Finance Act 2021

Capital allowances: other measures

15 Extension of temporary increase in annual investment allowance

(1) In section 32(1) of FA 2019 (which increases the maximum amount of the annual investment allowance to £1,000,000 for the period of two years beginning with 1 January 2019), for “two years” substitute “three years”.

(2) In consequence of the amendment made by subsection (1)—

(a) in section 32(2) of that Act, for “2021” substitute “2022”,

(b) in paragraph 2 of Schedule 13 to that Act and the heading before that paragraph, for “2021” (in each place) substitute “2022”,

(c) in paragraph 3(3)(b) of that Schedule, for “two years” substitute “three years”, and

(d) in the heading for that Schedule, for “2021” substitute “2022”.

16 Meaning of “general decommissioning expenditure”

(1) Chapter 13 of Part 2 of CAA 2001 (plant and machinery allowances: provisions affecting mining and oil industries) is amended as follows.

(2) Section 163 (meaning of “general decommissioning expenditure” for purposes of sections 164 and 165) is amended as follows.

(3) In subsection (1), at the end of paragraph (a), omit “or” and insert—

“(aa) the condition in subsection (3AB) is met, or”.

(4) In subsection (2), for “that is” substitute “paragraphs (a) and (b) of subsection (1) are”.

(5) In subsection (3A)—

(a) in the words before paragraph (a), omit “in complying with”;

(b) in paragraph (a), at the beginning insert “in complying with”;

(c) in paragraph (b)—

(i) at the beginning insert “in complying with”;

(ii) at the end omit “or”;

(d) in paragraph (c)—

(i) at the beginning insert “in complying with”;

(ii) at the end insert “, or

(d) otherwise in anticipation of a decommissioning measure.”

(6) After subsection (3A) insert—

“(3AA) For the purposes of subsection (3A)(d), expenditure is incurred otherwise in anticipation of a decommissioning measure if it is incurred—

(a) in preserving plant or machinery, the reuse or demolition of which it is reasonable to anticipate will be authorised or required by an approved abandonment programme, a condition to which the approval of such a programme will be subject or a condition or agreement described in subsection (3A)(c), or

(b) in doing something else which it is reasonable to anticipate will be authorised or required by an approved abandonment programme, a condition to which the approval of such a programme will be subject or a condition or agreement described in subsection (3A)(c).”

(7) After subsection (3AA) (inserted by subsection (6) of this section) insert—

“(3AB) The condition in this subsection is met if—

(a) the expenditure was incurred—

(i) in preparing an abandonment programme for approval, or

(ii) in preparing for the imposition of a condition by, or the making of an agreement with, the Secretary of State before the approval of an abandonment programme, and

(b) it is reasonable to anticipate that the approved abandonment programme, the condition imposed or the agreement made, as the case may be, will wholly or mainly relate to the decommissioning of plant or machinery to which subsection (3) applies.”

(8) In each of subsections (4ZA) and (4ZB), for “subsection (1)” substitute “subsection (1)(a) or (b)”.

(9) After section 163 insert—

“163A Expenditure in anticipation of approval of abandonment programme

(1) Expenditure to which section 163(3A)(d) applies by virtue of section 163(3AA)(b) is to be treated as never having been general decommissioning expenditure for the purposes of sections 164 and 165 unless, before the end of the relevant period, condition A or condition B is met in relation to the expenditure.

(2) Condition A is that—

(a) an abandonment programme is approved, and

(b) the programme, or a condition to which the approval of the programme was subject, authorises or requires the decommissioning of the plant or machinery to which the expenditure relates.

(3) Condition B is that—

(a) a condition is imposed by the Secretary of State, or an agreement is made with the Secretary of State, before the approval of an abandonment programme, and

(b) the condition or, as the case may be, the agreement authorises or requires the decommissioning of the plant or machinery to which the expenditure relates.

(4) For the purposes of this section “the relevant period” means the period—

(a) beginning with the day on which the expenditure was incurred, and

(b) ending with the fifth anniversary of the last day of the accounting period in which the expenditure was incurred.

