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Part 2U.K. Plant and machinery allowances

Modifications etc. (not altering text)

C2Pt. 2 modified (24.2.2003) by Proceeds of Crime Act 2002 (c. 29), s. 458(1), Sch. 10 para. 12 (with Sch. 10 para. 17(1)); S.I. 2003/120, art. 2, Sch. (with arts. 3 4) (as amended (20.2.2003) by S.I. 2003/333, art. 14)

C3 Pt. 2 restricted (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 paras. 10, 22 (with s. 38(2) ); S.I. 2004/2575 , art. 2(1) , Sch. 1

C4 Pt. 2 modified (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 paras. 9(2), 21(2) (with s. 38(2)); S.I. 2004/2575, art. 2(1) , Sch. 1

C5 Pt. 2 restricted (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 4 para. 4 ; S.I. 2004/2575 , art. 2(1) , Sch. 1

C6Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 19

C7Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 35

C8Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 paras. 36, 37

C9Pt. 2 modified (21.7.2009) by Finance Act 2009 (c. 10), s. 24

C10Pt. 2 modified (17.7.2013) by Finance Act 2013 (c. 29), s. 73(7)-(11) (with s. 73(6))

C11Pt. 2 modified (10.6.2021) by Finance Act 2021 (c. 26), s. 9(1)(a)

Chapter 1U.K. Introduction

11 General conditions as to availability of plant and machinery allowancesU.K.

(1)Allowances are available under this Part if a person carries on a qualifying activity and incurs qualifying expenditure.

(2)Qualifying activity” has the meaning given by Chapter 2.

(3)Allowances under this Part must be calculated separately for each qualifying activity which a person carries on.

(4)The general rule is that expenditure is qualifying expenditure if—

(a)it is capital expenditure on the provision of plant or machinery wholly or partly for the purposes of the qualifying activity carried on by the person incurring the expenditure, and

(b)the person incurring the expenditure owns the plant or machinery as a result of incurring it.

(5)But the general rule is affected by other provisions of this Act, and in particular by Chapter 3.

12 Expenditure incurred before qualifying activity carried onU.K.

[F1(1)] For the purposes of this Part, expenditure incurred for the purposes of a qualifying activity by a person about to carry on the activity is to be treated as if it had been incurred by him on the first day on which he carries on the activity.

[F2(2)Subsection (3) applies if—

(a)a company that does not have a Northern Ireland regional establishment incurs expenditure for the purposes of a trade,

(b)the activities for the purposes of which the expenditure is incurred would, if the company were a NIRE company, be an NI rate activity treated as a separate trade, and

(c)the company subsequently becomes a NIRE company.

(3)The expenditure is to be treated as incurred on the first day of the first chargeable period in which the company is a NIRE company.

(4)Subsection (5) applies if—

(a)a partnership that does not have a Northern Ireland regional establishment incurs expenditure for the purposes of a trade,

(b)the activities for the purposes of which the expenditure is incurred would, if the partnership were a Northern Ireland Chapter 7 firm, be an NI rate activity treated as a separate trade, and

(c)the partnership subsequently becomes a Northern Ireland Chapter 7 firm.

(5)The expenditure is to be treated for the purposes of this Part so far as relating to the corporate partner calculation as incurred on the first day of the first chargeable period in which the partnership is a Northern Ireland Chapter 7 firm.

(6)In this section “Northern Ireland regional establishment” has the same meaning as in Part 8B of CTA 2010 (see Chapter 5 of that Part as read, in relation to a partnership, with section 357WA(4) of that Act).]

Textual Amendments

F1S. 12 renumbered as s. 12(1) (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 1 para. 3(2)

F2S. 12(2)-(6) inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 1 para. 3(3)

13 Use for qualifying activity of plant or machinery provided for other purposesU.K.

(1)This section applies if a person—

(a)brings plant or machinery into use for the purposes of a qualifying activity carried on by him, and

(b)on the date when he does so, owns the plant or machinery as a result of having incurred capital expenditure (“actual expenditure”) on its provision for purposes other than those of that qualifying activity.

(2)The person is to be treated—

(a)as having incurred capital expenditure (“notional expenditure”) on the provision of the plant or machinery for the purposes of the qualifying activity on the date on which it is brought into use for those purposes, and

(b)as owning the plant or machinery as a result as having incurred that expenditure.

(3)Subject to subsection (4), the amount of the notional expenditure is the market value of the plant or machinery on the date when it is brought into use for the purposes of the qualifying activity.

(4)If the market value is greater than the actual expenditure, the amount of the notional expenditure is the amount of the actual expenditure, less any amount required to be deducted under subsection (5).

(5)The amount to be deducted is any amount that under section 218F3... would have been left out of account in determining the person’s available qualifying expenditure if the actual expenditure had been incurred on the provision of the plant or machinery for the purposes of the qualifying activity.

(6)The question whether the provision of the plant or machinery is to be treated as wholly or only partly for the purposes of the qualifying activity is to be determined according to whether the use referred to in subsection (1)(a) is wholly or only partly for those purposes.

(7)This section is subject to section 161 (pre-trading expenditure on mineral exploration and access).

Textual Amendments

F3Words in s. 13(5) omitted (with effect in accordance with Sch. 20 para. 6(19) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 20 para. 6(2)

Modifications etc. (not altering text)

C12S. 13 applied (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), ss. 827, (with s. 828(2), Sch. 2)

C13S. 13 applied (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 126(2), 1184(1) (with Sch. 2)

C14S. 13 modified by 2005 c. 5, s. 825C (as substituted (with effect in accordance with s. 3(4) of the amending Act) by Finance (No. 3) Act 2010 (c. 33), s. 3(3) (with s. 3(5)))

C15S. 13 modified by 2009 c. 4, s. 18C(2) (as inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 4, 31)

[F413AUse for other purposes of plant or machinery previously used for long funding leasingU.K.

(1)This section applies if a person who has been using plant or machinery for the purpose of leasing it under a long funding lease (see Chapter 6A)—

(a)ceases to use the plant or machinery for that purpose without ceasing to use it for the purposes of a qualifying activity carried on by him, and

(b)on the date of the cessation, owns the plant or machinery as a result of having incurred capital expenditure on its provision for the purposes of the qualifying activity.

(2)The person is to be treated—

(a)as having incurred capital expenditure (“notional expenditure”) on the provision of the plant or machinery for the purposes of the qualifying activity on the day after the cessation,

(b)as owning the plant or machinery as a result of having incurred that expenditure, and

(c)as if the plant or machinery on and after that day were different plant or machinery from the plant or machinery before that day.

(3)The amount of the notional expenditure is an amount equal to the termination amount, determined in accordance with section 70YG, in the case of the long funding lease under which the plant or machinery was last leased before the cessation.]

Textual Amendments

F4S. 13A inserted (with effect in accordance with Sch. 8 para. 15 of the amending Act) by Finance Act 2006 (c. 25), Sch. 8 para. 2

[F513BUse for other purposes of plant or machinery: property businessesU.K.

(1)This section applies if a person who has been using plant or machinery for the purposes of a relevant qualifying activity—

(a)ceases to use the plant or machinery for that purpose without ceasing to use it for the purposes of another relevant qualifying activity (“the other activity”) carried on by the person, and

(b)on the date of the cessation, owns the plant or machinery as a result of having incurred capital expenditure on its provision for the purposes of the other activity.

(2)The person is to be treated—

(a)as having incurred capital expenditure (“notional expenditure”) on the provision of the plant or machinery for the purposes of the other activity on the day after the cessation,

(b)as owning the plant or machinery as a result of having incurred that expenditure, and

(c)as if the plant or machinery on or after that day were different plant or machinery from the plant or machinery before that day.

(3)Subject to subsection (4), the amount of the notional expenditure is the market value of the plant or machinery on the date of cessation.

(4)If the market value is greater than the actual expenditure, the amount of the notional expenditure is the amount of the actual expenditure.

(5)Relevant qualifying activity” means—

(a)ordinary UK property business or UK furnished holiday lettings business, or

(b)ordinary overseas property business or EEA furnished holiday lettings business,

(as the case may be).]

Textual Amendments

F5S. 13B inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(2)

14 Use for qualifying activity of plant or machinery which is a giftU.K.

(1)This section applies if a person—

(a)is the owner of plant or machinery as a result of a gift, and

(b)brings the plant or machinery into use for the purposes of a qualifying activity carried on by him.

(2)The person is to be treated—

(a)as having incurred capital expenditure on the provision of the plant or machinery for the purposes of the qualifying activity on the date on which it is brought into use for those purposes, and

(b)as owning the plant or machinery as a result of having incurred that expenditure.

(3)The amount of that capital expenditure is to be treated as being the market value of the plant or machinery on the date when it was brought into use for the purposes of the qualifying activity.

(4)The question whether the provision of the plant or machinery is to be treated as wholly or only partly for the purposes of the qualifying activity is to be determined according to whether the use referred to in subsection (1)(b) is wholly or only partly for those purposes.

(5)This section is subject to section 161 (pre-trading expenditure on mineral exploration and access).

Chapter 2U.K. Qualifying activities

15 Qualifying activitiesU.K.

(1)Each of the following is a qualifying activity for the purposes of this Part—

(a)a trade,

(b)an ordinary [F6UK] [F7property] business,

(c)a [F8UK furnished] holiday lettings business,

(d)an [F9ordinary overseas] property business,

[F10(da)an EEA furnished holiday lettings business,]

(e)a profession or vocation,

(f)a concern listed in [F11section 12(4) of ITTOIA 2005 or] [F12section 39(4) of CTA 2009] (mines, transport undertakings etc.),

[F13(g)managing the investments of a company with investment business,]

(h)special leasing of plant or machinery, and

(i)an employment or office,

but to the extent only that the profits or gains from the activity are, or (if there were any) would be, chargeable to tax.

(2)Subsection (1) is subject to the following provisions of this Part.

[F14(2ZA)Where an activity of a company is treated by subsection (1) of section 6D (NI rate activity treated as separate trade) as a separate trade, that activity is an activity separate from any other activity of the company.

(2ZB)Where an activity of a Northern Ireland firm is treated by subsection (2) of section 6D as a separate trade for the purposes of the corporate partner calculation, that activity is for the purposes of this Part, so far as relating to the corporate partner calculation, an activity separate from every other activity of the Northern Ireland firm.]

[F15(2A)A business carried on through one or more permanent establishments outside the United Kingdom by a company in relation to which an election under section 18A of CTA 2009 has effect—

(a)is an activity separate from any other activity of the company, and

(b)is to be regarded as an activity all the profits and gains from which are not, or (if there were any) would not be, chargeable to tax.]

[F16(2B)Subsection (2A) does not apply to the business so far as it consists of a plant or machinery lease under which the company is a lessor if any profits or losses arising from the lease are to be left out of account as mentioned in section 18C(3) of CTA 2009.]

(3)This section, in so far as it provides for—

(a)an ordinary [F17UK] [F18property] business,

(b)an [F19ordinary overseas] property business, or

(c)special leasing of plant or machinery,

to be a qualifying activity, needs to be read with section 35 (expenditure on plant or machinery for use in a dwelling-house not qualifying expenditure in certain cases).

(4)Also, subsection (1)(i) needs to be read with sections 36 (restriction on qualifying expenditure in case of employment or office) and 80 (vehicles provided for purposes of employment or office).

Textual Amendments

F6Word in s. 15(1)(b) inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(3)(a)

F7 Word in s. 15(1)(b) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5) , s. 883(1) , Sch. 1 para. 526(2)(a) (with Sch. 2 )

F8Words in s. 15(1)(c) substituted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(3)(b)

F9Words in s. 15(1)(d) substituted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(3)(c)

F10S. 15(1)(da) inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(3)(d)

F12Words in s. 15(1)(f) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 476 (with Sch. 2 Pts. 1, 2)

F14S. 15(2ZA)(2ZB) inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 1 para. 4

F15S. 15(2A) inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 15, 31

F16S. 15(2B) inserted (1.1.2013) by Finance Act 2012 (c. 14), Sch. 20 paras. 9, 55(1)

F17Word in s. 15(3)(a) inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(3)(e)

F18 Word in s. 15(3)(a) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5) , s. 883(1) , Sch. 1 para. 526(3) (with Sch. 2 )

F19Words in s. 15(3)(b) substituted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(3)(f)

16 Ordinary [F20UK] [F21property] businessesU.K.

In this Part “[F22ordinary [F23UK] property] business[F24means a UK property business F25... ] except in so far as it is a [F26UK furnished] holiday lettings business.

Textual Amendments

F20Word in s. 16 heading inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(4)(a)

F23Word in s. 16 inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(4)(b)

F25Words in s. 16 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 477, Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F26Words in s. 16 substituted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(4)(c)

17 [F27UK furnished] holiday lettings businessesU.K.

(1)In this Part “[F28UK furnished] holiday lettings business” means [F29a UK property businessF30... which consists in, or so far as it consists in, the commercial letting of furnished holiday accommodation] as it consists of the commercial letting of furnished holiday accommodation in the United Kingdom.

(2)All [F31such] commercial lettings of furnished holiday accommodation made by a particular person or partnership or body of persons are to be treated as one qualifying activity.

[F32(3) For the purposes of income tax the “ commercial letting of furnished holiday accommodation ” has the same meaning as it has for the purposes of Chapter 6 of Part 3 of ITTOIA 2005.

For the purposes of corporation tax the “ commercial letting of furnished holiday accommodation[F33has the same meaning as it has for the purposes of Chapter 6 of Part 4 of CTA 2009 (see section 265)].]

(4)If there is a letting of accommodation only part of which is holiday accommodation, such apportionments are to be made for the purposes of this section as are just and reasonable.

Textual Amendments

F27Words in s. 17 heading substituted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(5)(a)

F28Words in s. 17(1) substituted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(5)(b)

F29Words in s. 17(1) substituted (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 528(2) (with Sch. 2)

F30Words in s. 17(1) repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 478(2), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F31Word in s. 17(2) inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(5)(c)

F32S. 17(3) substituted (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 528(3) (with Sch. 2)

F33Words in s. 17(3) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 478(3) (with Sch. 2 Pts. 1, 2)

[F3417AOrdinary overseas property businessU.K.

In this Part “ordinary overseas property business” means an overseas property business except in so far as it is an EEA furnished holiday lettings business.

Textual Amendments

F34Ss. 17A, 17B inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(6)

17B EEA furnished holiday lettings businessesU.K.

(1)In this Part “EEA furnished holiday lettings business” means an overseas property business which consists in, or so far as it consists in, the commercial letting of furnished holiday accommodation in one or more EEA states.

