Finance Act 1989

Section 121.

SCHEDULE 13 Capital Allowances: Miscellaneous Amendments

Buildings etc. bought after use

1 (1) In the [1968 c. 3.] Capital Allowances Act 1968 (“the 1968 Act”) after section 5 (buildings and structures bought unused) there shall be inserted—

“5A Buildings and structures bought after use

(1) This section applies where—

(a) expenditure is incurred on the construction of a building or structure by a person carrying on a trade which consists, in whole or part, in the construction of buildings or structures with a view to their sale, and

(b) after the building or structure has been used, he sells the relevant interest in it in the course of that trade or, as the case may be, of that part of that trade.

(2) Where this section applies, this Chapter shall have effect in relation to the person who buys the interest as if—

(a) the original expenditure had been capital expenditure,

(b) all appropriate writing-down allowances had been made to the person incurring it, and

(c) all appropriate balancing allowances or charges had been made on the occasion of the sale.”

(2) This paragraph shall have effect in any case where the purchase price payable on any sale becomes payable on or after the day on which this Act is passed.

Roads on industrial estates

2 (1) In section 7 of the 1968 Act (definition of “industrial building or structure”), after subsection (3A) there shall be inserted—

“(3B) A road on an industrial estate shall be treated as used for the purposes of a trade which falls within subsection (1) above if the buildings and structures on the estate are used wholly or mainly for such purposes.”

(2) This paragraph shall have effect in relation to any chargeable period or its basis period ending on or after the day on which this Act is passed.

Contributions to expenditure

3 (1) Section 84 of the 1968 Act (under which certain contributions etc. reduce allowable expenditure) shall be amended as follows.

(2) At the end of paragraph (b) of subsection (2) there shall be added the words “and not being expenditure which is allowed to be deducted in computing the profits or gains of a trade, profession or vocation carried on by that person”.

(3) After subsection (2) there shall be inserted—

“(2A) In determining for the purposes of subsection (2)(b) above whether an allowance could be made under the provisions of section 85 below, it shall be assumed that the person by whom expenditure has been or is to be met is within the charge to tax, whether or not that is in fact the case.”

(4) This paragraph shall have effect in relation to expenditure incurred on or after the day on which this Act is passed except in so far as a contribution to the expenditure was made before that day.

4 (1) In section 85 of the 1968 Act (which gives allowances in respect of certain contributions), after subsection (3) there shall be inserted—

“(3A) References in this section, and in Schedule 9 to this Act, to a trade shall be construed as including references to a profession or vocation.”

(2) This paragraph shall have effect in relation to contributions made on or after the day on which this Act is passed.

5 (1) This paragraph applies where allowances are made in respect of a contribution to capital expenditure by virtue of section 85 of the 1968 Act as applied by paragraph 15(6) of Schedule 8 to the [1971 c. 68.] Finance Act 1971.

(2) Where this paragraph applies in relation to a contribution made for the purposes of a trade carried on or to be carried on by the contributor, it shall be assumed for the purposes of section 44 of the Finance Act 1971—

(a) that the contribution was made for the purposes of a trade carried on by the contributor separately from any trade actually carried on by him, and

(b) that the separate trade is discontinued or transferred (in whole or in part) when the trade actually carried on is discontinued or transferred (in whole or in part);

and any allowance or charge which would on those assumptions fall to be made for any chargeable period in the case of the separate trade shall be made for that period in the case of the trade for the purposes of which the contribution was actually made.

(3) References in sub-paragraph (2) above to a trade shall be construed as including references to a profession or vocation.

(4) This paragraph shall have effect in relation to contributions made on or after the day on which this Act is passed.

6 (1) In its application in relation to allowances under Schedule 15 to the [1986 c. 41.] Finance Act 1986 (agricultural land and buildings), Schedule 9 to the 1968 Act shall have effect—

(a) with the omission of paragraph 4, and

(b) as if, in paragraph 3, the references to section 11 of the 1968 Act and to expenditure incurred on the construction of a building or structure were references to paragraph 3 of Schedule 15 to the Finance Act 1986 and to expenditure falling within paragraph 1(1) of that Schedule.

