Overview
635.This Chapter determines entitlement to allowances in respect of capital expenditure on plant and machinery which is or becomes a fixture.
636.Special rules are needed to deal with fixtures since land law treats them as belonging to the owner of the freehold. In many cases, this will mean that the person incurring expenditure on them for use in a qualifying activity will not be the owner of the fixture. In the absence of these rules, many taxpayers incurring capital expenditure on a fixture would fail to qualify for allowances under the general rule in section 11.
637.This Chapter contains six blocks of sections:
sections 172 to 175 set out the scope of the Chapter and define “fixture” and other terms used in the Chapter;
sections 176 to 184 determine who is treated as the owner of a fixture and when. The basic rule is that a person who incurs expenditure on a fixture is treated as the owner so long as they have an interest in the relevant land (section 176). Other taxpayers, who may be treated as the owner, are:
an equipment lessor (see section 177);
a person who buys an interest in the land (see sections 181 and 182); and
a lessee (see sections 183 and 184).
It should be noted that sections 193 to 195 also provide for circumstances in which a taxpayer is treated as owning a fixture;
sections 185 to 187 restrict the amount of qualifying expenditure for plant and machinery allowances in some circumstances. Broadly, these apply if capital allowances have already been claimed in respect of the fixture;
sections 188 to 192 give disposal events for fixtures in addition to those in Chapter 5;
sections 193 to 195 provide additional cases in which a taxpayer is treated as owning a fixture. These are listed separately because they are dependent on another taxpayer being treated as ceasing to own the fixture;
sections 196 to 201 give the disposal values for fixtures. They take the place of the general rules in Chapter 5; and
sections 202 to 204 deal with interpretation and administrative matters.
Section 172: Scope of Chapter etc.
638.This section is based on parts of sections 51, 52, 53, 54, 55, 56, 56A, 56B, 56C, 57 and 58 of CAA 1990. It defines the scope of the fixtures Chapter.
639.Subsection (3) makes clear that the provisions that treat a person as the owner of the fixture are subject to the provisions that treat a person as ceasing to be the owner of the fixture.
640.Subsection (4) ensures that references to a person being treated as the owner (or ceasing to be the owner) are references to ownership for the purposes of Part 2.
641.Section 51(1) ensures that if one person is treated as the owner of a fixture then no other person is entitled to an allowance in respect of the fixture. This provision has not been rewritten. See Change 26 in Annex 1.
Section 173: Meaning of “fixture” and “relevant land”
642.This section is based on section 51(2A) and part of section 51(2) of CAA 1990. It provides a definition of “fixture” and determines what is the “relevant land” for any fixture.
Section 174: Meaning of “equipment lease” and “lease”
643.This section is based on section 53(4) and parts of sections 51(2) and (3) and 53(1) of CAA 1990. It provides definitions for “equipment lease”, “equipment lessor”, “equipment lessee” and “lease”.
644.Subsection (1)(a) defines an “equipment lease” as an agreement entered into in the circumstances given in subsection (2). Subsection (1)(b) includes the actual lease entered into “under or as a result of such an agreement”. Section 53(4) refers to a lease “entered into pursuant to such an agreement”. Although the words used in this Act are simpler, the meaning is the same.
Section 175: Meaning of “interest in land”, etc.
645.This section is based on section 51(4) and parts of section 51(2) and (3) of CAA 1990. It provides a definition of “interest in land” for the purposes of the Chapter.
646.Subsection (2) is necessary because of Northern Ireland land law. In Northern Ireland, it remains possible for mortgagees to hold an interest in land as security. The interest in land may be conveyed or assigned to them. This subsection ensures that it is the mortgagor (borrower), and not the mortgagee (lender), that is treated as the owner of the interest.
Section 176: Person with interest in relevant land having fixture for purposes of qualifying activity
647.This section is based on part of section 51(1) and (2) of CAA 1990. It provides one of the ways in which a person may be treated as the owner of a fixture.
648.This provision deals with the circumstances in which a person, with an interest in the relevant land, incurs capital expenditure on the provision of plant or machinery and the plant or machinery becomes a fixture. Subsection (1) deals with this basic rule.
649.Subsections (2) and (3) provide tie-breaker rules if two (or more) persons might otherwise be treated as the owner under subsection (1). In Rule 3, it is the lesser interest that qualifies.