(2)All such commercial lettings of furnished holiday accommodation made by a particular person or partnership or body of persons are to be treated as one qualifying activity.

(3)Subsections (3) and (4) of section 17 are to apply for the purposes of this section as they apply for the purposes of that section.]

Textual Amendments

F34Ss. 17A, 17B inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(6)

18.Managing the investments of a company with investment businessU.K.

(1) For the purposes of this Part, managing the investments of a company with investment business consists of pursuing those purposes expenditure on which would be treated as expenses of management within [F35section 1219 of CTA 2009].

(2) In this Part “company with investment business” has the meaning given by [F36section 1218B] of CTA 2009.

Textual Amendments

F35Words in s. 18(1) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 479(2) (with Sch. 2 Pts. 1, 2)

F36Words in s. 18 substituted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 21(4), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

19 Special leasing of plant or machineryU.K.

(1)In this Part “special leasing”, in relation to plant or machinery, means hiring out the plant or machinery otherwise than in the course of any other qualifying activity (and references to a lessor or lessee in the context of special leasing are to be read accordingly).

(2)A qualifying activity consisting of special leasing of plant or machinery begins when the plant or machinery is first hired out in the circumstances given in subsection (1).

(3)A qualifying activity consisting of special leasing of plant or machinery is permanently discontinued if the lessor permanently ceases to hire out the plant or machinery otherwise than in the course of any other qualifying activity.

(4)A person who has more than one item of plant or machinery that is the subject of special leasing has a separate qualifying activity in relation to each item.

(5)If a company carrying on any [F37long-term business]

(a)hires out plant or machinery which is an investment asset (as defined by section 545(2)), and

(b)does not do so in the course of a property business,

the company is to be treated for the purposes of subsection (1) as hiring out the plant or machinery otherwise than in the course of a qualifying activity.

Textual Amendments

F37Words in s. 19(5) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 95

20 Employments and officesU.K.

(1)In section 15(1)(i) “employment” does not include an employment the performance of the duties of which is treated as the carrying on of a trade under [F38section 15 of ITTOIA 2005] (divers and diving supervisors in the North Sea etc.).

(2)Subsection (3) applies if the [F39earnings] for any duties of an employment or office [F40fall within section 22 or 26 of ITEPA 2003].

(3)This Part applies in relation to—

(a)[F41those earnings] , or

(b)any [F42other taxable earnings (as defined by section 10 of ITEPA 2003)] of the employment or office,

as if the performance of the duties did not belong to that employment or office.

Textual Amendments

F38 Words in s. 20(1) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5) , s. 883(1) , Sch. 1 para. 529 (with Sch. 2 )

F39 Word in s. 20(2) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1) , s. 723 , Sch. 6 para. 248(2)(a) (with Sch. 7 )

F40 Words in s. 20(2) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1) , s. 723 , Sch. 6 para. 248(2)(b) (with Sch. 7 )

F41 Words in s. 20(3) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1) , s. 723 , Sch. 6 para. 248(3)(a) (with Sch. 7 )

F42 Words in s. 20(3) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1) , s. 723 , Sch. 6 para. 248(3)(b) (with Sch. 7 )

Chapter 3U.K. Qualifying expenditure

Buildings, structures and landU.K.

21 BuildingsU.K.

(1)For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on the provision of a building.

(2)The provision of a building includes its construction or acquisition.

(3)In this section, “building” includes an asset which—

(a)is incorporated in the building,

(b)although not incorporated in the building (whether because the asset is moveable or for any other reason), is in the building and is of a kind normally incorporated in a building, or

(c)is in, or connected with, the building and is in list A.

List A

Assets treated as buildings

1.Walls, floors, ceilings, doors, gates, shutters, windows and stairs.
2.Mains services, and systems, for water, electricity and gas.
3.Waste disposal systems.
4.Sewerage and drainage systems.
5.Shafts or other structures in which lifts, hoists, escalators and moving walkways are installed.
6.Fire safety systems.

(4)This section is subject to section 23 [F43(but any reference in list C in subsection (4) of that section to “plant” does not include anything where expenditure on its provision is excluded by this section)].

Textual Amendments

F43Words in s. 21(4) inserted (with effect in accordance with s. 35(3) of the amending Act) by Finance Act 2019 (c. 1), s. 35(2)

22 Structures, assets and worksU.K.

(1)For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on—

(a)the provision of a structure or other asset in list B, or

(b)any works involving the alteration of land.

List B

Excluded structures and other assets

1.A tunnel, bridge, viaduct, aqueduct, embankment or cutting.
2.A way, hard standing (such as a pavement), road, railway, tramway, a park for vehicles or containers, or an airstrip or runway.
3.An inland navigation, including a canal or basin or a navigable river.
4.A dam, reservoir or barrage, including any sluices, gates, generators and other equipment associated with the dam, reservoir or barrage.
5.A dock, harbour, wharf, pier, marina or jetty or any other structure in or at which vessels may be kept, or merchandise or passengers may be shipped or unshipped.
6.A dike, sea wall, weir or drainage ditch.
7.

Any structure not within items 1 to 6 other than—

(a)

a structure (but not a building) within Chapter 2 of Part 3 (meaning of “industrial building”),

(b)

a structure in use for the purposes of an undertaking for the extraction, production, processing or distribution of gas, and

(c)

a structure in use for the purposes of a trade which consists in the provision of telecommunication, television or radio services.

(2)The provision of a structure or other asset includes its construction or acquisition.

(3)In this section—

(a)structure” means a fixed structure of any kind, other than a building (as defined by section 21(3)), and

(b)land” does not include buildings or other structures, but otherwise has the meaning given in Schedule 1 to the Interpretation Act 1978 (c. 30).

(4)This section is subject to section 23 [F44(but any reference in list C in subsection (4) of that section to “plant” does not include anything where expenditure on its provision is excluded by this section)].

Textual Amendments

F44Words in s. 22(4) inserted (with effect in accordance with s. 35(3) of the amending Act) by Finance Act 2019 (c. 1), s. 35(2)

23 Expenditure unaffected by sections 21 and 22U.K.

(1)Sections 21 and 22 do not apply to any expenditure to which any of the provisions listed in subsection (2) applies.

(2)The provisions are—

  • section 28 (thermal insulation of F45...buildings);

  • F46...

  • F47...

  • F48...

  • F49...

  • section 33 (personal security);

  • [F50section 33A (integral features);]

  • section 71 (software and rights to software);

  • section [F51143 of ITTOIA 2005 or section] 40D of F(No.2)A 1992 (election relating to tax treatment of films expenditure).

(3)Sections 21 and 22 also do not affect the question whether expenditure on any item described in list C is, for the purposes of this Act, expenditure on the provision of plant or machinery.

(4)But items 1 to 16 of list C do not include any asset whose principal purpose is to insulate or enclose the interior of a building or to provide an interior wall, floor or ceiling which (in each case) is intended to remain permanently in place.

List C

Expenditure unaffected by sections 21 and 22

1.Machinery (including devices for providing motive power) not within any other item in this list.
2.

F52...Gas and sewerage systems provided mainly—

(a)

to meet the particular requirements of the qualifying activity, or

(b)

to serve particular plant or machinery used for the purposes of the qualifying activity.

3.F53. . .
4.Manufacturing or processing equipment; storage equipment (including cold rooms); display equipment; and counters, checkouts and similar equipment.
5.Cookers, washing machines, dishwashers, refrigerators and similar equipment; washbasins, sinks, baths, showers, sanitary ware and similar equipment; and furniture and furnishings.
6. [F54Hoists.]
7.Sound insulation provided mainly to meet the particular requirements of the qualifying activity.
8.Computer, telecommunication and surveillance systems (including their wiring or other links).
9.Refrigeration or cooling equipment.
10.Fire alarm systems; sprinkler and other equipment for extinguishing or containing fires.
11.Burglar alarm systems.
12.Strong rooms in bank or building society premises; safes.
13.Partition walls, where moveable and intended to be moved in the course of the qualifying activity.
14.Decorative assets provided for the enjoyment of the public in hotel, restaurant or similar trades.
15.Advertising hoardings; signs, displays and similar assets.
16.Swimming pools (including diving boards, slides and structures on which such boards or slides are mounted).
17.Any glasshouse constructed so that the required environment (namely, air, heat, light, irrigation and temperature) for the growing of plants is provided automatically by means of devices forming an integral part of its structure.
18.Cold stores.
19.Caravans provided mainly for holiday lettings.
20.Buildings provided for testing aircraft engines run within the buildings.
21.Moveable buildings intended to be moved in the course of the qualifying activity.
22.The alteration of land for the purpose only of installing plant or machinery.
23.The provision of dry docks.
24.The provision of any jetty or similar structure provided mainly to carry plant or machinery.
25.The provision of pipelines or underground ducts or tunnels with a primary purpose of carrying utility conduits.
26.The provision of towers to support floodlights.
27.

The provision of—

(a)

any reservoir incorporated into a water treatment works, or

(b)

any service reservoir of treated water for supply within any housing estate or other particular locality.

28.

The provision of—

(a)

silos provided for temporary storage, or

(b)

storage tanks.

29.The provision of slurry pits or silage clamps.
30.The provision of fish tanks or fish ponds.
31.The provision of rails, sleepers and ballast for a railway or tramway.
32.The provision of structures and other assets for providing the setting for any ride at an amusement park or exhibition.
33.The provision of fixed zoo cages.

(5)In item 19 of list C, “caravan” includes, in relation to a holiday caravan site, anything that is treated as a caravan for the purposes of—

(a)the Caravan Sites and Control of Development Act 1960 (c. 62), or

(b)the Caravans Act (Northern Ireland) 1963 (c. 17 (N.I.)).

Textual Amendments

F45Word in s. 23(2) omitted (with effect in accordance with s. 71(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 71(7)

F46Words in s. 23(2) omitted (with effect in accordance with s. 72(4) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 72(2)

F47S. 23(2) entry omitted (with effect in accordance with Sch. 39 para. 35 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 39 para. 34(2)(a)

F48S. 23(2) entry omitted (with effect in accordance with Sch. 39 para. 35 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 39 para. 34(2)(b)

F49S. 23(2) entry omitted (with effect in accordance with Sch. 39 para. 35 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 39 para. 34(2)(c)

F50Words in s. 23(2) inserted (with effect in accordance with s. 73(6) of the amending Act) by Finance Act 2008 (c. 9), s. 73(1)(a)

F51 Words in s. 23(2) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5) , s. 883(1) , Sch. 1 para. 530 (with Sch. 2 )

F52Words in s. 23(4) omitted (with effect in accordance with s. 73(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 73(1)(b)(i)

F53Words in s. 23(4) omitted (with effect in accordance with s. 73(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 73(1)(b)(ii)

F54Word in s. 23(4) substituted (with effect in accordance with s. 73(6) of the amending Act) by Finance Act 2008 (c. 9), s. 73(1)(b)(iii)

24 Interests in landU.K.

(1)For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on the acquisition of an interest in land.

(2)In this section “land” does not include—

(a)buildings or other structures, or

(b)any asset which is so installed or otherwise fixed to any description of land as to become, in law, part of the land,

but otherwise has the meaning given in Schedule 1 to the Interpretation Act 1978 (c. 30).

(3)Subject to subsection (2), “interest in land” has the meaning given by section 175 (definitions in connection with provisions about fixtures).

25 Building alterations connected with installation of plant or machineryU.K.

If a person carrying on a qualifying activity incurs capital expenditure on alterations to an existing building incidental to the installation of plant or machinery for the purposes of the qualifying activity, this Part applies as if—

(a)the expenditure were expenditure on the provision of the plant or machinery, and

(b)the works representing the expenditure formed part of the plant or machinery.

Demolition costsU.K.

26 Demolition costsU.K.

(1)This section applies if—

(a)plant or machinery is demolished, and

(b)the last use of the plant or machinery was for the purposes of a qualifying activity.

(2)If the person carrying on the qualifying activity replaces the plant or machinery with other plant or machinery then, for the purposes of this Part, the net cost of the demolition to that person is treated as expenditure incurred on the provision of the other plant or machinery.

(3)If the person carrying on the qualifying activity does not replace the plant or machinery, the net cost of the demolition to that person is allocated to the appropriate pool for the chargeable period in which the demolition takes place.

(4)In subsection (3)—

  • the appropriate pool” means the pool to which the expenditure on the demolished plant or machinery has been or would be allocated in accordance with this Part, and

  • the net cost of the demolition” means the amount, if any, by which the cost of the demolition exceeds any money received for the remains of the plant or machinery.

(5)Subsection (3) is subject to section 164(4) ([F55general decommissioning expenditure] before cessation of ring fence trade: election for special allowance) [F56and sections 165A to 165E (restrictions on allowances: anti-avoidance).]

Textual Amendments

F55Words in s. 26(5) substituted (with effect in accordance with s. 109(7) of the amending Act) by Finance Act 2008 (c. 9), Sch. 34 para. 3

F56Words in s. 26(5) inserted (with effect in accordance with Sch. 32 para. 8 of the amending Act) by Finance Act 2013 (c. 29), Sch. 32 para. 3

Expenditure on thermal insulation [F57and personal security] U.K.

Textual Amendments

F57Words in s. 27 cross-heading substituted (with effect in accordance with Sch. 39 para. 35 of the amending Act) by Finance Act 2012 (c. 14), Sch. 39 para. 34(3)(b)

27 Application of Part to thermal insulation [F58and personal security] U.K.

(1)Subsection (2) has effect in relation to expenditure if—

(a)it is expenditure to which [F59section 28 or 33] applies, and

(b)an allowance under Part 2 or a deduction in respect of the expenditure could not, in the absence of this section, be made in calculating the income from the qualifying activity in question.

(2)This Part (including in particular section 11(4)) applies as if—

(a)the expenditure were capital expenditure on the provision of plant or machinery for the purposes of the qualifying activity in question, and

(b)the person who incurred the expenditure owned plant or machinery as a result of incurring it.

Textual Amendments

F58Words in s. 27 heading substituted (with effect in accordance with Sch. 39 para. 35 of the amending Act) by Finance Act 2012 (c. 14), Sch. 39 para. 34(3)(b)

F59Words in s. 27(1)(a) substituted (with effect in accordance with Sch. 39 para. 35 of the amending Act) by Finance Act 2012 (c. 14), Sch. 39 para. 34(3)(a)

28 Thermal insulation of F60... buildingsU.K.

(1)This section applies to expenditure if a person carrying on a qualifying activity [F61other than an ordinary [F62UK] property business or an [F63ordinary overseas] property business] has incurred it in adding insulation against loss of heat to [F64a] building occupied by him for the purposes of [F65the qualifying activity].