(2) This paragraph shall have effect in relation to contributions made on or after the day on which this Act is passed.

Scientific research

7 (1) In section 91 of the 1968 Act (allowances for expenditure on scientific research), after subsection (1B) there shall be inserted—

“(1C) Subject to subsections (1A) and (1B) above, where a person incurs capital expenditure which is partly within subsection (1) above and partly not, such apportionment of the expenditure shall be made for the purposes of this Part of this Act as may be just.”

(2) This paragraph shall have effect in relation to expenditure incurred on or after the day on which this Act is passed.

8 The amendments made in section 92 of the 1968 Act (assets ceasing to be used for scientific research) by section 63 of the [1985 c. 54.] Finance Act 1985 shall have effect in relation to any case where the relevant event (within the meaning given in section 92(1)) occurs on or after 1st April 1989 (as well as in the cases provided for by section 63(7) where it occurs before that date).

9 (1) In section 94 of the 1968 Act (interpretation of Part II), after subsection (4) there shall be added—

“(4A) Any reference in this Part of this Act to the time when an asset ceases to belong to a person shall, in the case of a sale, be construed as a reference to the time of completion or the time when possession is given, whichever is the earlier.”

(2) This paragraph shall have effect in any case where the sale is effected, or the contract for sale entered into, on or after the day on which this Act is passed.

Hire-purchase, leases etc.

10 (1) In section 45(1) of the [1971 c. 68.] Finance Act 1971 (machinery or plant held by a person under a hire-purchase or similar agreement to be treated as belonging to him), in paragraph (a), after the words “to him” there shall be inserted the words “(and not to any other person)”.

(2) This paragraph shall have effect in relation to capital expenditure incurred under contracts entered into on or after the day on which this Act is passed.

11 In section 46 of the Finance Act 1971 (machinery and plant on lease) after subsection (2) there shall be inserted—

“(2A) In this section “lease” includes an agreement for a lease where the term to be covered by the lease has begun, and any tenancy, but does not include a mortgage, and “lessee” and other cognate expressions shall be construed accordingly.”

12 (1) In section 48 of the Finance Act 1971, after subsection (4) (which provides for the manner of making capital allowances and imposes restrictions in certain cases where the machinery or plant is on lease), there shall be inserted—

“(4A) Section 403(3) of the Taxes Act (group relief) shall not apply to an allowance if or to the extent that, by virtue of the proviso to subsection (4) above, subsection (3) of the said section 74 does not apply to it.”

(2) This paragraph shall have effect in any case where the accounting period of the surrendering company (within the meaning of Chapter IV of Part X of the Taxes Act 1988) ends on or after the day on which this Act is passed.

Gifts of machinery or plant

13 (1) Paragraph 7 of Schedule 8 to the Finance Act 1971 (effect of use after user not attracting capital allowances, or after receipt by way of gift) shall be amended as follows.

(2) In sub-paragraph (1) the words “Subject to sub-paragraph (2) below” and the words from “by reason of” to the end of paragraph (b) shall cease to have effect.

(3) After sub-paragraph (1A) there shall be inserted—

“(1B) Where a person is treated as having incurred capital expenditure on the provision of machinery or plant by virtue of sub-paragraph (1)(b) above, he shall for the purposes of paragraph 3 above be treated as having done so by way of purchase from the donor.”

(4) This paragraph shall have effect in cases where machinery or plant is brought into use on or after the day on which this Act is passed.

