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Capital Allowances Act 2001


Schedule 3: Transitionals and savings

2051.Provisions of only transitional effect are brought together in this Schedule. This is different from the approach taken in CAA 1990. It allows this Act to meet comments from those who responded in consultation that:

  • the effect of provisions in the existing legislation should be maintained in the Act even if there is very little chance of their having practical effect; and

  • shorter and clearer legislation in the main body of the Act helps readers who want to know the treatment of expenditure in periods covered by the Act.

2052.There is nothing in this Schedule to reflect section 18(11) of CAA 1990. See Note 78 in Annex 2.

2053.Sections 39(2)(a) and (8)(a), 40(4)(a) and (b)(ii), 45, 47 and 49 of CAA 1990 (“the old expenditure provisions”) are not reproduced in this Schedule. See Note 77 in Annex 2.

Paragraphs 1 to 7

2054.Paragraph 2 is included to ensure that provisions in the Act which change the law are not subject to the general proposition about continuity.

Paragraph 8

2055.This paragraph allows anyone affected by the minor changes in the law in this Act to elect that those changes do not apply for a chargeable period which started before 1 April 2001 (for corporation tax) or 6 April 2001 (for income tax) and ends after. This allows the Act to be applied as soon as practicable (which is what consultation showed was generally wanted) without imposing changes retrospectively.

2056.Paragraph 8(5) provides two meanings of “the relevant chargeable period”. In general it is a chargeable period which straddles 1 or 6 April. But there is a special rule for contributions. This is because a contribution might, in principle at least, be made in a straddling chargeable period (or an earlier chargeable period) to expenditure which is not incurred until a chargeable period which starts after 1 or 6 April.

Paragraph 24

2057.This paragraph ensures that the further registration requirement for the deferment rules (in section 154) does not apply in respect of ships first brought into use before 21 April 1994.

Paragraph 46 to 51

2058.These paragraphs maintain entitlement to first-year allowances for additional VAT liabilities in respect of plant or machinery within the VAT capital goods scheme. This arises broadly if:

  • there was expenditure on computers which qualified for first-year allowances in the period 1 November 1992 to 31 October 1993 or 2 July 1997 to 1 July 1998;

  • the expenditure was incurred by a partially-exempt business; and

  • the proportion of exempt business changes.

2059.This affects a tiny minority of taxpayers. They will all have had to claim the first-year allowances in accordance with the legislation for the periods in question. The possibility of additional VAT liabilities only arises for up to ten years after the expenditure. So the legislation is both transitory and of only very limited interest.

2060.The same approach is taken to initial allowances for contracts entered into between October 1992 and November 1993 for buildings in enterprise zones. See paragraph 75.

Paragraph 55

2061.This paragraph is based on section 82 of CAA 1990. It provides for expenditure which was:

  • incurred before 6 April 1976; and

  • was not eligible expenditure within section 39 of FA 1976

to be unaffected by the Act.

2062.The type of expenditure that is involved relates back to before the introduction of pooling in FA 1971. Expenditure could not be pooled under the FA 1971 provisions if it was incurred before 27 October 1970. In 1976, remaining expenditure which was still not pooled could be pooled but an exception was made for some types of expenditure, broadly those things that would be in single asset pools.

2063.In CAA 1990 the position was preserved by section 82 of CAA 1990. This disapplied CAA 1990 and all its repeals for this expenditure so that it continued to be treated as before, without being pooled.

2064.It is impossible to say whether any of these pools are still in existence and it is equally impossible to say that there are none. This paragraph therefore preserves the position.

Paragraph 88

2065.This is based on section 119 of CAA 1990 and deals with the transition from MOWA in 1986. Its principal effect now is to allow recapture under Part 5 of excessive relief on expenditure incurred before 1 April 1986 even where some or all of that relief was given under MOWA.

Paragraph 94

2066.This paragraph is based on section 522(2) and (7) of ICTA and section 146(3) of CAA 1990. It provides writing-down allowances for expenditure on the purchase of patent rights incurred before 1 April 1986.

2067.Subparagraph (2) preserves the effect of section 161(3) of CAA 1990. See Note 74 in Annex 2.

Paragraph 98

2068.This paragraph is based on section 523(4) of ICTA. It provides a reduced writing-down allowance on pre-1 April 1986 expenditure.

2069.Subparagraph (3) is new. It provides that the reduced writing-down allowance is proportionately increased or reduced if the chargeable period for which it is given is more or less than a year. See Change 66 in Annex 1.

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