(2)This section also applies to expenditure if a person carrying on a qualifying activity consisting of an ordinary [F62UK] [F66property] business [F67or an [F63ordinary overseas] property business] has incurred it in adding insulation against loss of heat to [F68a] building let by him in the course of the business.

[F69(2A)Subsection (2) is subject to section 35 (expenditure on plant or machinery for use in dwelling-house not qualifying expenditure).

(2B)This section does not apply to expenditure within subsection (2) if a deduction for that expenditure is allowable—

(a)under [F70section 251 of CTA 2009], or

(b)under section 312 of ITTOIA 2005,

(deductions for expenditure on energy-saving items).

(2C)For the purposes of subsection (2B), whether such a deduction is allowable is to be determined without regard to subsection (1)(e) of the section in question.]

F71(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F60Word in s. 28 heading omitted (with effect in accordance with s. 71(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 71(6)

F61Words in s. 28(1) substituted (with effect in accordance with s. 71(8) of the amending Act) by Finance Act 2008 (c. 9), s. 71(2)(a)

F62Word in s. 28(1)(2) inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(7)(a)

F63Words in s. 28(1)(2) substituted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(7)(b)

F64Word in s. 28(1) substituted (with effect in accordance with s. 71(8) of the amending Act) by Finance Act 2008 (c. 9), s. 71(2)(b)

F65Words in s. 28(1) substituted (with effect in accordance with s. 71(8) of the amending Act) by Finance Act 2008 (c. 9), s. 71(2)(c)

F66Word in s. 28(2) substituted (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), , Sch. 1 para. 531 (with Sch. 2)

F67Words in s. 28(2) inserted (with effect as mentioned in s. 69(2) of the amending Act) by Finance Act 2001 (c. 9), s. 69(1), Sch. 21 para. 1

F68Word in s. 28(2) substituted (with effect in accordance with s. 71(8) of the amending Act) by Finance Act 2008 (c. 9), s. 71(3)

F69S. 28(2A)-(2C) inserted (with effect in accordance with s. 71(8) of the amending Act) by Finance Act 2008 (c. 9), s. 71(4)

F70Words in s. 28(2B)(a) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 480 (with Sch. 2 Pts. 1, 2)

F71S. 28(3) omitted (with effect in accordance with s. 71(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 71(5)

F7229 Fire safetyU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F72S. 29 omitted (with effect in accordance with s. 72(4) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 72(1)

F7330 Safety at designated sports groundsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F73S. 30 repealed (with effect in accordance with Sch. 39 para. 35 of the amending Act) by Finance Act 2012 (c. 14), Sch. 39 para. 33(a)

F7431 Safety at regulated stands at sports groundsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F74S. 31 repealed (with effect in accordance with Sch. 39 para. 35 of the amending Act) by Finance Act 2012 (c. 14), Sch. 39 para. 33(b)

F7532 Safety at other sports groundsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F75S. 32 repealed (with effect in accordance with Sch. 39 para. 35 of the amending Act) by Finance Act 2012 (c. 14), Sch. 39 para. 33(c)

33 Personal securityU.K.

(1)This section applies to expenditure if—

(a)it is incurred by an individual or partnership of individuals in connection with the provision for, or for use by, the individual, or any of the individuals, of a security asset,

(b)the individual or partnership is carrying on a relevant qualifying activity, and

(c)the special threat conditions are met.

(2)The special threat conditions are that—

(a)the asset is provided or used to meet a threat which—

(i)is a special threat to the individual’s personal physical security, and

(ii)arises wholly or mainly because of the relevant qualifying activity, and

(b)the person incurring the expenditure—

(i)has the sole object of meeting that threat in incurring that expenditure, and

(ii)intends the asset to be used solely to improve personal physical security.

(3)If—

(a)the person incurring the expenditure intends the asset to be used solely to improve personal physical security, but

(b)there is another use which is incidental to improving personal physical security,

that other use is ignored for the purposes of this section.

(4)The fact that an asset improves the personal physical security of any member of the family or household of the individual concerned, as well as that of the individual, does not prevent this section from applying.

(5)If—

(a)the asset is not intended to be used solely to improve personal physical security, but the expenditure incurred on it would otherwise be expenditure to which this section applies, and

(b)the person incurring the expenditure intends the asset to be used partly to improve personal physical security,

this section applies only to the proportion of the expenditure attributable to the intended use to improve personal physical security.

(6)In this section “security asset” means an asset which improves personal security; and here “asset”—

(a)does not include—

(i)a car, ship or aircraft, or

(ii)a dwelling or grounds appurtenant to a dwelling, but

(b)subject to paragraph (a), includes equipment, a structure (such as a wall) and an asset which becomes fixed to land.

F76(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8)In this section “relevant qualifying activity” means a qualifying activity consisting of—

(a)a trade,

(b)an ordinary [F77UK] [F78property] business,

(c)a [F79UK furnished] holiday lettings business,

(d)an [F80ordinary overseas] property business, F81...

[F82(da)an EEA furnished holiday lettings business, or]

(e)a profession or vocation.

Textual Amendments

F76S. 33(7) omitted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 13 (with Sch. 11 paras. 30-32)

F77Word in s. 33(8)(b) inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(8)(a)

F78 Word in s. 33(8)(b) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5) , s. 883(1) , Sch. 1 para. 532 (with Sch. 2 )

F79Words in s. 33(8)(c) substituted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(8)(b)

F80Words in s. 33(8)(d) substituted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(8)(c)

F81Word in s. 33(8)(d) omitted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 14 para. 12(8)(d)

F82S. 33(8)(da) inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(8)(d)

[F83Expenditure on integral features]U.K.

Textual Amendments

F83Ss. 33A, 33B and cross-heading inserted (with effect in accordance with s. 73(6) of the amending Act) by Finance Act 2008 (c. 9), s. 73(2)

[F8333AExpenditure on provision or replacement of integral featuresU.K.

(1)This section applies where a person carrying on a qualifying activity incurs expenditure on the provision or replacement of an integral feature of a building or structure used by the person for the purposes of the qualifying activity.

(2)This Part (including in particular section 11(4)) applies as if—

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

(b)the person who incurred the expenditure owned plant or machinery as a result of incurring it.

(3)If the expenditure is qualifying expenditure, it may not be deducted in calculating the income from the qualifying activity.

(4)If the expenditure is not qualifying expenditure, whether it may be so deducted is to be determined without regard to this section.

(5)For the purposes of this section each of the following is an integral feature—

(a)an electrical system (including a lighting system),

(b)a cold water system,

(c)a space or water heating system, a powered system of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system,

(d)a lift, an escalator or a moving walkway,

(e)external solar shading.

(6)The items listed in subsection (5) do not include any asset whose principal purpose is to insulate or enclose the interior of a building or to provide an interior wall, floor or ceiling which (in each case) is intended to remain permanently in place.

(7)The Treasury may by order—

(a)provide that subsection (5) does not include a feature of a building or structure specified in the order, expenditure on which would (if not within subsection (5)) be qualifying expenditure other than special rate expenditure, and

(b)add to the list in subsection (5) a feature of a building or structure expenditure on the provision of which would not (apart from the order) be expenditure on the provision of plant or machinery.

(8)An order under subsection (7) may make such incidental, supplemental, consequential and transitional provision as the Treasury thinks fit.

Modifications etc. (not altering text)

C16S. 33A(3) excluded by 2005 c. 5, s. 55A(2) (as inserted (with effect in accordance with Sch. 4 paras. 56, 57 of the amending Act) by Finance Act 2013 (c. 29), Sch. 4 para. 11(3)

33BMeaning of “replacement” in section 33AU.K.

(1)Expenditure to which this section applies is to be treated for the purposes of section 33A as expenditure on the replacement of an integral feature.

(2)This section applies to expenditure incurred by a person on an integral feature if the amount of the expenditure is more than 50% of the cost of replacing the integral feature at the time the expenditure is incurred.

(3)Subsection (4) applies where—

(a)a person incurs expenditure (“initial expenditure”) on an integral feature which is not more than 50% of the cost of replacing the integral feature at the time it is incurred, but

(b)in the period of 12 months beginning with the initial expenditure being incurred the person incurs further expenditure on the integral feature.

(4)If the aggregate of—

(a)the amount of the initial expenditure, and

(b)the amount (or the aggregate of the amounts) of the further expenditure,

is more than 50% of the cost of replacing the integral feature at the time the initial expenditure was incurred, this section applies to the initial expenditure and the further expenditure.

(5)Where section 33A applies because of subsection (4), all such assessments and adjustments of assessments are to be made as are necessary to give effect to that section.]

Exclusion of certain types of expenditureU.K.

34 Expenditure by MPs and others on accommodationU.K.

(1)Expenditure is not qualifying expenditure if it is incurred by—

(a)a member of the House of Commons,

(b)a member of the Scottish Parliament,

(c)a member of the National Assembly for Wales, or

(d)a member of the Northern Ireland Assembly,

in or in connection with the provision or use of residential or overnight accommodation for the purpose given in subsection (2).

(2)The purpose is enabling the member to perform the duties of a member of the body in or about—

(a)the place where the body sits, or

(b)the constituency or region for which the member has been returned.

[F8434AExpenditure on plant or machinery for long funding leasing not qualifying expenditureU.K.

Expenditure is not qualifying expenditure if it is incurred on the provision of plant or machinery for leasing under a long funding lease (see Chapter 6A).]

Textual Amendments

F84S. 34A inserted (with effect in accordance with Sch. 8 para. 15 of the amending Act) by Finance Act 2006 (c. 25), Sch. 8 para. 3

35 Expenditure on plant or machinery for use in dwelling-house not qualifying expenditure in certain casesU.K.

(1)This section applies if a person is carrying on a qualifying activity consisting of—

(a)an ordinary [F85UK] [F86property] business,

(b)an [F87ordinary overseas] property business, or

(c)special leasing of plant or machinery.

(2)The person’s expenditure is not qualifying expenditure if it is incurred in providing plant or machinery for use in a dwelling-house.

(3)If plant or machinery is provided partly for use in a dwelling-house and partly for other purposes, such apportionment of the expenditure incurred in providing that plant or machinery is to be made for the purposes of subsection (2) as is just and reasonable.

Textual Amendments

F85Word in s. 35(1)(a) inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(9)(a)

F86Word in s. 35(1)(a) substituted (with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), , Sch. 1 para. 533 (with Sch. 2)

F87Words in s. 35(1)(b) substituted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(9)(b)

[F8836 Restriction on qualifying expenditure in case of employment or officeU.K.

(1)Where the qualifying activity consists of an employment or office—

(a)expenditure on the provision of a mechanically propelled road vehicle, or a cycle, is not qualifying expenditure, and

(b)other expenditure is qualifying expenditure only if the plant or machinery is necessarily provided for use in the performance of the duties of the employment or office.

(2) In this section “ cycle ” has the meaning given by section 192(1) of the Road Traffic Act 1988. ]

Textual Amendments

F88S. 36 substituted (with effect as mentioned in s. 59(3)(4) of the amending Act) by Finance Act 2001 (c. 9), s. 59(1)(3)(4)

37 Exclusion where sums payable in respect of depreciationU.K.

(1)Expenditure incurred by a person in providing plant or machinery for the purposes of a qualifying activity is not qualifying expenditure if it appears—

(a)that during the period during which the plant or machinery will be used for the purposes of the qualifying activity sums are, or are to be, payable to that person directly or indirectly, and

(b)that those sums are in respect of, or take account of, the whole of the depreciation of the plant or machinery resulting from its use for those purposes.

(2)Subsection (1) does not apply if the sums fall to be taken into account as income of the person or in calculating the profits of a qualifying activity carried on by him.

38 Production animals etc.U.K.

Expenditure is not qualifying expenditure if it is incurred on—

[F89(a)animals or other creatures to which section 30 of ITTOIA 2005 or section 50 of CTA 2009 (animals kept for trade purposes) applies,

(b)animals or other creatures to which Chapter 8 of Part 2 of ITTOIA 2005 or Chapter 8 of Part 3 of CTA 2009 (herd basis rules) applies, or

(c)shares in animals or creatures such as are mentioned in paragraph (a) or (b).]

Textual Amendments

F89S. 38(a)-(c) substituted for s. 38(a)(b) (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 481 (with Sch. 2 Pts. 1, 2)

[F9038ZAVehicles for which deductions allowed at fixed rate under Part 2 of ITTOIA 2005U.K.

Expenditure is not qualifying expenditure if—

(a)it is incurred in respect of a vehicle in a period, and

(b)a deduction is made for the period in respect of the expenditure under section 94D of ITTOIA 2005 (deduction allowable at fixed rate for expenditure on vehicles).]

Textual Amendments

F90S. 38ZA inserted (with effect in accordance with Sch. 5 para. 6 of the amending Act) by Finance Act 2013 (c. 29), Sch. 5 para. 5(2)

[F91Chapter 3AU.K.AIA qualifying expenditure

Textual Amendments

F91Pt. 2 Ch. 3A inserted (with effect in accordance with Sch. 24 para. 23 of the amending Act) by Finance Act 2008 (c. 9), Sch. 24 para. 2

38AAIA qualifying expenditureU.K.

(1)An annual investment allowance is not available unless the qualifying expenditure is AIA qualifying expenditure.

(2)Expenditure is AIA qualifying expenditure if—

(a)it is incurred by a qualifying person on or after the relevant date, and

(b)it is not excluded by any of the general exclusions in section 38B.

(3)Qualifying person” means—

(a)an individual,

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

(c)a company.

(4)In determining whether expenditure is AIA qualifying expenditure, any effect of section 12 on the time at which it is to be treated as incurred is to be disregarded.

(5)The relevant date” means—

(a)for corporation tax purposes, 1 April 2008, and

(b)for income tax purposes, 6 April 2008.

38BGeneral exclusions applying to section 38AU.K.

Expenditure within any of the following general exclusions is not AIA qualifying expenditure.

  • General exclusion 1

    The expenditure is incurred in the chargeable period in which the qualifying activity is permanently discontinued.

  • General exclusion 2

    The expenditure is incurred on the provision of a car (as defined by section [F92268A]).

  • General exclusion 3

    The expenditure is incurred wholly for the purposes of a ring fence trade in respect of which tax is chargeable under [F93section 330(1) of CTA 2010] (supplementary charge in respect of ring fence trades).

  • General exclusion 4

    The circumstances of the incurring of the expenditure are that—

    (a)

    the provision of the plant or machinery on which the expenditure is incurred is connected with a change in the nature or conduct of the trade or business carried on by a person other than the person incurring the expenditure, and

    (b)

    the obtaining of an annual investment allowance is the main benefit, or one of the main benefits, which could reasonably be expected to arise from the making of the change.