Allowances for ships

14 (1) In paragraph 8A of Schedule 8 to the [1971 c. 68.] Finance Act 1971 (which enables shipowners to elect to defer allowances in certain cases), in sub-paragraph (1)(b), for the words from “the expenditure” to “falling” there shall be substituted the words “the ship is not provided for leasing or letting on charter otherwise than by way of lease, or is so provided but it appears that the ship will be used in the requisite period (within the meaning of section 64 of the [1980 c. 48.] Finance Act 1980) for a qualifying purpose (within the meaning of that section) and will not at any time in that period be used for any other purpose, and the expenditure does not fall”.

(2) This paragraph shall have effect in relation to expenditure incurred on or after the day on which this Act is passed.

15 (1) In section 58 of the [1985 c. 54.] Finance Act 1985 (extension of first-year allowances to ships which are not new), after subsection (2) there shall be added—

“(3) In consequence of subsection (1) above—

(a) no disclaimer or claim under section 41(3) of the Finance Act 1971 may be made in respect of any ship,

(b) section 66(7) of the Finance Act 1980 and paragraph 3 of Schedule 11 to the [1982 c. 39.] Finance Act 1982 shall have effect with the omission of the word “new” in each place where it occurs, and

(c) section 59(4)(c) and (6)(c) of the [1984 c. 43.] Finance Act 1984 shall have effect with the omission of the word “new”.”

(2) Paragraph (a) of section 58(3) of the Finance Act 1985 shall have effect in relation to disclaimers and claims made on or after the day on which this Act is passed, paragraph (b) of that subsection shall have effect in any case where the requisite period begins on or after that day and paragraph (c) of that subsection shall come into force on that day.

Sales etc. and succession to trades between connected persons

16 (1) In paragraph 13 of Schedule 8 to the Finance Act 1971 (successions to trades between connected persons), after sub-paragraph (3) there shall be inserted—

“(3A) Section 48(1) of the [1968 c. 3.] Capital Allowances Act 1968 and section 65(5) of the Finance Act 1980 shall not apply in any case where an election is made under this paragraph.”

(2) This paragraph shall have effect in relation to successions occurring on or after the day on which this Act is passed.

17 In section 68(4) of the [1972 c. 41.] Finance Act 1972 (which modifies the restrictions on allowances imposed by paragraph 3 of Schedule 8 to the [1972 c. 41.] Finance Act 1971 in the case of sales etc. between connected persons) for paragraphs (b) and (c) there shall be substituted—

“(b) where capital expenditure was incurred by the seller on the provision of the machinery or plant, the amount of that expenditure;

(c) where capital expenditure was incurred by any person connected with the seller on the provision of the machinery or plant, the amount of the expenditure incurred by that person.”

Leased assets

18 In section 73(5) of the [1980 c. 48.] Finance Act 1980 (application of sections 64 to 72 to activities other than trades), for the words “first-year” there shall be substituted the words “writing-down”.

19 In Schedule 11 to the [1982 c. 39.] Finance Act 1982, in paragraph 4(3), for the reference to section 243(2) of the Taxes Act 1988 there shall be substituted a reference to section 343(2).

Dwelling-houses

20 (1) In paragraph 4(5)(c) of Schedule 12 to the Finance Act 1982 (application of section 78 of and Schedule 7 to the 1968 Act to certain sales of dwelling-houses), for the words “are at the time of the sale” there shall be substituted the words “at the time of the sale are or at any earlier time were”.

(2) This paragraph shall have effect in any case where the time of the sale referred to in paragraph 4(5)(c) is after 14th January 1989.

Short-life assets

21 (1) In section 57(6) of the [1985 c. 54.] Finance Act 1985 (election for certain machinery or plant to be treated as short-life assets)—

(a) for the words “the short-life asset” there shall be substituted the words “a short-life asset provided for leasing”, and

(b) in paragraph (b)—

(i) after the word “expenditure”, where it first appears, there shall be inserted the words “in respect of the notional trade”,

(ii) for the words following “1980)” there shall be substituted the words “be, or be added to, the trader’s qualifying expenditure for that chargeable period.”