(5) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (1).

(6) If a person who has made a return becomes aware that, after making it, anything in it has become incorrect because of the operation of this section, the person must give notice to an officer of Revenue and Customs specifying how the return needs to be amended.

(7) A notice under subsection (6) must be given within 3 months beginning with the day on which the person first became aware that anything in the return had become incorrect because of the operation of this section.

(8) In this section, “abandonment programme”, “approval” and “approved” (in relation to an abandonment programme) have the same meaning as in Part 4 of the Petroleum Act 1998.”

(10) The amendments made by this section have effect in relation to expenditure incurred on or after 3 March 2021.

17 Extensions of plant or machinery leases for reasons related to coronavirus

(1) In Part 2 of CAA 2001, Chapter 6A (interpretation of provisions about long funding leases) has effect subject to the following modifications.

(2) Section 70YB (long funding operating lease: extension of term of lease) has effect as if, in subsection (1), at the beginning there were inserted “Subject to section 70YCA (extension of term of lease for reasons related to coronavirus),”.

(3) Section 70YC (extension of term of lease that is not a long funding lease) has effect as if, in subsection (1), at the beginning there were inserted “Subject to section 70YCA (extension of term of lease for reasons related to coronavirus),”.

(4) That Chapter has effect as if after section 70YC there were inserted—

“70YCA Extension of term of lease for reasons related to coronavirus

(1) Sections 70YB(1) and 70YC(1) (extension of lease terms) do not apply in any case where subsection (2) applies (but see subsection (3)).

(2) This subsection applies where, in relation to a relevant lease—

(a) on or after 1 January 2020, there is (or was) a change in the payments under the lease that would have been payable on or before 30 June 2021,

(b) the effect of the change is that the term of the lease is extended (and, were it not for this section, section 70YB(1) or 70YC(1) would apply),

(c) the change would not have been made if it were not for coronavirus,

(d) after the change, the consideration for the lease is substantially the same as, or less than, the consideration for the lease before the change,

(e) there is no other substantive change to the terms of the lease, and

(f) the lessor and lessee have not made any arrangement in connection with any changes to capital allowances relating to the lease and arising as a result of the change mentioned in paragraph (a).

(3) But subsection (2) does not apply where, in relation to a relevant lease, the lessor or the lessee elects that subsection (2) does not apply.

(4) The Treasury may by regulations substitute for the second date for the time being specified in subsection (2)(a) such other date as they consider appropriate.

(5) In this section—

• “coronavirus” has the same meaning as in the Coronavirus Act 2020 (see section 1(1) of that Act);

• “relevant lease” means—

  (a)

  a long funding operating lease, or

  (b)

  a plant or machinery lease that is not a long funding lease.

70YCB Elections under section 70YCA

(1) An election under section 70YCA must be made by notice to an officer of Revenue and Customs no later than the end of the period of 21 months beginning with the day after the day on which the change mentioned in section 70YCA(2)(a) occurred.

(2) But an election under that section is of no effect unless—

(a) the party making the election notifies the other party to the lease of the election, and

(b) the notice under subsection (1) is accompanied by a copy of the notification given to the other party.

(3) A notice under subsection (1) must include such information as may be specified (whether generally or specifically) by an officer of Revenue and Customs.

(4) An election under section 70YCA is irrevocable.

(5) Where a party to the lease makes or amends a tax return for a period in which the change mentioned in section 70YCA(2)(a) occurred, that party must include with that return or amended return a copy of any election made under that section in respect of the lease.

(6) The following provisions do not apply to an election under section 70YCA—

(a) section 42 of, and Schedule 1A to, TMA 1970 (claims and elections for income tax purposes);

(b) paragraphs 54 to 60 of Schedule 18 to FA 1998 (claims and elections for corporation tax purposes).

(7) References in this section to a tax return, in the case of an election for the purposes of a trade, profession or business carried on by persons in partnership, are to be read, in relation to those persons, as references to a return under section 12AA of TMA 1970 (partnership returns).”