  • General exclusion 5

    Any of the following sections applies—

    • section 13 (use for qualifying activity of plant or machinery provided for other purposes);

    • section 13A (use for other purposes of plant or machinery provided for long funding leasing);

    • section 14 (use for qualifying activity of plant or machinery which is a gift).

    This is subject to section 161 (pre-trading expenditure on mineral exploration and access).]

Textual Amendments

F92Word in s. 38B substituted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 2 (with Sch. 11 paras. 30-32)

F93Words in s. 38B substituted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 324 (with Sch. 2)

Chapter 4U.K. First-year qualifying expenditure

GeneralU.K.

39 First-year allowances available for certain types of qualifying expenditure onlyU.K.

A first-year allowance is not available unless the qualifying expenditure is first-year qualifying expenditure under [F94any of the following provisions]

F95. . .F95. . .
F96. . .F96. . .
F95. . .F95. . .
F97. . .F97. . .
[F98section 45Dexpenditure on cars with low CO2 emissions,]
[F99section 45DA expenditure on zero-emission goods vehicles,]
[F100section 45Eexpenditure on plant or machinery for gas refuelling station] F101...
[F102section 45EA expenditure on plant or machinery for electric vehicle charging point]
[F103section 45Fexpenditure on plant and machinery for use wholly in a ring fence trade.]
F104. . .F104. . .
[F105section 45Kexpenditure on plant and machinery for use in designated assisted areas.]
[F106section 45O expenditure on plant and machinery for use in [F107special tax sites].]
[F108section 45S expenditure on plant or machinery in other cases]

Textual Amendments

F94Words in s. 39 inserted (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14), Sch. 30 para. 2(a)

F95S. 39 entries omitted (21.7.2008) by virtue of Finance Act 2008 (c. 9), s. 76(5)(a) (with s. 76(7)(8))

F96S. 39 entry omitted (with effect in accordance with s. 75(5)-(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 75(3)(a)

F97Words in s. 39 omitted (with effect in accordance with s. 33(5) of the amending Act) by virtue of Finance Act 2019 (c. 1), s. 33(2)(b)(iii)(a)

F98Words in s. 39 inserted (with effect as mentioned in s. 59 of the amending Act) by Finance Act 2002 (c. 23), s. 59, Sch. 19 para. 2

F99Words in s. 39 inserted (with effect in accordance with Sch. 7 para. 7 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 7 para. 2

F100Words in s. 39 inserted (with effect as mentioned in s. 61 of the amending Act) by Finance Act 2002 (c. 23), s. 61, Sch. 20 para. 2

F101Word in s. 39 repealed (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14), Sch. 30 para. 2(b), Sch. 43 Pt. 3(9)

F102Words in s. 39 inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), s. 38(2)

F103Words in s. 39 inserted (with effect as mentioned in s. 63 of the amending Act) by Finance Act 2002 (c. 23), s. 63, Sch. 21 para. 2

F104Words in s. 39 omitted (with effect in accordance with s. 33(5) of the amending Act) by virtue of Finance Act 2019 (c. 1), s. 33(2)(b)(iii)(b)

F105Words in s. 39 inserted (with effect in accordance with Sch. 11 para. 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 11 para. 2

F106Words in s. 39 inserted (10.6.2021) by Finance Act 2021 (c. 26), Sch. 22 para. 2

F108Words in s. 39 inserted (22.2.2024) by Finance (No. 2) Act 2023 (c. 30), s. 7(2) (as amended by Finance Act 2024 (c. 3), s. 1(2)(a))

Types of expenditure which may qualify for first-year allowancesU.K.

F10940 Expenditure incurred for Northern Ireland purposes by small or medium-sized enterprisesU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F109Ss. 40-43 omitted (with application in accordance with s. 76(7) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 76(2) (with s. 76(8))

F10941 Miscellaneous exclusions from section 40 (expenditure for Northern Ireland purposes etc.)U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F109Ss. 40-43 omitted (with application in accordance with s. 76(7) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 76(2) (with s. 76(8))

F10942 Exclusion of plant or machinery partly for use outside Northern IrelandU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F109Ss. 40-43 omitted (with application in accordance with s. 76(7) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 76(2) (with s. 76(8))

F10943 Effect of plant or machinery subsequently being primarily for use outside Northern IrelandU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F109Ss. 40-43 omitted (with application in accordance with s. 76(7) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 76(2) (with s. 76(8))

F11044 Expenditure incurred by small or medium-sized enterprisesU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F110S. 44 omitted (with effect in accordance with s. 75(5)-(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 75(2)

F11145 ICT expenditure incurred by small enterprisesU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F111S. 45 omitted (21.7.2008) by virtue of Finance Act 2008 (c. 9), s. 76(3) (with s. 76(7)(8))

F11245A Expenditure on energy-saving plant or machineryU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F112Ss. 45A-45C repealed (with effect in accordance with s. 33(5) of the amending Act) by Finance Act 2019 (c. 1), s. 33(1)(a)

F11245AASection 45A exclusion: feed-in tariffs and renewable heat incentives U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F112Ss. 45A-45C repealed (with effect in accordance with s. 33(5) of the amending Act) by Finance Act 2019 (c. 1), s. 33(1)(a)

F11245B Certification of energy-saving plant and machineryU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F112Ss. 45A-45C repealed (with effect in accordance with s. 33(5) of the amending Act) by Finance Act 2019 (c. 1), s. 33(1)(a)

F11245C Energy-saving components of plant or machineryU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F112Ss. 45A-45C repealed (with effect in accordance with s. 33(5) of the amending Act) by Finance Act 2019 (c. 1), s. 33(1)(a)

45D Expenditure on cars with low carbon dioxide emissionsU.K.

(1)Expenditure is first-year qualifying expenditure if—

(a)it is incurred in the period beginning with 17th April 2002 and ending with 31st March [F1132025],

(b)it is expenditure on a car which is first registered on or after 17th April 2002 and which is unused and not second-hand,

[F114(c)the car—

(i)is electrically-propelled, or

(ii)has low CO2 emissions, and]

(d)the expenditure is not excluded by section 46 (general exclusions).

[F115(1A)The Treasury may by order amend subsection (1)(a) so as to extend the period specified.]

(2) For the purposes of this section [F116a car has low CO2 emissions if it] satisfies the conditions in subsections (3) and (4).

(3) The first condition is that, when the car is first registered, it is so registered on the basis of [F117a qualifying emissions certificate.]

(4) The second condition is that the applicable CO 2 emissions figure [F118in relation to] the car does not exceed [F1190] grams per kilometre driven.

F120(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F120(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)The Treasury may by order amend the amount from time to time specified in subsection (4).

(8)In this section any reference to a car [F121is to a car within the meaning of section 268A, except that it]

(a)includes a reference to a mechanically propelled road vehicle of a type commonly used as a hackney carriage, F122...

F122(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F123(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F123(10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F124(11)In this section—

  • “applicable CO2 emissions figure” and “qualifying emissions certificate” have the meanings given in section 268C;

  • electrically-propelled” has the meaning given in section 268B.]

Textual Amendments

F114S. 45D(1)(c) substituted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 14(2) (with Sch. 11 paras. 30-32)

F115S. 45D(1A) inserted (17.7.2014) by Finance Act 2014 (c. 26), s. 64(2)

F116Words in s. 45D(2) substituted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 14(3) (with Sch. 11 paras. 30-32)

F117Words in s. 45D(3) substituted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 14(4) (with Sch. 11 paras. 30-32)

F118Words in s. 45D(4) substituted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 14(5) (with Sch. 11 paras. 30-32)

F119Word in s. 45D(4) substituted (with effect in accordance with art. 1(2)(a) of the amending S.I.) by The Capital Allowances Act 2001 (Car Emissions) (Extension of First-year Allowances) (Amendment) Order 2021 (S.I. 2021/120), arts. 1(1), 3(b)

F120S. 45D(5)(6) omitted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 14(6) (with Sch. 11 paras. 30-32)

F121Words in s. 45D(8) inserted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 14(7)(a) (with Sch. 11 paras. 30-32)

F122S. 45D(8)(b) and preceding word omitted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 14(7)(b) (with Sch. 11 paras. 30-32)

F123S. 45D(9)(10) omitted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 14(8) (with Sch. 11 paras. 30-32)

F124S. 45D(11) inserted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 14(9) (with Sch. 11 paras. 30-32)

[F12545DAExpenditure on zero-emission goods vehiclesU.K.

(1)Expenditure is first-year qualifying expenditure if—

(a)it is incurred in the period of [F12615 years] beginning with the relevant date,

(b)it is incurred on the provision of a zero-emission goods vehicle,

(c)the vehicle is unused and not second-hand,

(d)the vehicle is registered, and

(e)the expenditure is not excluded by section 46 (general exclusions).

[F127(1A)The Treasury may by order amend subsection (1)(a) so as to extend the period specified.]

(2)For the purposes of subsection (1)(d) it does not matter whether the vehicle is first registered before or after the expenditure is incurred.

(3)In this section—

  • goods vehicle” means a mechanically propelled road vehicle which is of a design primarily suited for the conveyance of goods or burden of any description;

  • the relevant date” means—

    (a)

    in the case of expenditure incurred by a person within the charge to corporation tax, 1 April 2010, and

    (b)

    in the case of expenditure incurred by a person within the charge to income tax, 6 April 2010;

  • zero-emission goods vehicle” means a goods vehicle which cannot in any circumstances emit CO2 by being driven.

(4)The Treasury may by order amend this Chapter so as to provide for specified descriptions of vehicles to be treated, or not to be treated, as goods vehicles for the purposes of this section.

(5)This section is subject to section 45DB.

Textual Amendments

F125Ss. 45DA, 45DB inserted (with effect in accordance with Sch. 7 para. 7 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 7 para. 3

F127S. 45DA(1A) inserted (17.7.2014) by Finance Act 2014 (c. 26), s. 64(3)

45DBExclusions from allowances under section 45DAU.K.

(1)Expenditure incurred by a person is not first-year qualifying expenditure under section 45DA if it is within subsection (2), (4) or (6).

(2)Expenditure is within this subsection if, at the time a claim is made under section 3 for a section 45DA allowance in respect of the expenditure, the person who incurred the expenditure is, or forms part of, an undertaking within subsection (3).

(3)An undertaking is within this subsection if one or both of the following conditions are met—

(a)it is reasonable to assume that the undertaking would be regarded as [F128an undertaking in difficulty for the purposes of the General Block Exemption Regulation];

(b)the undertaking is subject to an outstanding recovery order made by virtue of Article 108(2) of the Treaty on the Functioning of the European Union (Commission Decision declaring aid illegal and incompatible with the common market).

(4)Expenditure is within this subsection if it is incurred for the purposes of a qualifying activity—

(a)in the fishery or aquaculture sector, as covered by [F129Regulation (EU) No 1379/2013 of the European Parliament and of the Council], or

(b)relating to the management of waste of undertakings.

(5)In subsection (4)(b) the reference to waste of undertakings does not include waste of the person who incurred the expenditure or of any other person forming part of the same undertaking as that person.

(6)Expenditure is within this subsection to the extent that it is taken into account for the purposes of a relevant grant, or relevant payment, made towards that expenditure.

(7)A grant or payment is relevant if it is—

(a)a F130... State aid, other than an allowance under this Part, or

(b)a grant or subsidy, other than a F130... State aid, which the Treasury by order declares to be relevant for the purposes of the withholding of a section 45DA allowance.

(8)If a relevant grant or relevant payment towards the expenditure is made after the making of a section 45DA allowance, the allowance is to be withdrawn F131....

(9)All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (8).

(10)Any such assessment or adjustment is not out of time if it is made within 3 years of the end of the chargeable period in which the grant or payment was made.

(11)In this section—

  • General Block Exemption Regulation” means Commission Regulation [F132(EU) No 651/2014] (General block exemption Regulation) [F133as it had effect in the United Kingdom immediately before IP completion day];

  • “management” and “waste” have the meaning given by Article 1 of Directive 2006/12/EC of the European Parliament and of the Council;

  • F134. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  • section 45DA allowance” means a first year allowance in respect of expenditure that is first-year qualifying expenditure under section 45DA;

  • undertaking” means—

    (a)

    an autonomous enterprise, or

    (b)

    an enterprise (not within paragraph (a)) and its partner enterprises (if any) and its linked enterprises (if any),

    and for this purpose “enterprise”, “autonomous enterprise”, “partner enterprises” and “linked enterprises” have the meaning given by Annex 1 to the General Block Exemption Regulation.

[F135(11A)Nothing in this section limits references to “State aid” to State aid which is required to be notified to and approved by the European Commission.]

(12)The Treasury may by order make such provision amending this section as appears to them appropriate for the purpose of giving effect to any future amendments of or instrument replacing—

(a)the General Block Exemption Regulation,

(b)the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02),

[F136(c)Regulation (EU) No 1379/2013 of the European Parliament and of the Council,]

(d)Directive 2006/12/EC of the European Parliament and of the Council, or

(e)the Treaty on the Functioning of the European Union.]

Textual Amendments

F125Ss. 45DA, 45DB inserted (with effect in accordance with Sch. 7 para. 7 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 7 para. 3

F128Words in s. 45DB(3)(a) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 2(2)

F129Words in s. 45DB(4)(a) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 2(3)

F130Word in s. 45DB(7) omitted (with effect in accordance with s. 45(8)(9) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 45(4)

F131Words in s. 45DB(8) omitted (with effect in accordance with s. 45(8)(9) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 45(5)

F132Words in s. 45DB(11) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 2(4)

F134Words in s. 45DB(11) omitted (with effect in accordance with s. 45(8)(9) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 45(6)

F135S. 45DB(11A) inserted (with effect in accordance with s. 45(8)(9) of the amending Act) by Finance Act 2015 (c. 11), s. 45(7)

F136S. 45DB(12)(c) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 2(5)

[F13745E Expenditure on plant or machinery for gas refuelling stationU.K.

(1)Expenditure is first-year qualifying expenditure if—

(a)it is incurred in the period beginning with 17th April 2002 and ending with 31st March [F1382025],

(b)it is expenditure on plant or machinery for a gas refuelling station where the plant or machinery is unused and not second-hand, and

(c)it is not excluded by section 46 (general exclusions).

[F139(1A)The Treasury may by order amend subsection (1)(a) so as to extend the period specified.]

(2)For the purposes of this section expenditure on plant or machinery for a gas refuelling station is expenditure on plant or machinery installed at a gas refuelling station for use solely for or in connection with refuelling vehicles with natural gas[F140, biogas] or hydrogen fuel.

