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PART 2 continued CHAPTER 12 continued
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.
(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);
(c) the amount which is, or is expected to be, the amount of expenditure on new shipping incurred—
(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 385 or 393 of ICTA (losses) are to be disregarded.
(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—
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, and
FYA 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.
(1) The shipowner may, by notice to the Inland Revenue, 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.
(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.
(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 the Inland Revenue 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.
(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.
(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.
(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 the Inland Revenue, 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 the Inland Revenue.
(5) Subsection (4) applies in spite of any limitation on the time for making assessments.
(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
(c) the expenditure is allocated to a single ship pool.
(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.
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
(c) any transaction in such a series,
was to secure the deferment of a balancing charge under section 135.
(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
(c) section 107 applies in relation to the expenditure (overseas leasing).
(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.
(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.
(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.
(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.
(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—
(a) it is an offshore installation, or
(b) it would be such an installation if the activity for which it is to be established or maintained were carried on in or under controlled waters.
(3) “Offshore installation” and “controlled waters” have the same meaning as in the Mineral Workings (Offshore Installations) Act 1971 (c. 61).
(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 in respect of which, under section 113(2) or 343(2) of ICTA, the qualifying activity is not treated as having been discontinued.
(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).
(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 in respect of which, under section 113(2) or 343(2) of ICTA, it is not treated as having been discontinued.
(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.
(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 839 of ICTA) 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 839 of ICTA) 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 in respect of which, under section 113(2) or 343(2) of ICTA, the qualifying activity is not treated as having been discontinued.
(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).
(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)).
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 Chapter IV of Part X of ICTA (group relief).
In this Chapter—
“mineral extraction trade”, and
“mineral exploration and access”
have the same meaning as in Part 5 (mineral extraction allowances).
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.
(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 mineral extraction trade, and
(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.
(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)).
(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 any of paragraphs (a) to (c) of section 492(1) of ICTA (oil extraction activities, the acquisition, enjoyment or exploitation of oil rights, etc.), and
(b) constitute a separate trade (whether as a result of section 492(1) of ICTA or otherwise).
(1) In sections 164 and 165 “abandonment expenditure” means expenditure which meets the requirements in subsections (2) to (4).
(2) The expenditure must have been incurred—
(a) for the purposes of, or in connection with, the closing down of an oil field or of any part of an oil field, and
(b) on the demolition of plant or machinery—
(i) which has been brought into use for the purposes of a ring fence trade, and
(ii) which is, or forms part of, an offshore installation or a submarine pipeline.
(3) The demolition of the plant or machinery must be carried out, wholly or substantially, to comply with—
(a) an abandonment programme, or
(b) any condition to which the approval of an abandonment programme is subject.
(4) The plant or machinery must not be replaced.
(5) In this section—
(a) “oil field” has the same meaning as in Part I of OTA 1975, and
(b) “abandonment programme”, “offshore installation” and “submarine pipeline” have the same meaning as in Part IV of the Petroleum Act 1998 (c. 17).
(1) If a person carrying on a ring fence trade incurs abandonment expenditure, he may elect to have a special allowance made to him.
(2) The election—
(a) must be made by notice to the Inland Revenue no later than 2 years after the end of the chargeable period in which the abandonment expenditure is incurred, and
(b) is irrevocable.
(3) The election must specify—
(a) the abandonment expenditure to which it relates, and
(b) any amounts received for the remains of the plant or machinery in question.
(4) If a person makes an election under this section—
(a) he is entitled to a special allowance, of an amount equal to the net abandonment cost, for the chargeable period in which the abandonment expenditure is incurred, and
(b) section 26(3) (net cost of demolition added to existing pool where plant or machinery not replaced) does not apply.
(5) “The net abandonment cost” means the amount by which the abandonment expenditure to which the election relates exceeds any amounts received for the remains of the plant or machinery.
(1) This section applies if—
(a) a person (“the former trader”) has ceased to carry on a ring fence trade,
(b) the former trader incurs abandonment expenditure on the demolition of plant or machinery within the post-cessation period, and
(c) the abandonment expenditure is not otherwise deductible in calculating the income of the former trader for any tax purpose.
(2) “The post-cessation period” means the period of 3 years immediately following the last day on which the former trader carried on the ring fence trade.
(3) If this section applies—
(a) an amount equal to the relevant abandonment cost 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) 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.
(4) In subsection (3)—
“the appropriate pool” means the pool to which the expenditure on the demolished plant or machinery has been allocated, and
“the relevant abandonment cost” means the amount by which the abandonment expenditure exceeds any amounts received within the post-cessation period for the remains of the plant or machinery.
(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.
Capital Allowances Act 2001