Overview
251.This Chapter makes general provision for the calculation of allowances and charges under this Part. Its provisions are subject to adaptations and modifications provided in the following Chapters. They make special provisions for particular types of asset.
252.Section 52 gives the amount of first-year allowance a person is entitled to in a chargeable period if they incur first-year qualifying expenditure and own the plant or machinery. The person may then claim first-year allowances for the whole or part of first-year qualifying expenditure.
253.Sections 53 and 54 require expenditure to be pooled to decide entitlement to allowances or liability to balancing charges. Allowances may be writing-down allowances or balancing allowances. There are single asset pools, class pools and a main pool. Later Chapters define which expenditure must be allocated to a class or single asset pool. Only expenditure which is not allocated to a class or single asset pool is allocated to the main pool. If a person carries on more than one qualifying activity, there are separate pools for each activity.
254.Sections 55 and 56 decide entitlement to an allowance or liability to a charge for each pool for a chargeable period. This depends on the difference between the available qualifying expenditure (AQE) for a pool for the chargeable period and the total of any disposal receipts to be brought into account (TDR):
if AQE exceeds TDR, the person is entitled to an allowance. The entitlement is to a writing-down allowance except in the final chargeable period of the pool when it is to a balancing allowance. The rate of writing-down allowances is 25% except for long-life assets (6%) and overseas leasing (10%);
if TDR exceeds AQE, the person is liable to a balancing charge equal to the difference.
255.Sections 57 to 59 give the general rules for AQE and pointers to other provisions which affect it. The general rule is that AQE for a pool is the qualifying expenditure allocated to the pool for the chargeable period (section 58) plus any unrelieved qualifying expenditure brought forward from the previous chargeable period (section 59).
256.Section 60 defines “disposal receipt” and “disposal event”:
a disposal receipt is the amount of any disposal value a person must bring into account;
a disposal event is an event of the type which requires a person to bring a disposal value into account.
257.General disposal events and disposal values are listed in section 61; there are others elsewhere.
258.Sections 63 to 65 restrict disposal values in some cases. There is a general limit equal to the qualifying expenditure incurred by the person (or in some cases a connected person). The disposal value is nil for some gifts. It is also nil if no first-year allowance is made and no qualifying expenditure is allocated to a pool (subject to additional conditions if the plant or machinery is acquired from a connected person).
259.Section 65 gives the general rules for when there is a final chargeable period for a pool.
260.Section 66 gives pointers to some other provisions dealing with disposal values.
Section 52: First-year allowances
261.This section is based mainly on section 22(1) of CAA 1990. It gives entitlement to first-year allowances.
262.Subsection (1) gives entitlement to first-year allowances if a person both incurs first-year qualifying expenditure in a chargeable period and owns the plant or machinery in that chargeable period.
263.Subsection (2) makes clear that any first-year allowance is made for the chargeable period in which the expenditure is incurred.
264.Subsection (3) gives the rates of first-year allowances.
265.Subsection (4) allows a person to claim first-year allowances for only some (including none) of their first-year qualifying expenditure. This is more direct than section 22(7) of CAA 1990. That permits a person to require that the amount of the allowance, or aggregate amount of the allowances, be reduced to an amount specified in that claim. The ability to do so helps people who might otherwise face a balancing charge in the same chargeable period. They can then add some or all of the first-year qualifying expenditure to their pool for the current chargeable period (see paragraph 295 below).
266.Section 22(7) of CAA 1990 deals with the aggregate of allowances to keep the sums simple. Section 52 gives people the option of doing that in practice by claiming for the same proportion of all first-year qualifying expenditure or of claiming for different proportions of different items of expenditure.
267.Section 22(7) does not permit a claim for reduced first-year allowances for ships. But section 30(1)(b) of CAA 1990 makes equivalent provision.
268.Section 22(7) and 30(1) require the claim to specify the reduced allowance required. Subsection (4) achieves this more directly by dealing with qualifying expenditure. See Note 15 in Annex 2.
269.Subsection (5) gives signposts to other provisions which may affect first-year allowances.