(3)For the purposes of subsection (2) the plant or machinery which is for use for or in connection with refuelling vehicles with natural gas[F140, biogas] or hydrogen fuel includes—

(a)any storage tank for natural gas [F140, biogas] or hydrogen fuel,

(b)any compressor, pump, control or meter used for or in connection with refuelling vehicles with natural gas[F140, biogas] or hydrogen fuel, and

(c)any equipment for dispensing natural gas[F140, biogas] or hydrogen fuel to the fuel tank of a vehicle.

(4)For the purposes of this section—

  • [F141biogas” means gas produced by the anaerobic conversion of organic matter and used for propelling vehicles;]

  • gas refuelling station” means any premises, or that part of any premises, where vehicles are refuelled with natural gas[F140, biogas] or hydrogen fuel;

  • hydrogen fuel” means a fuel consisting of gaseous or cryogenic liquid hydrogen which is used for propelling vehicles;

  • vehicle” means a mechanically propelled road vehicle.]

Textual Amendments

F137S. 45E inserted (with effect as mentioned in s. 61 of the amending Act) by Finance Act 2002 (c. 23), s. 61, Sch. 20 para. 3

F139S. 45E(1A) inserted (17.7.2014) by Finance Act 2014 (c. 26), s. 64(4)

F140Word in s. 45E inserted (with effect in accordance with s. 78(5) of the amending Act) by Finance Act 2008 (c. 9), s. 78(3)

F141Words in s. 45E(4) inserted (with effect in accordance with s. 78(5) of the amending Act) by Finance Act 2008 (c. 9), s. 78(4)

[F14245EAExpenditure on plant or machinery for electric vehicle charging pointU.K.

(1)Expenditure is first-year qualifying expenditure if—

(a)it is incurred in the relevant period,

(b)it is expenditure on plant or machinery for an electric vehicle charging point where the plant or machinery is unused and not second-hand, and

(c)it is not excluded by section 46 (general exclusions).

(2)For the purposes of this section expenditure on plant or machinery for an electric vehicle charging point is expenditure on plant or machinery installed solely for the purpose of charging electric vehicles.

(3)The “relevant period” is the period beginning with 23 November 2016 and ending with—

(a)in the case of expenditure incurred by a person within the charge to corporation tax, 31 March [F1432025], and

(b)in the case of expenditure incurred by a person within the charge to income tax, 5 April [F1442025].

(4)The Treasury may by regulations amend subsection (3) so as to extend the relevant period.

(5)In this section—

  • electric vehicle” means a road vehicle that can be propelled by electrical power (whether or not it can also be propelled by another kind of power);

  • electric vehicle charging point” means a facility for charging an electric vehicle.]

Textual Amendments

F142S. 45EA inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), s. 38(3)

F143Word in s. 45EA(3)(a) substituted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), s. 9

F144Word in s. 45EA(3)(b) substituted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), s. 9

[F14545F Expenditure on plant and machinery for use wholly in a ring fence tradeU.K.

(1)Expenditure is first-year qualifying expenditure if—

(a)it is incurred on or after 17th April 2002,

(b)it is incurred by a company,

(c)it is incurred on the provision of plant or machinery for use wholly for the purposes of a ring fence trade, and

(d)it is not excluded by section 46 (general exclusions).

(2)This section is subject to section 45G (plant or machinery used for less than five years in a ring fence trade).

(3) In this section “ ring fence trade ” means a ring fence trade in respect of which tax is chargeable under [F146section 330(1) of CTA 2010] (supplementary charge in respect of ring fence trades). ]

Textual Amendments

F145S. 45F inserted (with effect as mentioned in s. 63 of the amending Act) by Finance Act 2002 (c. 23), s. 63, Sch. 21 para. 3

F146Words in s. 45F(3) substituted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 325 (with Sch. 2)

[F14745G Plant or machinery used for less than five years in a ring fence tradeU.K.

(1)Expenditure incurred by a company on the provision of plant or machinery is to be treated as never having been first-year qualifying expenditure under section 45F if the plant or machinery—

(a)is at no time in the relevant period used in a ring fence trade carried on by the company or a company connected with it, or

(b)is at any time in the relevant period used for a purpose other than that of a ring fence trade carried on by the company or a company connected with it.

(2) For the purposes of this section “ the relevant period ” means whichever of the following periods, beginning with the incurring of the expenditure, first ends, namely—

(a)the period ending with the fifth anniversary of the incurring of the expenditure, or

(b)the period ending with the day preceding the first occasion on which the plant or machinery, after becoming owned by the company which incurred the expenditure, is not owned by a company which is either that company or a company connected with it.

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

(4)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, he must give notice to [F148an officer of Revenue and Customs] specifying how the return needs to be amended.

(5)The notice 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.

(6) In this section “ ring fence trade ” has the same meaning as in section 45F. ]

Textual Amendments

F147S. 45G inserted (with effect as mentioned in s. 63 of the amending Act) by Finance Act 2002 (c. 23), s. 63, Sch. 21 para. 4

F14945HExpenditure on environmentally beneficial plant or machineryU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F149Ss. 45H-45J repealed (with effect in accordance with s. 33(5) of the amending Act) by Finance Act 2019 (c. 1), s. 33(1)(b)

F14945ICertification of environmentally beneficial plant and machineryU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F149Ss. 45H-45J repealed (with effect in accordance with s. 33(5) of the amending Act) by Finance Act 2019 (c. 1), s. 33(1)(b)

F14945JEnvironmentally beneficial components of plant or machineryU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F149Ss. 45H-45J repealed (with effect in accordance with s. 33(5) of the amending Act) by Finance Act 2019 (c. 1), s. 33(1)(b)

[F15045KExpenditure on plant and machinery for use in designated assisted areasU.K.

(1)Expenditure is first-year qualifying expenditure if—

(a)it is incurred by a company on the provision of plant or machinery for use primarily in an area which at the time the expenditure is incurred is a designated assisted area,

(b)it is incurred in the period F151... beginning with [F152the date on which the area is (or is treated as) designated under subsection (2)(a)] [F153and ending with whichever is the later of the day immediately before the eighth anniversary of that date or 31st March 2021],

(c)Conditions A to E are met.

[F154(1A)The Treasury may by order amend subsection (1)(b) so as to extend the period specified.]

(2)Designated assisted area” means an area which—

(a)is designated by an order made by the Treasury, and

(b)falls wholly within an assisted area.

(3)An area may be designated by an order under subsection (2)(a) only if at the time the order is made—

(a)the area falls wholly within an enterprise zone, and

(b)a memorandum of understanding, in respect of the area, relating to the availability of allowances in respect of expenditure to which this section applies has been entered into by the Treasury and the responsible authority for the area.

(4)An order made under subsection (2)(a) may provide that an area designated by the order is to be treated as having been so designated at times falling before the order is made.

(5)But where an area has previously been designated by an order under subsection (2)(a), section 14 of the Interpretation Act 1978 does not apply, by virtue of subsection (4), so as to imply a power to make an order (“the new order”) treating that area (or any part of it) as if it were not so designated at times falling before the new order is made.

(6)Condition A is that the company is within the charge to corporation tax.

(7)Condition B is that the expenditure is incurred for the purposes of a qualifying activity within section 15(1)(a) or (f).

(8)Condition C is that the expenditure is incurred for the purposes of—

(a)a business of a kind not previously carried on by the company,

(b)expanding a business carried on by the company, or

(c)starting up an activity which relates to a fundamental change in a product or production process of, or service provided by, a business carried on by the company.

[F155(8A)Condition C is met by virtue of subsection (8)(c) only if the amount of the expenditure exceeds the amount by which the relevant plant or machinery is depreciated in the period of 3 years ending immediately before the beginning of the chargeable period in which the expenditure is incurred.

(8B)Relevant plant or machinery” means the plant or machinery being used at the end of the period of 3 years mentioned in subsection (8A) for the purposes of the product, process or service mentioned in subsection (8)(c).]

(9)Condition D is that the plant or machinery is unused and not second-hand.

(10)Condition E is that the expenditure is not replacement expenditure.

(11)Replacement expenditure” means expenditure incurred on the provision of plant or machinery (“new plant or machinery”) intended to perform the same or a similar function, for the purposes of the qualifying activity of the company, as other plant or machinery (“replaced plant or machinery”)—

(a)on which the company has previously incurred qualifying expenditure, and

(b)which has been superseded by the new plant or machinery.

(12)But if and to the extent that—

(a)the expenditure is incurred on the provision of new plant or machinery that is capable of and intended to perform a significant additional function, when compared to the replaced plant or machinery, and

(b)the additional function enhances the capacity or productivity of the qualifying activity in question,

so much of the expenditure as is attributable to the additional function is not to be regarded as replacement expenditure.

(13)The part of the expenditure attributable to the additional function is to be determined on a just and reasonable basis.

(14)In this section—

  • assisted area” means—

    (a)

    an area specified as a development area under section 1 of the Industrial Development Act 1982, or

    (b)

    Northern Ireland;

  • enterprise zone” means an area recognised by the Treasury as an area in respect of which there is a special focus on economic development and identified on a map published by the Treasury for the purposes of this section;

  • “the responsible authority”, for an area, means—

    (a)

    if the area is in England, a local authority for all or part of the area or two or more such local authorities,

    (b)

    if the area is in Scotland, the Scottish Ministers,

    (c)

    if the area is in Wales, the Welsh Ministers, and

    (d)

    if the area is in Northern Ireland, the Department of Enterprise, Trade and Investment in Northern Ireland.

(15)The Treasury may by order amend the definition of “assisted area” in subsection (14) in consequence of any changes made to the areas in the United Kingdom granted assisted area status by virtue of Article 107(3) of the Treaty on the Functioning of the European Union.

(16)This section is subject to—

  • section 45L (plant or machinery partly for use outside designated assisted areas),

  • section 45M (exclusions from section 45K allowances),

  • section 45N (effect of plant or machinery subsequently being primarily used in an area other than a designated assisted area), and

  • section 46 (general exclusions).

Textual Amendments

F150Ss. 45K-45N inserted (with effect in accordance with Sch. 11 para. 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 11 para. 3

F152Words in s. 45K(1)(b) substituted (15.9.2016) by Finance Act 2016 (c. 24), s. 69

F154S. 45K(1A) inserted (17.7.2014) by Finance Act 2014 (c. 26), s. 64(5)(b)

F155S. 45K(8A)(8B) inserted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 3

45LExclusion of plant or machinery partly for use outside designated assisted areasU.K.

(1)Expenditure on plant or machinery is not first-year qualifying expenditure under section 45K if—

(a)at the time when it is incurred, the company incurring it intends the plant or machinery to be used partly in a non-designated area, and

(b)the main purpose, or one of the main purposes, for which any person is a party to the relevant arrangements is the obtaining of a first-year allowance, or a greater first-year allowance, in respect of the part of the expenditure that is attributable to that intended use in a non-designated area.

(2)For the purposes of subsection (1)(b), the part of the expenditure that is attributable to that intended use in a non-designated area is to be determined on a just and reasonable basis.

(3)In this section—

  • non-designated area” means an area which is not a designated assisted area within the meaning of section 45K;

  • the relevant arrangements” means—

    (a)

    the transaction under which the expenditure is incurred, and

    (b)

    any scheme or arrangements of which that transaction forms part.

Textual Amendments

F150Ss. 45K-45N inserted (with effect in accordance with Sch. 11 para. 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 11 para. 3

45MExclusions from allowances under section 45KU.K.

(1)Expenditure incurred by a person is not first-year qualifying expenditure under section 45K if it is within subsection (2), (4), [F156(7) or (7A)].

(2)Expenditure is within this subsection if, at the time a claim is made under section 3 for a section 45K allowance in respect of the expenditure, the person who incurred the expenditure is, or forms part of, an undertaking within subsection (3).

(3)An undertaking is within this subsection if one or both of the following conditions are met—

(a)it is reasonable to assume that the undertaking would be regarded as [F157an undertaking in difficulty for the purposes of the General Block Exemption Regulation];

(b)the undertaking is subject to an outstanding recovery order made by virtue of Article 108(2) of the Treaty on the Functioning of the European Union (Commission Decision declaring aid illegal and incompatible with the common market).

(4)Expenditure is within this subsection if it is incurred for the purposes of a qualifying activity—

(a)in the fishery or aquaculture sector, as covered by [F158Regulation (EU) No 1379/2013 of the European Parliament and of the Council],

(b)in the coal sector, steel sector, shipbuilding sector or synthetic fibres sector,

[F159(ba)in the transport sector or related infrastructure,

(bb)relating to energy generation, distribution or infrastructure,

(bc)relating to the development of broadband networks,]

(c)relating to the management of waste of undertakings, or

(d)relating to—

(i)the primary production of agricultural products,

(ii)on-farm activities necessary for preparing an animal or plant product for the first sale, or

(iii)the first sale of agricultural products by a primary producer to wholesalers, retailers or processors, in circumstances where that sale does not take place on separate premises reserved for that purpose.

[F160(4A)Expressions used in subsection (4)(b), (ba), (bb) or (bc) and in the General Block Exemption Regulation have the same meaning as in that Regulation.]

(5)In subsection (4)(c) the reference to waste of undertakings does not include waste of the person who incurred the expenditure or of any other person forming part of the same undertaking as that person.

F161(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)Expenditure is within this subsection if a relevant grant or relevant payment is made towards—

(a)that expenditure, or

(b)any other expenditure which is incurred by any person in respect of the same designated assisted area, and on the same single investment project, as that expenditure.

[F162(7A)Expenditure is within this subsection if—

(a)the area by reference to which the condition in section 45K(1)(a) is met is not an area which falls within Article 107(3)(a) of the Treaty on the Functioning of the European Union,

(b)the condition in section 45K(8)(a) is not met in relation to the expenditure, and

(c)at the time the expenditure is incurred the company is not an SME for the purposes of the General Block Exemption Regulation.]

(8)A section 45K allowance made in respect of first-year qualifying expenditure is to be withdrawn if—

(a)after it is made, a relevant grant or relevant payment is made towards that expenditure, or

(b)within the period of 3 years beginning when that expenditure was incurred, a relevant grant or relevant payment is made towards any other expenditure which is incurred by any person in respect of the same designated assisted area, and on the same single investment project, as that expenditure.

(9)All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (8).

(10)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, that person must give notice to an officer of Revenue and Customs specifying how the return needs to be amended.

(11)The notice 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.

