) from the contractor, and

(b) some of the expenditure incurred by the relevant participator to acquire the interest in the contract is attributable to plant or machinery which—

(i) is treated by section 168 as owned by the contractor, or

(ii) is treated by section 169 or subsection (2) as owned by another person (“the other participator”).

(2) The plant or machinery is to be treated for the purposes of this Part as owned by the relevant participator (and not by any other person) until—

(a) it ceases to be owned by the government or representative, or

(b) it ceases to be used, or held for use, by any person under the contract.

This is subject to a later application of this subsection.

(3) The person who, until subsection (2) applies, is treated as owning the plant or machinery is to be treated for the purposes of this Part as if he had disposed of it for a consideration equal to the relevant participator’s expenditure attributable to it.

(4) The relevant participator is to be treated for the purposes of this Part as if—

(a) he had incurred capital expenditure of an amount given by subsection (5), and

(b) he owned the plant or machinery (in accordance with subsection (2)) as a result of having incurred that expenditure.

(5) The amount of that expenditure is—

(a) the amount of the relevant participator’s expenditure attributable to the plant or machinery, or

(b) if less, the disposal value to be brought into account by the contractor or the other participator as a result of subsection (3).

(6) The expenditure attributable to plant or machinery for the purposes of this section is to be determined having regard to what is just and reasonable in the circumstances.

Disposal values on cessation of ownership

171

(1) This section applies if a person treated as owning plant or machinery under section 168(2), 169(2) or 170(2) ceases to be treated as owning it solely as a result of one of those provisions.

(2) If the person receives capital compensation, the disposal value to be brought into account is the amount of the compensation.

(3) If the person does not receive capital compensation, the disposal value to be brought into account is nil.

Chapter 14 — Fixtures

Introduction

Scope of Chapter etc.

172

(1) This Chapter applies to determine entitlement to allowances under this Part in respect of expenditure on plant or machinery that is, or becomes, a fixture.

(2) For the purposes of this Part, ownership of plant or machinery that is, or becomes, a fixture is determined under this Chapter.

(2A) Subsections (1) and (2) are subject to section 172A.

(3) The provisions of this Chapter that treat a person as being the owner of a fixture (see sections 176 to 184 and 193 to 195B) are subject to the provisions of this Chapter which treat a person as ceasing to be the owner of a fixture (see sections 188 to 192A).

(4) References in this Chapter to a person being treated—

(a) as the owner of plant or machinery, or

(b) as ceasing to be the owner of plant or machinery,

are to be read as references to the person being so treated for the purposes of this Part.

(5) This Chapter does not affect any entitlement a person has to an allowance as a result of section 538 (contribution allowances for plant and machinery).

Meaning of “fixture” and “relevant land”

173

(1) In this Chapter “fixture”—

(a) means plant or machinery that is so installed or otherwise fixed in or to a building or other description of land as to become, in law, part of that building or other land, and

(b) includes any boiler or water-filled radiator installed in a building as part of a space or water heating system.

(2) In this Chapter “relevant land”, in relation to a fixture means—

(a) the building or other description of land of which the fixture becomes part, or

(b) in the case of a boiler or water-filled radiator which is a fixture as a result of subsection (1)(b), the building in which it is installed as part of a space or water heating system.

Meaning of “equipment lease” and “lease”

174

(1) In this Chapter “equipment lease” means—

(a) an agreement entered into in the circumstances given in subsection (2), or

(b) a lease entered into under or as a result of such an agreement.

(2) The circumstances are that—

(a) a person incurs capital expenditure on the provision of plant or machinery for leasing,

(b) an agreement is entered into for the lease, directly or indirectly from that person, of the plant or machinery to another person,

(d) the agreement is not an agreement for the plant or machinery to be leased as part of the relevant land.

(3) In this Chapter—

“equipment lessor” means the person from whom (directly or indirectly) the equipment lease provides for the plant or machinery to be leased, and

“equipment lessee” means the person to whom the equipment lease provides for the plant or machinery to be leased.

(4) Except in the context of leasing plant or machinery, any reference in this Chapter to a lease is to—

(a) any leasehold estate in or, in Scotland, lease of, the land (whether in the nature of a head-lease, sub-lease or under-lease), or

(b) any agreement to acquire such an estate or, in Scotland, lease;

and, in relation to such an agreement, “grant” is to be read accordingly.

Meaning of “interest in land”, etc.

175

(1) In this Chapter “interest in land” means—

(a) the fee simple estate in the land or an agreement to acquire such an estate,

(b) in relation to Scotland, the interest of the owner or an agreement to acquire such an interest,

(d) an easement or servitude or an agreement to acquire an easement or servitude, and

(e) a licence to occupy land.

(2) If an interest in land is—

(a) conveyed or assigned by way of security, and

(b) subject to a right of redemption,

the person with the right of redemption is treated for the purposes of this Chapter as having that interest, and not the creditor.

Persons who are treated as owners of fixtures

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

176

(1) If—

(a) a person incurs capital expenditure on the provision of plant or machinery for the purposes of a qualifying activity carried on by him,

(b) the plant or machinery becomes a fixture, and

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