(2) The amendment made by sub-paragraph (1)(b)(i) above is to section 57(6) of the Finance Act 1985 as it has effect as amended by section 57(6) of the [1986 c. 41.] Finance Act 1986 and as it has effect by virtue of section 57(7) of that Act and the amendment made by sub-paragraph (1)(b)(ii) above is to section 57(6) of the Finance Act 1985 as it has effect by virtue of section 57(7) of the Finance Act 1986.

(3) This paragraph shall have effect in relation to any chargeable period or its basis period ending on or after the day on which this Act is passed.

22 (1) In Schedule 15 to the Finance Act 1985 (machinery and plant excluded from treatment as short-life assets), for paragraph 8 (leased assets) there shall be substituted—

“8. Machinery or plant provided for leasing, except—

(a) machinery or plant which it appears will be used in the requisite period (within the meaning of section 64 of the Finance Act 1980) for a qualifying purpose (within the meaning of that section) and will not at any time in that period be used for any other purpose,

(b) vehicles of the kind mentioned in subsection (12) of that section.”

(2) In paragraph 9 of that Schedule (leased assets) for the words from “1980” to the end there shall be substituted the word “applies”.

(3) This paragraph shall have effect in relation to expenditure incurred on or after the day on which this Act is passed.

Machinery and plant which are fixtures

23 (1) In Schedule 17 to the [1985 c. 54.] Finance Act 1985, in paragraph 9 (disposal value of fixtures) in sub-paragraph (10), for the words “another person” onwards there shall be substituted the words “—

(a) another person incurs expenditure on the provision of the fixture, and

(b) the former owner brings a disposal value into account in accordance with section 44 of the [1971 c. 68.] Finance Act 1971,

there shall be disregarded for material purposes so much (if any) of that expenditure as exceeds that disposal value”.

(2) This paragraph shall have effect in relation to expenditure incurred on or after the day on which this Act is passed.

Mineral extraction

24 (1) In Schedule 13 to the [1986 c. 41.] Finance Act 1986 (new code for minerals), in paragraph 16(5) (unrelieved value for the purposes of qualifying expenditure), for the reference to section 55 of that Act there shall be substituted a reference to Schedule 15.

(2) This paragraph shall have effect in cases where buildings or structures cease, on or after the day on which this Act is passed, permanently to be used for any purpose.

Agricultural land and buildings

25 At the end of section 56(3) of the Finance Act 1986 (interpretation of new provisions relating to agriculture), there shall be added the words “and section 4(11) of and Chapter VI of Part I of the [1968 c. 3.] Capital Allowances Act 1968 shall apply in relation to Schedule 15 as they apply in relation to section 68 of that Act”.

26 In paragraph 7(3) of Schedule 15 to the Finance Act 1986 (amount of writing-down allowances after a balancing event) the words “subject to paragraph 9 below” shall be omitted.

Patent rights

27 (1) Section 521 of the Taxes Act 1988 shall be amended as follows.

(2) In subsection (5) (which limits allowable expenditure in the case of certain sales entered into between connected persons or for the purpose of obtaining an allowance)—

(a) the words “within the terms of section 839” shall be omitted, and

(b) for the words “the disposal value” onwards there shall be substituted the words “the relevant amount determined in accordance with subsection (6) below”.

(3) After subsection (5) there shall be added—

“(6) The relevant amount referred to in subsection (5) above is—

(a) in a case in which, by virtue of subsections (2) to (4) above, a disposal value falls to be brought into account by reason of the sale, an amount equal to that disposal value,

(b) in a case in which no disposal value falls to be brought into account as mentioned in paragraph (a) above, but the seller receives on the sale a capital sum in respect of which he is chargeable to tax in accordance with section 524, an amount equal to that sum,

(c) in any other case, an amount equal to whichever of the following is the smallest—

(i) the price which the rights would have fetched if sold in the open market,

(ii) where capital expenditure was incurred by the seller on acquiring the rights, the amount of that expenditure,

(iii) where capital expenditure was incurred by any person connected with the seller on acquiring the rights, the amount of the expenditure incurred by that person.