(12)In this section—

  • agricultural product”, [F163has] the same meaning as in the General Block Exemption Regulation;

  • General Block Exemption Regulation” means Commission Regulation [F164(EU) No 651/2014] (General block exemption Regulation)[F165as it had effect in the United Kingdom immediately before IP completion day];

  • “management” and “waste” have the meaning given by Article 1 of Directive 2006/12/EC of the European Parliament and of the Council;

  • relevant grant or relevant payment” means a grant or payment which is—

    (a)

    a State aid, other than an allowance under this Part, or

    (b)

    a grant or subsidy, other than a State aid, which the Treasury by order declares to be relevant for the purposes of the witholding of a section 45K allowance;

  • section 45K allowance” means a first-year allowance in respect of expenditure that is first-year qualifying expenditure under section 45K;

  • single investment project” has the same meaning as in the General Block Exemption Regulation;

  • undertaking” means—

    (a)

    an autonomous enterprise, or

    (b)

    an enterprise (not within paragraph (a)) and its partner enterprises (if any) and its linked enterprises (if any),

    and for this purpose “enterprise”, “autonomous enterprise”, “partner enterprises” and “linked enterprises” have the meaning given by Annex 1 to the General Block Exemption Regulation.

(13)Nothing in this section limits references to “State aid” to State aid which is required to be notified to and approved by the European Commission.

(14)For the purposes of this section references to expenditure incurred in respect of a designated assisted area includes expenditure incurred on the provision of things for use primarily in that area or on services to be provided primarily in that area.

(15)The Treasury may by order make such provision amending this section as appears to them appropriate for the purpose of giving effect to any future amendments of or instruments replacing—

(a)the General Block Exemption Regulation,

(b)the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02),

[F166(c)Regulation (EU) No 1379/2013 of the European Parliament and of the Council,]

(d)Directive 2006/12/EC of the European Parliament and of the Council, or

(e)the Treaty on the Functioning of the European Union.

Textual Amendments

F150Ss. 45K-45N inserted (with effect in accordance with Sch. 11 para. 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 11 para. 3

F156Words in s. 45M(1) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(2)

F157Words in s. 45M(3)(a) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(3)

F158Words in s. 45M(4)(a) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(4)(a)

F159Ss. 45M(4)(ba)-(bc) inserted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(4)(b)

F160S. 45M(4A) inserted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(5)

F161S. 45M(6) omitted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 13 para. 4(6)

F162S. 45M(7A) inserted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(7)

F163Word in s. 45M(12) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(8)(a)

F164Words in s. 45M(12) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(8)(b)

F166S. 45M(15)(c) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(9)

45NEffect of plant or machinery subsequently being primarily for use outside designated assisted areasU.K.

(1)Expenditure on the provision of plant or machinery is to be treated as never having been first-year qualifying expenditure under section 45K if, at any relevant time—

(a)the primary use to which the plant and machinery is put is other than in an area which was a [F167relevant area] at the time the expenditure was incurred, or

(b)the plant or machinery is held for use otherwise than primarily in an area which was [F168a relevant] area at that time.

(2)Relevant time” means a time which—

(a)falls within the relevant period, and

(b)is a time when the plant or machinery is owned by—

(i)the person who incurred the expenditure, or

(ii)a person who is, or at any time in that period has been, connected with that person.

(3)The relevant period” means the period of 5 years beginning with—

(a)the day on which the plant or machinery in question is first brought into use for the purposes of a qualifying activity carried on by the company, or

(b)if earlier, the day on which it is first held for such use.

[F169(3A)“Relevant area” means—

(a)in relation to expenditure which would be within subsection (7A) of section 45M if paragraph (a) of that subsection were omitted, a designated assisted area within the meaning of section 45K which falls within Article 107(3)(a) of the Treaty on the Functioning of the European Union, and

(b)in relation to any other expenditure, a designated assisted area within the meaning of section 45K.]

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

(5)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, that person must give notice to an officer of Revenue and Customs specifying how the return needs to be amended.

(6)The notice 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.]

Textual Amendments

F150Ss. 45K-45N inserted (with effect in accordance with Sch. 11 para. 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 11 para. 3

F167Words in s. 45N(1) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 5(2)(a)

F168Words in s. 45N(1) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 5(2)(b)

F169S. 45N(3A) inserted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 5(3)

[F17045OExpenditure on plant and machinery for use in [F171special tax sites] U.K.

(1)Expenditure incurred by a company on the provision of plant or machinery is first-year qualifying expenditure if conditions A to E are met.

(2)Condition A is that the plant or machinery is for use primarily in an area which, at the time the expenditure is incurred, is a [F171special tax site].

(3)Condition B is that the plant or machinery is unused and is not second-hand.

(4)Condition C is that the expenditure is incurred for the purposes of a qualifying activity within section 15(1)(a) or (f).

(5)Condition D is that the expenditure is incurred on or before [F172the applicable sunset date in relation to the special tax site concerned (as to which see section 332(4) and (5) of F(No.2)A 2023)].

(6)Condition E is that the company is within the charge to corporation tax.

(7)This section is subject to—

  • regulations under section 45P,

  • section 45Q (exclusion of plant or machinery partly for use outside [F171special tax sites]),

  • [F173section 45R (effect of failing to comply with ongoing requirements) and regulations under that section, and]

  • section 46 (general exclusions).

Textual Amendments

F170Ss. 45O-45R inserted (10.6.2021) by Finance Act 2021 (c. 26), Sch. 22 para. 3

F172Words in s. 45O(5) substituted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), s. 332(2)(4)

F173Words in s. 45O(7) substituted (24.2.2022) by Finance Act 2022 (c. 3), Sch. 16 para. 2

45PPower to amend conditionsU.K.

(1)The Treasury may by regulations change the conditions that must be met in order for expenditure to be first-year qualifying expenditure under section 45O (whether by adding, removing or altering conditions).

(2)Regulations under this section may not remove the requirement for the plant or machinery to be for use primarily in an area which, at the time the expenditure is incurred, is a [F171special tax site].

(3)Regulations under this section may, among other things—

(a)make provision by reference to the expenditure, the plant or machinery, the company that incurred the expenditure or a person who is or has been connected with that company;

(b)impose conditions relating to accounts or other records;

(c)impose other conditions requiring a person to take steps specified in the regulations;

(d)make different provision for different purposes;

(e)include incidental, supplementary, consequential, transitional or transitory provision.

(4)Regulations under this section—

(a)may amend, repeal or otherwise modify section 45O and other provisions of this Part, and

(b)where made under subsection (3)(e), may amend, repeal or otherwise modify other provisions of this Act or provisions of another Act.

Textual Amendments

F170Ss. 45O-45R inserted (10.6.2021) by Finance Act 2021 (c. 26), Sch. 22 para. 3

45QExclusion of plant or machinery partly for use outside [F171special tax sites] U.K.

(1)This section applies if—

(a)at the time when expenditure on plant or machinery is incurred, the company incurring it intends the plant or machinery to be used partly in an area which is not a [F171special tax site], and

(b)the main purpose, or one of the main purposes, for which a person is party to the relevant arrangements is the obtaining of a first-year allowance, or a greater first-year allowance, in respect of the part of the expenditure that is attributable to that intended use in an area which is not a [F171special tax site] ([F174the “non-qualifying part” of] the expenditure).

(2)The [F175non-qualifying part] of the expenditure is not first-year qualifying expenditure under section 45O.

(3)For the purposes of this section, the [F176non-qualifying part] of the expenditure is to be determined on a just and reasonable basis.

(4)In this section, “the relevant arrangements” means—

(a)the transaction under which the expenditure on the plant or machinery is incurred, and

(b)any scheme or arrangements of which that transaction forms part.

Textual Amendments

F170Ss. 45O-45R inserted (10.6.2021) by Finance Act 2021 (c. 26), Sch. 22 para. 3

45REffect of [F177failing to comply with ongoing requirements] U.K.

(1)Expenditure on the provision of plant or machinery is to be treated as never having been first-year qualifying expenditure under section 45O if, at any relevant time—

(a)the primary use to which the plant or machinery is put is other than in an area which, at the time the expenditure was incurred, was a [F171special tax site], or

(b)the plant or machinery is held for use otherwise than primarily in an area which was a [F171special tax site] at that time.

(2)Relevant time” means a time within the relevant period when the plant or machinery is owned by—

(a)the company that incurred the expenditure, or

(b)a person who is, or at any time in that period has been, connected with that company.

(3)The relevant period” means the period of 5 years beginning with—

(a)the day on which the plant or machinery in question is first brought into use for the purposes of a qualifying activity carried on by the company, or

(b)if earlier, the day on which it is first held for such use.

[F178(3A)The Treasury may by regulations make provision adding, removing or altering, or otherwise about, circumstances in which expenditure on the provision of plant or machinery is to be treated as never having been first-year qualifying expenditure under section 45O.

(3B)The power to make regulations under subsection (3A) may be exercised only in relation to expenditure incurred on or after the date on which the regulations come into force.

(3C)Subsections (3) and (4) of section 45P apply in relation to regulations under subsection (3A) as they apply in relation to regulations under that section.]

(4)All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (1) [F179or regulations under subsection (3A)].

(5)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 [F180or of regulations under subsection (3A)], that person must give notice to an officer of Revenue and Customs specifying how the return needs to be amended.

(6)The notice 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 [F181or of regulations under subsection (3A)].]

Textual Amendments

F170Ss. 45O-45R inserted (10.6.2021) by Finance Act 2021 (c. 26), Sch. 22 para. 3

F179Words in s. 45R(4) inserted (24.2.2022) by Finance Act 2022 (c. 3), Sch. 16 para. 3(4)

F180Words in s. 45R(5) inserted (24.2.2022) by Finance Act 2022 (c. 3), Sch. 16 para. 3(5)

F181Words in s. 45R(6) inserted (24.2.2022) by Finance Act 2022 (c. 3), Sch. 16 para. 3(6)

[F18245S Expenditure on plant or machinery in other casesU.K.

Expenditure is first-year qualifying expenditure if—

(a)it is incurred on or after 1 April 2023,

(b)it is incurred by a company within the charge to corporation tax,

(c)it is expenditure on plant or machinery which is unused and not second-hand, and

(d)it is not excluded by section 45T (exclusion of expenditure under disqualifying arrangements) or 46 (general exclusions).]

Textual Amendments

F182Ss. 45S, 45T inserted (22.2.2024) by Finance (No. 2) Act 2023 (c. 30), s. 7(3) (as amended by Finance Act 2024 (c. 3), s. 1(1)(2)(a))

[F18245T Exclusion of expenditure incurred under disqualifying arrangementsU.K.

(1)Expenditure is not first-year qualifying expenditure under section 45S if the expenditure is incurred directly or indirectly in consequence of, or otherwise in connection with, disqualifying arrangements.

(2)Arrangements are “disqualifying arrangements” for the purposes of this section if—

(a)the main purpose, or one of the main purposes, of the arrangements is to secure a tax advantage connected with expenditure being first-year qualifying expenditure under section 45S (including securing the advantage by avoiding a balancing charge under section 59A or 59B or reducing the amount or timing of such a charge), and

(b)it is reasonable, taking account of all the relevant circumstances—

(i)to conclude that the arrangements are, or include steps that are, contrived, abnormal or lacking a genuine commercial purpose, or

(ii)to regard the arrangements as circumventing the intended limits of relief under this Act or otherwise exploiting shortcomings in this Act.

(3)In this section “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).]

Textual Amendments

F182Ss. 45S, 45T inserted (22.2.2024) by Finance (No. 2) Act 2023 (c. 30), s. 7(3) (as amended by Finance Act 2024 (c. 3), s. 1(1)(2)(a))

46 General exclusions F183...U.K.

(1)Expenditure within any of the general exclusions in subsection (2) is not first-year qualifying expenditure under [F184any of the following provisions]

  • F185. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  • F186. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  • F185. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  • F187. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  • [F188 section 45D (expenditure on cars with low CO2 emissions),]

  • [F189section 45DA (expenditure on zero-emission goods vehicles), ]

  • [F190section 45E (expenditure on plant or machinery for gas refuelling station)], F191...

  • [F192section 45EA (expenditure on plant or machinery for electric vehicle charging point)]

  • [F193section 45F (expenditure on plant and machinery for use wholly in a ring fence trade)]

    F187. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  • [F194section 45K (expenditure on plant and machinery for use in designated assisted areas).]

  • [F195section 45O (expenditure on plant and machinery for use in [F196special tax sites]).]

  • [F197section 45S (expenditure on plant or machinery in other cases)]

(2)The general exclusions are—

  • General exclusion 1

    The expenditure is incurred in the chargeable period in which the qualifying activity is permanently discontinued.

  • General exclusion 2

    The expenditure is incurred on the provision of a car (as defined by section [F198268A]).

  • F199...

  • F200...

  • General exclusion 5

    The expenditure would be long-life asset expenditure but for paragraph 20 of Schedule 3 (transitional provisions).

  • General exclusion 6

    The expenditure is on the provision of plant or machinery for leasing (whether in the course of a trade or otherwise).

    For this purpose, the letting of a ship on charter, or of any other asset on hire, is to be regarded as leasing (whether or not it would otherwise be so regarded).

  • General exclusion 7

    The circumstances of the incurring of the expenditure are that—

    (a)

    the provision of the plant or machinery on which the expenditure is incurred is connected with a change in the nature or conduct of a trade or business carried on by a person other than the person incurring the expenditure, and

    (b)

    the obtaining of a first-year allowance is the main benefit, or one of the main benefits, which could reasonably be expected to arise from the making of the change.

  • General exclusion 8

    [F201Any] of the following sections applies—

    • section 13 (use for qualifying activity of plant or machinery provided for other purposes);

    • [F202section 13A (use for other purposes of plant or machinery provided for long funding leasing);]

    • section 14 (use for qualifying activity of plant or machinery which is a gift).

    This is subject to section 161 (pre-trading expenditure on mineral exploration and access).

[F203(3)Subsection (1) is subject to the following provisions of this section.

(4)General exclusion 2 does not prevent expenditure being first-year qualifying expenditure under section 45D.]

[F204(4A)General exclusion 6 does not prevent expenditure being first-year qualifying expenditure under section 45S if the plant or machinery is provided for leasing under an excluded lease of background plant or machinery for a building.]

