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Capital Allowances Act 2001


78.This Part provides for plant and machinery allowances. These can be first-year allowances, writing-down allowances or balancing allowances. It also provides for balancing charges.

79.Chapters 1 to 3 set out provisions which decide if a person is in a position to claim allowances. Chapter 1 gives first the general rule that a person must have a qualifying activity and qualifying expenditure. It also gives the general rule as to what is qualifying expenditure and some common additional ways a person may be treated as having incurred it. Chapter 2 defines qualifying activities. Chapter 3 makes more detailed provisions as to what is and is not qualifying expenditure.

80.Chapter 4 identifies expenditure which gives entitlement to first-year allowances. This is called first-year qualifying expenditure.

81.Chapter 5 deals with entitlement to first-year allowances, writing-down allowances and balancing allowances; and with liability to balancing charges. Before writing-down allowances can be claimed, qualifying expenditure must be allocated to a pool. Entitlement to allowances or liability to charges then depends on the total amount in the pool. There are separate pools for each qualifying activity. Within each qualifying activity there may be a main pool; class pools for long-life assets and for assets leased outside the UK; and a number of single asset pools. Figure 1 summarises the various pools.

82.Chapters 6 to 16 make additional provisions for particular types of expenditure and for particular circumstances in which plant or machinery is used or subsidised. They modify the requirements of the earlier Chapters. Chapters 8 to 16 require expenditure to be allocated to class pools or single asset pools rather than the main pool for a qualifying activity.

83.Chapter 17 restricts entitlement to plant and machinery allowances in various circumstances.

84.Chapter 18 deals with additional VAT rebates or liabilities under the VAT capital goods scheme. This scheme applies to certain expenditure on land and computers.

85.Chapter 19 sets out how plant and machinery allowances are given effect.

86.Chapter 20 contains supplementary provisions.

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