(7) Section 839 (connected persons) shall apply for the purposes of this section.”

(4) This paragraph shall have effect in relation to expenditure incurred on or after the day on which this Act is passed.

Exclusion of double allowances

28 (1) Where an allowance is made to any person in respect of capital expenditure under one of the provisions specified in sub-paragraph (4) below—

(a) no allowance shall be made to him under any other of those provisions—

(i) in respect of that expenditure, or

(ii) in relation to the construction, provision or acquisition of any asset to the construction, provision or acquisition of which the first-mentioned allowance relates, and

(b) that expenditure and any expenditure relating to the provision of any asset to the provision of which the first-mentioned allowance relates shall not be taken into account in determining his qualifying expenditure for the purpose of any allowance or charge under section 44 of the [1971 c. 68.] Finance Act 1971.

(2) Where in the case of any person an allowance or charge under that section is made by reference to an amount of qualifying expenditure which took account of a particular amount of capital expenditure, no allowance shall be made to him under any of the provisions specified in sub-paragraph (4) below—

(a) in respect of that capital expenditure, or

(b) in relation to the provision of any asset if that capital expenditure related to the provision of that asset.

(3) In this paragraph—

• “asset” means asset of any kind, including a building or structure, and

• “capital expenditure” includes any contribution to capital expenditure,

and references to the provision of an asset include references to its construction or acquisition.

(4) The provisions referred to in sub-paragraphs (1) and (2) above are—

(a) Chapter I of Part I of the 1968 Act (industrial buildings and structures),

(b) Chapter IV of Part I of that Act (dredging),

(c) Chapter V of Part I of that Act (agricultural land and buildings),

(d) Part II of that Act (scientific research),

(e) Schedule 12 to the [1982 c. 39.] Finance Act 1982 (certain let dwelling-houses),

(f) Schedule 13 to the [1986 c. 41.] Finance Act 1986 (mineral extraction),

(g) Schedule 15 to the Finance Act 1986 (agricultural land and buildings).

(5) The following provisions (which are superseded by sub-paragraphs (1) to (4) above) shall cease to have effect—

(a) sections 9(b), 14, 50(2), 67(11) and 93(1) and (2) of the 1968 Act,

(b) paragraph 2 of Schedule 8 to the Finance Act 1971,

(c) paragraph 8 of Schedule 6 to the [1978 c. 42.] Finance Act 1978,

(d) in sections 74(6) and 75(6) of the [1980 c. 48.] Finance Act 1980, the words from the beginning to “and”,

(e) paragraph 11 of Schedule 12 to the [1982 c. 39.] Finance Act 1982, and

(f) section 56(5) of the [1986 c. 41.] Finance Act 1986,

and in section 92(5) of the 1968 Act the words “allowed or” and “balancing allowance or” shall cease to have effect.

(6) This paragraph shall have effect in relation to any chargeable period or its basis period ending on or after the day on which this Act is passed.

Time when expenditure incurred

29 (1) In section 56 of the [1985 c. 54.] Finance Act 1985 (time when capital expenditure is incurred) at the end of subsection (1) there shall be added “and

(g) sections 117 and 118 of the Finance Act 1989.”

(2) This paragraph shall have effect in relation to expenditure incurred on or after 6th April 1989.

30 (1) In section 56(8) of the Finance Act 1985 (preservation of certain provisions under which expenditure is taken to have been incurred later than section 56 provides), for the words “or the [1971 c. 68.] Finance Act 1971” there shall be substituted the words “the Finance Act 1971, Schedule 12 to the Finance Act 1982 or Schedules 13 and 15 to the Finance Act 1986”.

(2) This paragraph shall have effect in relation to any chargeable period or its basis period ending on or after the day on which this Act is passed.