Capital Allowances Act 2001

Chapter 6 E+W+S+N.I. Hire-purchase etc. and plant or machinery provided by lessee

Hire-purchase and similar contracts E+W+S+N.I.

67 Plant or machinery treated as owned by person entitled to benefit of contract, etc. E+W+S+N.I.

(1) This section applies if—

(a) a person carrying on a qualifying activity incurs capital expenditure on the provision of plant or machinery for the purposes of the qualifying activity, and

(b) the expenditure is incurred under a contract providing that the person shall or may become the owner of the plant or machinery on the performance of the contract.

(2) The plant or machinery is to be treated for the purposes of this Part as owned by the person (and not by any other person) at any time when he is entitled to the benefit of the contract so far as it relates to the plant or machinery.

(3) At the time when the plant or machinery is brought into use for the purposes of the qualifying activity, the person is to be treated for the purposes of this Part as having incurred all capital expenditure in respect of the plant or machinery to be incurred by him under the contract after that time.

(4) If a person—

(a) is treated under subsection (2) as owning plant or machinery,

(b) ceases to be entitled to the benefit of the contract in question so far as it relates to that plant or machinery, and

(c) does not then in fact become the owner of the plant or machinery,

the person is to be treated as ceasing to own the plant or machinery at the time when he ceases to be entitled to the benefit of the contract.

(5) This section is subject to section 69 (hire-purchase and fixtures) and subsection (3) is subject to section 229 (anti-avoidance).

68 Disposal value on cessation of notional ownership E+W+S+N.I.

(1) This section applies if a person—

(a) is treated under section 67(4) as ceasing to own plant or machinery, and

(b) is required to bring a disposal value into account as a result.

(2) If the plant or machinery has been brought into use for the purposes of the qualifying activity before the person ceases to own the plant or machinery, the disposal value is the total of—

(a) any relevant capital sums, and

(b) any capital expenditure treated under section 67(3) as having been incurred when the plant or machinery was brought into use but which has not in fact been incurred.

(3) If the plant or machinery has not been brought into use for the purposes of the qualifying activity before the person ceases to own the plant or machinery, the disposal value is the total of any relevant capital sums.

(4) “Relevant capital sums” means capital sums that the person receives or is entitled to receive by way of consideration, compensation, damages or insurance money in respect of—

(a) his rights under the contract, or

(b) the plant or machinery.

(5) This section is subject to section 229 (anti-avoidance).

69 Hire-purchase etc. and fixtures E+W+S+N.I.

(1) Section 67 does not—

(a) apply to expenditure incurred on plant or machinery which is a fixture, or

(b) prevent Chapter 14 (fixtures) applying in relation to expenditure on plant or machinery incurred under such a contract as is mentioned in section 67(1)(b).

(2) If—

(a) a person is treated under section 67(2) as owning plant or machinery,

(b) the plant or machinery becomes a fixture, and

(c) the person is not treated under Chapter 14 as being the owner of the plant or machinery,

the person is to be treated for the purposes of this Part as ceasing to own the plant or machinery at the time when it becomes a fixture.

(3) In this section “fixture” has the meaning given by section 173(1).

Plant or machinery provided by lessee E+W+S+N.I.

70 Plant or machinery provided by lessee E+W+S+N.I.

(1) This section applies if—

(a) under the terms of a lease, a lessee is required to provide plant or machinery,

(b) the lessee incurs capital expenditure on the provision of that plant or machinery for the purposes of a qualifying activity which the lessee carries on,

(c) the plant or machinery is not so installed or otherwise fixed in or to a building or any other description of land as to become, in law, part of that building or other land, and

(d) the lessee does not own the plant or machinery.

(2) The lessee—

(a) is to be treated as being the owner of the plant or machinery, as a result of incurring the capital expenditure, for so long as it continues to be used for the purposes of the qualifying activity, but

(b) is not required to bring a disposal value into account because the lease ends.

(3) Subsection (4) applies if—

(a) the plant or machinery continues to be used for the purposes of the lessee’s qualifying activity until the lease ends,

(b) the lessor holds the lease in the course of a qualifying activity, and

(c) on or after the ending of the lease, a disposal event occurs in respect of the plant or machinery at a time when the lessor owns the plant or machinery as a result of the requirement under the terms of the lease.

(4) The lessor is required to bring a disposal value into account in the appropriate pool for the chargeable period in which the disposal event occurs.

(5) “The appropriate pool” means the pool which would be applicable under this Part in relation to the lessor’s qualifying activity if—

(a) the expenditure incurred by the lessee had been qualifying expenditure incurred by the lessor, and

(b) that qualifying expenditure were being allocated to a pool for the chargeable period in which the disposal event occurs.

(6) In this section “lease” includes—

(a) an agreement for a lease if the term to be covered by the lease has begun, and

(b) any tenancy,

but does not include a mortgage (and “lessee” and “lessor” are to be read accordingly).