F205(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F205(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F183Words in s. 46 heading omitted (21.7.2008) by virtue of Finance Act 2008 (c. 9), s. 76(5)(b)(ii) (with s. 76(7)(8))

F184 Words in s. 46(1) inserted (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14) , Sch. 30 para. 4(1)(a)

F185S. 46(1) entries omitted (21.7.2008) by virtue of Finance Act 2008 (c. 9), s. 76(5)(b)(i) (with s. 76(7)(8))

F186S. 46(1) entry omitted (with effect in accordance with s. 75(5)-(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 75(3)(b)

F187Words in s. 46(1) omitted (with effect in accordance with s. 33(5) of the amending Act) by virtue of Finance Act 2019 (c. 1), s. 33(2)(b)(iv)(a)

F188Entry in s. 46(1) relating to s. 45D inserted (with effect as mentioned in s. 59 of the amending Act) by Finance Act 2002 (c. 23), s. 59, Sch. 19 para. 4(2)

F189Words in s. 46(1) inserted (with effect in accordance with Sch. 7 para. 7 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 7 para. 4

F190Entry in s. 46(1) relating to s. 45E inserted (with effect as mentioned in s. 61of the amending Act) by Finance Act 2002 (c. 23), s. 61, Sch. 20 para. 4

F191 Word in s. 46(1) repealed (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14) , Sch. 30 para. 4(1)(b) , 43 Pt. 3(9)

F192Words in s. 46(1) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), s. 38(4)

F193Entry in s. 46(1) relating to s. 45F inserted (with effect as mentioned in s. 63 of the amending Act) by Finance Act 2002 (c. 23), s. 63, Sch. 21 para. 5

F194Words in s. 46(1) inserted (with effect in accordance with Sch. 11 para. 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 11 para. 4

F195Words in s. 46(1) inserted (10.6.2021) by Finance Act 2021 (c. 26), Sch. 22 para. 4

F197Words in s. 46(1) inserted (22.2.2024) by virtue of Finance (No. 2) Act 2023 (c. 30), s. 7(4)(a) (as amended by Finance Act 2024 (c. 3), s. 1(2)(a))

F198Word in s. 46(2) substituted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 3 (with Sch. 11 paras. 30-32)

F199Words in s. 46(2) omitted (with effect in accordance with s. 70(2) of the amending Act) by virtue of Finance Act 2013 (c. 29), s. 70(1)(a)

F200Words in s. 46(2) omitted (with effect in accordance with s. 70(2) of the amending Act) by virtue of Finance Act 2013 (c. 29), s. 70(1)(b)

F201Word in s. 46(2) substituted (with effect in accordance with Sch. 8 para. 15 of the amending Act) by Finance Act 2006 (c. 25), Sch. 8 para. 4(2)(a)

F202Words in s. 46(2) inserted (with effect in accordance with Sch. 8 para. 15 of the amending Act) by Finance Act 2006 (c. 25), Sch. 8 para. 4(2)(b)

F203Entry relating to s. 46(3)(4) inserted (with effect as mentioned in s. 59 of the amending Act) by Finance Act 2002 (c. 23), s. 59, Sch. 19 para. 4(3)

F205S. 46(5)(6) omitted (with effect in accordance with s. 33(5) of the amending Act) by virtue of Finance Act 2019 (c. 1), s. 33(2)(b)(iv)(b)

Modifications etc. (not altering text)

C17S. 46(2) restricted (10.6.2021) by Finance Act 2021 (c. 26), s. 9(9)

Expenditure of small or medium-sized enterprisesU.K.

F20647 Expenditure of small or medium-sized enterprises: companiesU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F206Ss. 47-49 omitted (with effect in accordance with s. 75(5)-(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 75(3)(c)

F20648 Expenditure of small or medium-sized enterprises: businessesU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F206Ss. 47-49 omitted (with effect in accordance with s. 75(5)-(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 75(3)(c)

F20649 Whether company is a member of a large or medium-sized groupU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F206Ss. 47-49 omitted (with effect in accordance with s. 75(5)-(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 75(3)(c)

SupplementaryU.K.

50 Time when expenditure is incurredU.K.

In determining whether expenditure is first-year qualifying expenditure under this Chapter, any effect of section 12 on the time at which it is to be treated as incurred is to be disregarded.

F20751 Disclosure of information between UK tax authoritiesU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F207S. 51 omitted (21.7.2008) by virtue of Finance Act 2008 (c. 9), s. 76(5)(c) (with s. 76(7)(8))

Chapter 5U.K. Allowances and charges

Modifications etc. (not altering text)

C18 Pt. 2 modified (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 para. 21(2) (with s. 38(2) ); S.I. 2004/2575 , art. 2(1) , Sch. 1

C19 Pt. 2 restricted (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 para. 10 (with s. 38(2) ); S.I. 2004/2575 , art. 2(1) , Sch. 1

C20Pt. 2 modified (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), s. 7

[F208Annual investment allowanceU.K.

Textual Amendments

F208Ss. 51A-51N and cross-heading inserted (with effect in accordance with Sch. 24 para. 23 to the amending Act) by Finance Act 2008 (c. 9), Sch. 24 para. 3

51AEntitlement to annual investment allowanceU.K.

(1)A person is entitled to an allowance (an “annual investment allowance”) in respect of AIA qualifying expenditure if—

(a)the expenditure is incurred in a chargeable period to which this Act applies, and

(b)the person owns the plant and machinery at some time during that chargeable period.

(2)Any annual investment allowance is made for the chargeable period in which the AIA qualifying expenditure is incurred.

(3)If the AIA qualifying expenditure incurred in a chargeable period is less than or equal to the maximum allowance, the person is entitled to an annual investment allowance in respect of all the AIA qualifying expenditure.

(4)If the AIA qualifying expenditure incurred in a chargeable period is more than the maximum allowance, the person is entitled to an annual investment allowance in respect of so much of the AIA qualifying expenditure as does not exceed the maximum allowance.

(5)The maximum allowance is [F209£1,000,000].

(6)But if the chargeable period is more or less than a year, the maximum allowance is proportionately increased or reduced.

(7)A person may claim an annual investment allowance in respect of all the AIA qualifying expenditure in respect of which the person is entitled to an allowance, or in respect of only some of it.

(8)The Treasury may by order substitute for the amount for the time being specified in subsection (5) such [F210greater] amount as it thinks fit.

(9)An order under subsection (8) may make such incidental, supplemental, consequential and transitional provision as the Treasury thinks fit.

(10)This section is subject to—

(a)sections 51B to 51N (restrictions on entitlement to annual investment allowance),

[F211section 70DA(2) (transfer and long funding leaseback: no annual investment allowance for lessee),]

(b)section 205 (reduction of allowance if plant or machinery provided partly for purposes other than those of qualifying activity),

(c)section 210 (reduction of allowance if it appears that a partial depreciation subsidy is or will be payable), and

(d)sections 217, 218A[F212, 229A(2)] and 241 (anti-avoidance: no allowance in certain cases),

and needs to be read with section 236 (additional VAT liabilities).

Textual Amendments

F209Sum in s. 51A(5) substituted (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), s. 8(2)(a)

F210Word in s. 51A(8) substituted (with effect in accordance with s. 11(5)-(13) of the amending Act) by Finance Act 2011 (c. 11), s. 11(3)

F211Words in s. 51A(10) inserted (as an unnumbered paragraph) (with effect in accordance with Sch. 32 para. 17 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 12

F212Word in s. 51A(10) inserted (with effect in accordance with Sch. 32 para. 22 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 18

Modifications etc. (not altering text)

C21S. 51A(5) modified (temp.) (17.7.2013) by Finance Act 2013 (c. 29), s. 7, Sch. 1

C22S. 51A(5) modified (temp.) (17.7.2014) by Finance Act 2014 (c. 26), s. 10, Sch. 2

C23S. 51A(5) modified (temp.) (12.2.2019) by Finance Act 2019 (c. 1), s. 32, Sch. 13 (as amended by Finance Act 2021 (c. 26), s. 15(1))

51BFirst restriction: companiesU.K.

(1)A company is entitled to a single annual investment allowance in respect of all the qualifying activities carried on by the company in a chargeable period.

(2)The company may allocate the annual investment allowance to the relevant AIA qualifying expenditure as it thinks fit.

(3)The relevant AIA qualifying expenditure is the AIA qualifying expenditure incurred by the company in the chargeable period mentioned in subsection (1).

(4)This section is subject to sections 51C, 51D and 51E.

51CSecond restriction: groups of companiesU.K.

(1)This section applies in relation to—

(a)a company which, in a financial year, is a parent undertaking of one or more other companies, and

(b)those other companies.

(2)The companies are entitled to a single annual investment allowance between them in respect of the relevant AIA qualifying expenditure.

(3)The companies may allocate the annual investment allowance to the relevant AIA qualifying expenditure as they think fit.

(4)The relevant AIA qualifying expenditure is the AIA qualifying expenditure incurred by the companies in chargeable periods ending in the financial year mentioned in subsection (1).

(5)A company (“P”) is a parent undertaking of another company (“C”) in a financial year if P is a parent undertaking of C at the end of C's chargeable period ending in that financial year.

(6)In this section “parent undertaking” has the same meaning as in section 1162 of the Companies Act 2006.

(7)This section is subject to section 51D.

51DThird restriction: groups of companies under common controlU.K.

(1)Where in a financial year two or more groups of companies are—

(a)controlled by the same person (see section 51F), and

(b)related to one another (see section 51G),

this section applies in relation to the companies which are members of those groups.

(2)The companies are entitled to a single annual investment allowance between them in respect of the relevant AIA qualifying expenditure.

(3)The companies may allocate the annual investment allowance to the relevant AIA qualifying expenditure as they think fit.

(4)The relevant AIA qualifying expenditure is the AIA qualifying expenditure incurred by the companies in chargeable periods ending in the financial year mentioned in subsection (1).

(5)In this section and in sections 51F and 51G, a group of companies means—

(a)a company which, in the financial year mentioned in subsection (1), is a parent undertaking of one or more other companies, and

(b)those other companies,

(and the members of the group are the company which is the parent undertaking and those other companies).

(6)A company (“P”) is a parent undertaking of another company (“C”) in a financial year if P is a parent undertaking of C at the end of C's chargeable period ending in that financial year.

(7)In this section “parent undertaking” has the same meaning as in section 1162 of the Companies Act 2006.

51EFourth restriction: other companies under common controlU.K.

(1)This section applies in relation to two or more companies which in a financial year are—

(a)controlled by the same person (see section 51F), and

(b)related to one another (see section 51G),

and in relation to which to neither section 51C nor section 51D applies.

(2)The companies are entitled to a single annual investment allowance between them in respect of the relevant AIA qualifying expenditure.

(3)The companies may allocate the annual investment allowance to the relevant AIA qualifying expenditure as they think fit.

(4)The relevant AIA qualifying expenditure is the AIA qualifying expenditure incurred by the companies in chargeable periods ending in the financial year mentioned in subsection (1).

51FCompanies and groups: meaning of “control”U.K.

(1)A company is controlled by a person in a financial year if it is controlled by that person at the end of its chargeable period ending in that financial year.

(2)A group of companies is controlled by a person in a financial year if the company which is the parent undertaking is controlled by that person at the end of its chargeable period ending in that financial year.

(3)Section 574(2) defines “control” in relation to a company which is a body corporate.

(4)In relation to a company (“C”) which is not a body corporate, control means the power of a person (“P”) to secure—

(a)by means of the holding of shares or the possession of voting power in relation to C or another body, or

(b)as a result of any powers conferred by the constitution of C or another body,

that the affairs of C are conducted in accordance with P's wishes.

(5)In subsection (4) “shares” has the meaning given by section 1161(2) of the Companies Act 2006.

51GCompanies and groups: meaning of “related”U.K.

(1)A company (“C1”) is related to another company (“C2”) in a financial year if one or both of—

(a)the shared premises condition, and

(b)the similar activities condition,

are met in relation to the companies in that financial year.

(2)Where C1 is related to C2 in a financial year, C1 is also related to any other company to which C2 is related in that financial year.

(3)A group of companies (“G1”) is related to another group of companies (“G2”) in a financial year if in that financial year a company which is a member of G1 is related to a company which is a member of G2.

(4)Where G1 is related to G2 in a financial year, G1 is also related to any other group of companies to which G2 is related in that financial year.

(5)The shared premises condition is met in relation to two companies in a financial year if, at the end of the relevant chargeable period of one or both of the companies, the companies carry on qualifying activities from the same premises.

(6)The similar activities condition is met in relation to two companies in a financial year if—

(a)more than 50% of the turnover of one company for the relevant chargeable period is derived from qualifying activities within a particular NACE classification, and

(b)more than 50% of the turnover of the other company for the relevant chargeable period is derived from qualifying activities within that NACE classification.

(7)In this section—

  • NACE classification” means the first level of the common statistical classification of economic activities in the European Union established by Regulation (EC) No 1893/2006 of the European Parliament and the Council of 20 December 2006 (as that Regulation has effect [F213in EU law]), and

  • relevant chargeable period”, in relation to a company and a financial year, means the chargeable period of the company ending in that financial year.

51HFifth restriction: qualifying activities under common controlU.K.

(1)This section applies in relation to two or more qualifying activities which, in a tax year—

(a)are carried on by a qualifying person other than a company,

(b)are controlled by the same person (see section 51I), and

(c)are related to one another (see section 51J).

(2)A qualifying activity is carried on by a qualifying person in a tax year if it is carried on by the person at the end of the chargeable period for the activity ending in the tax year.

(3)Where all the qualifying activities are carried on by one qualifying person, that person is entitled to a single annual investment allowance in respect of the relevant AIA qualifying expenditure.

(4)Where the qualifying activities are carried on by more than one qualifying person, those persons are entitled to a single annual investment allowance between them in respect of the relevant AIA qualifying expenditure.

(5)The person or persons carrying on the qualifying activities may allocate the annual investment allowance to the relevant AIA qualifying expenditure as the person or persons think fit.

(6)The relevant AIA qualifying expenditure is the AIA qualifying expenditure incurred for the purposes of the qualifying activities in the chargeable periods for those activities ending in the tax year mentioned in subsection (1).

51IQualifying activities: meaning of controlU.K.

(1)A qualifying activity is controlled by a person in a tax year if it is controlled by the person at the end of the chargeable period for that activity which ends in that tax year.

(2)A qualifying activity carried on by an individual is controlled by the individual who carries it on.

(3)A qualifying activity carried on by a partnership is controlled by the person (if any) who controls the partnership.

(4)Section 574(3) defines “control” in relation to a partnership.

(5)Where partners who between them control one partnership also between them control another partnership, the qualifying activities carried on by the partnerships are to be treated as controlled by the same person.

51JQualifying activity: meaning of “related”U.K.

(1)A qualifying activity (“A1”) is related to another qualifying activity (“A2”) in a tax year if one or both of—

(a)the shared premises condition, and

(b)the similar activities condition,

are met in relation to the activities in the tax year.

(2)Where A1 is related to A2 in a tax year, A1 is also related to any other qualifying activity to which A2 is related in that tax year.

(3)The shared premises condition is met in relation to two qualifying activities in a tax year if, at the end of the relevant chargeable period for one or both of the activities, the activities are carried on from the same premises.

