Chapter 2: Contribution allowances
Overview
1871.This Chapter enables certain contributions to another person’s expenditure to qualify for allowances under Parts 2 to 5 and Part 9.
1872.Section 537 gives the general conditions which have to be satisfied for contributions to be able to lead to allowances under Parts 2 to 5.
1873.Sections 538 to 541 then give additional details relevant to each of those Parts in turn.
1874.Section 542 provides for allowances to be given on contributions after the transfer of a trade or relevant activity.
1875.Section 543 provides allowances for contributions for dredging.
Section 537: Conditions for contribution allowances under Parts 2 to 5
1876.This section is based on parts of section 154 of CAA 1990. It gives the general conditions which have to be met if a contributor (C) is to be able to get allowances under Parts 2 to 5 for a contribution.
1877.Section 154 of CAA 1990 applies explicitly to trades, professions and vocations. Subsection (4) applies for this Chapter the explicit list of activities in section 536(5). See paragraph 1866 above and Change 59 in Annex 1.
Section 538: Plant and machinery
1878.This section is based mainly on sections 154(2) and 155(6) of CAA 1990 together with parts of sections 154(1) and 155(2) and (3) of CAA 1990. If the conditions in subsection (1) are met, the contributor (C) is treated by subsection (2) as incurring expenditure on, owning and using R’s asset. This means the contributor (C) meets some of the conditions for plant and machinery allowances which otherwise would mean the contributor (C) had no entitlement. It does not mean the contributor (C) is necessarily entitled to plant and machinery allowances. For example the asset must still be plant or machinery.
1879.There is a minor change. Subsection (3) requires expenditure to be allocated to a single asset pool. This was the intention in 1989 (in what became, on consolidation, section 155(6) of CAA 1990) in order that plant and machinery allowances for a contribution could be given to a successor if part of a trade was transferred. But the fact that the expenditure is meant to be allocated to a single asset pool was not achieved unambiguously. See Change 60 in Annex 1.
1880.The general rule for single asset pools for contributions expenditure now covers contributions to expensive cars, in contrast to section 35(1) of CAA 1990 which handles them separately. See Note 19 in Annex 2.
1881.Subsections (4) to (6) provide for allowances in respect of contributions to be given to a successor when an activity or part of an activity is transferred.
1882.The single asset pool for contributions expenditure on plant and machinery leads to writing-down allowances at 25%, 10% or 6% as appropriate. Sections 102(2) and 109(3) apply to all types of single asset pools. See Note 23 in Annex 2.
1883.By providing explicitly for property businesses to be “relevant activities” for the purposes of Part 2 it is not necessary for this Act to make specific provision for plant and machinery allowances for a landlord’s contributions to expenditure for the purposes of a tenant’s trade. See Note 68 in Annex 2.
Section 539: Industrial buildings
1884.This section is based on section 154(1) and parts of section 155 of CAA 1990. If the conditions in subsection (1) are met, the contributor (C) is treated by subsection (2) as incurring expenditure on, and using, a similar asset to R’s.
1885.Subsections (3) to (6) provide for entitlement to industrial buildings allowances in respect of contributions made for the purposes of a tenant’s trade to go with the relevant interest held by C.
