Capital Allowances Act 2001

Expenditure of small or medium-sized enterprises E+W+S+N.I.

47 Expenditure of small or medium-sized enterprises: companies E+W+S+N.I.

(1) Use this section to decide whether expenditure incurred by a company is, for the purposes of this Chapter, incurred by—

(a) a small or medium-sized enterprise, or

(b) a small enterprise.

(2) The expenditure is incurred by a small or medium-sized enterprise if the company—

(a) qualifies (or is treated as qualifying) as small or medium-sized under the relevant companies legislation in relation to the financial year of the company in which the expenditure is incurred, and

(b) is not a member of a large group at the time when the expenditure is incurred.

(3) The expenditure is incurred by a small enterprise if the company—

(a) qualifies (or is treated as qualifying) as small under the relevant companies legislation in relation to the financial year of the company in which the expenditure is incurred, and

(b) is not a member of a large or medium-sized group at the time when the expenditure is incurred.

(4) Except in the case of a company formed and registered in Northern Ireland—

(a) “the relevant companies legislation” means section 247 of the Companies Act 1985 (c. 6), and

(b) “financial year” has the same meaning as in Part VII of the 1985 Act.

(5) In the case of such a company—

(a) “the relevant companies legislation” means Article 255 of the Companies (Northern Ireland) Order 1986 (S.I.1986/1032 (N.I.6)), and

(b) “financial year” has the same meaning as in Part VIII of the 1986 Order.

(6) “Company” means—

(a) a company, or an oversea company, within the meaning of the 1985 Act, or

(b) a company, or a Part XXIII company, within the meaning of the 1986 Order.

48 Expenditure of small or medium-sized enterprises: businesses E+W+S+N.I.

(1) Use this section to decide whether expenditure incurred by a business is, for the purposes of this Chapter, incurred by—

(a) a small or medium-sized enterprise, or

(b) a small enterprise.

(2) In this section “business” means—

(a) an individual,

(b) a partnership of which all the members are individuals,

(c) a registered friendly society within the meaning of Chapter II of Part XII of ICTA, or

(d) a body corporate which is not a company but is within the charge to corporation tax.

(3) The expenditure is incurred by a small or medium-sized enterprise if—

(a) the expenditure is incurred for the purposes of a qualifying activity carried on by the business, and

(b) the business passes the hypothetical company test, in relation to that expenditure, as a small or medium-sized company.

(4) The expenditure is incurred by a small enterprise if—

(a) the expenditure is incurred for the purposes of a qualifying activity carried on by the business, and

(b) the business passes the hypothetical company test, in relation to that expenditure, as a small company.

(5) To apply the hypothetical company test, assume that—

(a) the qualifying activity is carried on by a company (“the hypothetical company”),

(b) every trade, business, profession or vocation carried on by the business is carried on by the business as part of that activity,

(c) the financial years of the hypothetical company coincide with the chargeable periods of the business, and

(d) accounts of the hypothetical company for any relevant chargeable period have been duly drawn up as if that period were a financial year of the company.

(6) The business passes the hypothetical company test as a small or medium-sized company in relation to the expenditure in question if, on the assumptions in subsection (5), the company would qualify (or be treated as qualifying) as small or medium-sized under the relevant companies legislation in relation to the financial year in which the expenditure is assumed to be incurred.

(7) The business passes the hypothetical company test as a small company in relation to the expenditure in question if, on the assumptions in subsection (5), the company would qualify (or be treated as qualifying) as small under the relevant companies legislation in relation to the financial year in which the expenditure is assumed to be incurred.

(8) Except in the case of a business carrying on a qualifying activity wholly or mainly in Northern Ireland—

(a) “the relevant companies legislation” means section 247 of the Companies Act 1985 (c. 6), and

(b) “financial year” has the same meaning as in Part VII of that Act;

and the reference in subsection (5)(d) to accounts being duly drawn up is to their being drawn up in accordance with that Act.

(9) In the case of such a business—

(a) “the relevant companies legislation” means Article 255 of the Companies (Northern Ireland) Order 1986 (S.I.1986/1032 (N.I.6)), and

(b) “financial year” has the same meaning as in Part VIII of that Order;

and the reference in subsection (5)(d) to accounts being duly drawn up is to their being drawn up in accordance with that Order.

49 Whether company is a member of a large or medium-sized group E+W+S+N.I.

(1) Use this section to decide whether, for the purposes of section 47, a company is—

(a) a member of a large group, or

(b) a member of a large or medium-sized group.

(2) Subject to subsection (4), a company is a member of a large group at the time when any expenditure is incurred if—

(a) it is at that time the parent undertaking of a group which does not qualify as small or medium-sized in relation to the financial year of the parent undertaking in which that time falls, or

(b) it is at that time a subsidiary undertaking in relation to the parent undertaking of such a group.

(3) Subject to subsection (4), a company is a member of a large or medium-sized group at the time when any expenditure is incurred if—

(a) it is at that time the parent undertaking of a group which does not qualify as small in relation to the financial year of the parent undertaking in which that time falls, or

(b) it is at that time a subsidiary undertaking in relation to the parent undertaking of such a group.

(4) If, at the time when any expenditure is incurred by a company, any arrangements exist which are such that, had effect been given to them immediately before that time, the company or a successor of the company—

(a) would, at that time, have been a member of a large group, or

(b) would, at that time, have been a member of a large or medium-sized group,

the company incurring the expenditure is to be treated as a member of a large group or (as the case may be) a large or medium-sized group at that time.

(5) For the purposes of subsections (2) and (3), the question whether—

(a) a group qualifies as small or medium-sized, or

(b) a group qualifies as small,

is to be decided by reference to the relevant companies legislation (but reading references in that legislation to a parent company as references to a parent undertaking).

(6) In subsection (5) “the relevant companies legislation” means—

(a) except in the case of a company formed and registered in Northern Ireland, section 249 of the Companies Act 1985 (c. 6);

(b) in the case of such a company, Article 257 of the Companies (Northern Ireland) Order 1986 (S.I.1986/1032 (N.I.6)).

(7) For the purposes of subsection (4) a company is the successor of another if—

(a) it carries on a trade which, in whole or in part, the other company has ceased to carry on, and

(b) the circumstances are such that section 343 of ICTA (company reconstructions without a change of ownership) applies in relation to the two companies as the predecessor and the successor within the meaning of that section,

and “arrangements” means arrangements of any kind (whether or not in writing or legally enforceable).

(8) In this section “financial year”, “group”, “parent undertaking” and “subsidiary undertaking” have the same meaning as in—

(a) except in the case of a company formed and registered in Northern Ireland, Part VII of the 1985 Act;

(b) in the case of such a company, Part VIII of the 1986 Order.