(4)The similar activities condition is met in relation to two qualifying activities in a tax year if, at the end of the relevant chargeable period for one or both of the activities, the activities are within the same NACE classification.

(5)In this section—

  • NACE classification” has the same meaning as in section 51G, and

  • relevant chargeable period”, in relation to a qualifying activity and a tax year, means the chargeable period for that activity ending in that tax year.

[F21451JASixth restriction: allocation where profits chargeable at NI rateU.K.

(1)This section applies if—

(a)section 51B, 51C, 51D or 51E applies, and

(b)the relevant AIA qualifying expenditure for the purposes of the section in question includes expenditure incurred in a low-rate year in respect of an NI rate activity.

(2)For the purposes of this section expenditure is “incurred in a low-rate year” if it is incurred in a financial year for which the Northern Ireland rate is lower than the main rate.

(3)The maximum annual investment allowance that may be allocated under section 51B, 51C, 51D or 51E to AIA qualifying expenditure incurred in a low-rate year in respect of qualifying activities other than NI rate activities is determined by the formula—

where—

A is the amount of the single annual investment allowance that would otherwise be available for allocation;

T is so much of the relevant AIA qualifying expenditure for the purposes of the section in question as is incurred in a low-rate year;

NI is so much of the relevant AIA qualifying expenditure for the purposes of the section in question as is expenditure incurred in a low-rate year in respect of an NI rate activity.]

Textual Amendments

F214S. 51JA inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 1 para. 5

51KOperation of annual investment allowance where restrictions applyU.K.

(1)This section applies where because of section 51B, 51C, 51D, 51E or 51H a person is (or persons between them are) entitled to a single annual investment allowance in respect of relevant AIA qualifying expenditure.

(2)If the relevant AIA qualifying expenditure is less than or equal to the maximum allowance, the person is (or the persons between them are) entitled to an annual investment allowance in respect of all the relevant AIA qualifying expenditure.

(3)If the relevant AIA qualifying expenditure is more than the maximum allowance, the person is (or the persons between them are) entitled to an annual investment allowance in respect of so much of the relevant AIA qualifying expenditure as does not exceed the maximum allowance.

(4)The maximum allowance is the amount for the time being specified in section 51A(5); but this is subject to sections 51M and 51N (which provide that in certain cases an additional amount of annual investment allowance may be available).

(5)The person or persons may claim an annual investment allowance in respect of all the relevant AIA qualifying expenditure in respect of which the person is (or the persons between them are) entitled to an allowance, or in respect of only some of it.

(6)The amount of the annual investment allowance allocated to relevant AIA qualifying expenditure incurred in a chargeable period must not exceed the amount of the annual investment allowance to which a person would be entitled in respect of that expenditure under section 51A(5) and (6) if section 51B, 51C, 51D, 51E or 51H did not apply.

51LSpecial provision for short chargeable periodsU.K.

(1)This section applies where—

(a)more than one chargeable period of a company ends in a financial year, or

(b)more than one chargeable period for a qualifying activity ends in a tax year.

(2)Whether section 51C, 51D or 51E applies in relation to the company, or section 51H applies in relation to the qualifying activity, is to be determined in relation to each chargeable period ending in that year as if it were the only chargeable period ending in that year.

(3)AIA qualifying expenditure incurred in a chargeable period in relation to which the section in question does not apply is not relevant AIA qualifying expenditure for the purposes of that section.

51MSpecial provision for long chargeable periodsU.K.

(1)This section applies where—

(a)section 51H applies in relation to two or more qualifying activities controlled by a person (“P”) in a tax year, and

(b)the relevant chargeable period for one of those qualifying activities (“A1”) is longer than a year.

(2)An additional amount of annual investment allowance may be allocated to relevant AIA qualifying expenditure incurred for the purposes of A1.

(3)That additional amount is the amount, or the aggregate of the amounts, of any relevant unused allowance for each tax year (a “previous tax year”)—

(a)which falls before the tax year mentioned in subsection (1)(a), and

(b)in which part of A1's relevant chargeable period falls.

(4)The amount of the relevant unused allowance for a previous tax year is (subject to subsections (7) and(8))—

but where the amount given by that formula is less than nil, the amount of the relevant unused allowance for the previous tax year is nil.

(5)In subsection (4)—

  • MA is the amount specified in section 51A(5) in relation to the previous tax year, and

  • AM is the amount of any annual investment allowance made under section 51A or 51K in respect of AIA qualifying expenditure incurred for the purposes of a relevant qualifying activity in the chargeable period for that activity ending in the previous tax year.

(6)Relevant qualifying activity” means—

(a)any qualifying activity carried on by a qualifying person other than a company which was controlled by P in the previous tax year (see section 51I) and related to A1 in that tax year (see section 51J), and

(b)if A1 was controlled by P in the previous tax year (see section 51I), A1.

(7)Where any part of the amount calculated under subsection (4) has, on a previous application of this section, been allocated to AIA qualifying expenditure incurred for the purposes of a qualifying activity controlled by P in a tax year before that mentioned in subsection (1)(a), the amount of the relevant unused allowance is reduced accordingly.

(8)Where the amount of the relevant unused allowance for a previous tax year would (apart from this subsection) exceed—

the amount of the relevant unused allowance for that tax year is limited to the amount given by that formula.

(9)In subsection (8)—

  • DCPY is the number of days in A1's relevant chargeable period falling in the previous tax year,

  • DY is the number of days in that tax year, and

  • MA has the meaning given by subsection (5).

(10)Nothing in this section prevents section 51K(6) applying in relation to relevant AIA qualifying expenditure incurred for the purposes of A1.

(11)In this section references to a relevant chargeable period, in relation to a qualifying activity, are to the chargeable period for that activity ending in the tax year mentioned in subsection (1)(a).

51NSpecial provision for long chargeable periods: supplementaryU.K.

(1)This section applies where—

(a)section 51H applies in relation to two or more qualifying activities controlled by a person (“P”) in a tax year, and

(b)the relevant chargeable period for more than one of those qualifying activities is longer than a year.

(2)Section 51M applies in relation to each of the qualifying activities mentioned in subsection (1)(b) and the tax year mentioned in subsection (1)(a), as it applies in relation to A1 and the tax year mentioned in subsection (1)(a) of that section.

(3)But where two or more of the qualifying activities mentioned in subsection (1)(b) were related in a previous tax year, section 51M applies with the following modifications.

(4)The amount of any relevant unused allowance for that tax year is to be calculated under section 51M(4) to (7) (without regard to section 51M(8)).

(5)For that purpose section 51M(6) applies as if the references to A1 were references to any of the qualifying activities mentioned in subsection (1)(b).

(6)The amount of the relevant unused allowance may be allocated between those activities, but this is subject to subsection (7).

(7)The amount of the relevant unused allowance allocated to any one of those activities may not exceed the amount given by the formula in section 51M(8).]

First-year allowancesU.K.

52 First-year allowancesU.K.

(1)A person is entitled to a first-year allowance in respect of first-year qualifying expenditure if—

(a)the expenditure is incurred in a chargeable period to which this Act applies, and

(b)the person owns the plant or machinery at some time during that chargeable period.

(2)Any first-year allowance is made for the chargeable period in which the first-year qualifying expenditure is incurred.

(3)The amount of the allowance is a percentage of the first-year qualifying expenditure in respect of which the allowance is made, as shown in the Table—

Table

Amount of first-year allowances

Type of first-year qualifying expenditureAmount
F215. . .F215. . .
F216. . .F216. . .
F215. . .F215. . .
F217. . .F217. . .
[F218Expenditure qualifying under section 45D (expenditure on cars with low CO2 emissions)100%]
[F219Expenditure qualifying under section 45DA (expenditure on zero-emission goods vehicles) 100%]
[F220Expenditure qualifying under section 45E (expenditure on plant or machinery for gas refuelling station)100%]
[F221Expenditure qualifying under section 45EA (expenditure on plant or machinery for electric vehicle charging point) 100%]
[F222Expenditure qualifying under section 45F (expenditure for use wholly in a ring fence trade) 100%]
F223. . .F223. . .
[F224Expenditure qualifying under section 45K (expenditure on plant and machinery for use in designated assisted areas) 100%]
[F225Expenditure qualifying under section 45O (expenditure on plant and machinery for use in [F226special tax sites]) 100%]
[F227Expenditure qualifying under section 45S (expenditure on plant or machinery in other cases) which is not special rate expenditure 100%]
[F227Expenditure qualifying under section 45S (expenditure on plant or machinery in other cases) which is special rate expenditure 50%]

F228...

[F229(3A)Subsection (3B) applies where the Treasury make regulations under section 45EA(4) (power to extend relevant period).

(3B)The regulations may amend the amount specified in column 2 of the Table in subsection (3) for expenditure qualifying under section 45EA, but only in relation to expenditure incurred after the date on which the relevant period would have ended but for the regulations.]

(4)A person who is entitled to a first-year allowance may claim the allowance in respect of the whole or a part of the first-year qualifying expenditure.

(5)Subsection (1) needs to be read with section 236 (first-year allowances in respect of additional VAT liabilities) and is subject to—

  • [F230section 70DA(2) (transfer and long funding leaseback: no first-year allowance for lessee),]

  • section 205 (reduction of first-year allowance if plant or machinery provided partly for purposes other than those of qualifying activity),

  • section 210 (reduction of first-year allowance if it appears that a partial depreciation subsidy is or will be payable), F231...

  • [F232section 212T (cap on first-year allowances: zero-emission goods vehicles), F233...]

  • [F234 section 212U (cap on first-year allowances: expenditure on plant and machinery for use in designated assisted areas), and ]

  • sections 217[F235, 229A(2) ] F236... and 241 (anti-avoidance: no first-year allowance in certain cases).

Textual Amendments

F215S. 52(3) entries omitted (21.7.2008) by virtue of Finance Act 2008 (c. 9), s. 76(5)(d) (with s. 76(7)(8))

F216S. 52(3) entry omitted (with effect in accordance with s. 75(5)-(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 75(3)(d)(i)

F217Words in s. 52(3) omitted (with effect in accordance with s. 33(5) of the amending Act) by virtue of Finance Act 2019 (c. 1), s. 33(2)(b)(v)(a)

F218S. 52(3): words in Table added (with effect as mentioned in s. 59 of the amending Act) by Finance Act 2002 (c. 23), s. 59, Sch. 19 para. 5

F219Words in s. 52(3) Table inserted (with effect in accordance with Sch. 7 para. 7 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 7 para. 5(2)

F220S. 52(3): words in Table added (with effect as mentioned in s. 61 of the amending Act) by Finance Act 2002 (c. 23), s. 61, Sch. 20 para. 5

F221Words in s. 52(3) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), s. 38(5)(a)

F222Words in s. 52(3) substituted (with effect in accordance with s. 108(2) of the amending Act) by Finance Act 2008 (c. 9), s. 108(1)

F223Words in s. 52(3) omitted (with effect in accordance with s. 33(5) of the amending Act) by virtue of Finance Act 2019 (c. 1), s. 33(2)(b)(v)(b)

F224Words in s. 52(3) inserted (with effect in accordance with Sch. 11 para. 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 11 para. 5(2)

F225Words in s. 52(3) inserted (10.6.2021) by Finance Act 2021 (c. 26), Sch. 22 para. 5

F227Words in s. 52(3) Table inserted (22.2.2024) by Finance (No. 2) Act 2023 (c. 30), s. 7(5) (as amended by Finance Act 2024 (c. 3), s. 1(2)(a))

F228Words in s. 52(3) omitted (with effect in accordance with s. 75(5)-(8) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 75(3)(d)(ii)

F229S. 52(3A)(3B) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), s. 38(5)(b)

F230Words in s. 52(5) inserted (with effect in accordance with Sch. 32 para. 17 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 13

F231Word in s. 52(5) omitted (with effect in accordance with Sch. 7 para. 7 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 7 para. 5(3)(a)

F232Words in s. 52(5) inserted (with effect in accordance with Sch. 7 para. 7 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 7 para. 5(3)(b)

F233Word in s. 52(5) omitted (with effect in accordance with Sch. 11 para. 8 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 11 para. 5(3)(a)

F234S. 52(5) entry inserted (with effect in accordance with Sch. 11 para. 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 11 para. 5(3)(b)

F235Word in s. 52(5) inserted (with effect in accordance with Sch. 32 para. 22 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 19

F236Words in s. 52(5) omitted (with effect in accordance with Sch. 20 para. 6(19) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 20 para. 6(3)

Modifications etc. (not altering text)

C24S. 52(3) modified (temp.) (with effect in accordance with s. 30(2) of the amending Act) by Finance Act 2006 (c. 25), s. 30(1)

[F237Prevention of double relief]U.K.

Textual Amendments

F237S. 52A and cross-heading inserted (with effect in accordance with Sch. 24 para. 23 of the amending Act) by Finance Act 2008 (c. 9), Sch. 24 para. 4

52APrevention of double reliefU.K.

A person may not [F238claim— ]

[F238(a)an annual investment allowance and a first-year allowance in respect of the same expenditure, or

(b)first-year allowances under two or more of the provisions listed in section 39 in respect of the same expenditure.]

Textual Amendments

F238Words in s. 52A substituted (with effect in accordance with Sch. 11 para. 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 11 para. 6

PoolingU.K.

53 Pooling of qualifying expenditureU.K.

(1)Qualifying expenditure has to be pooled for the purpose of determining a person’s entitlement to writing-down allowances and balancing allowances and liability to balancing charges.

(2)If a person carries on more than one qualifying activity, expenditure relating to the different activities must not be allocated to the same pool.

54 The different kinds of poolsU.K.

(1)There are single asset pools, class pools and the main pool.

(2)A single asset pool may not contain expenditure relating to more than one asset.

(3)The following provide for qualifying expenditure to be allocated to a single asset pool—

  • F239. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ;

  • section 86 (short-life asset);

  • section 127 (ship);

  • section 206 (plant or machinery provided or used partly for purposes other than those of qualifying activity);

  • section 211 (payment of partial depreciation subsidy);

  • section 538 (contribution allowances: plant and machinery).

(4)A class pool is a pool which may contain expenditure relating to more than one asset.

(5)The following provide for qualifying expenditure to be allocated to a class pool—

  • [F240section 104C (special rate expenditure); ]

  • section 107 (overseas leasing).

(6)Qualifying expenditure may be allocated to the main pool only if it does not fall to be allocated to a single asset pool or a class pool.

Textual Amendments

F239Words in s. 54(3) omitted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1), 29(1) to the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 15 (with Sch. 11 paras. 30-32)

F240Words in s. 54(5) substituted (with effect in accordance with Sch. 26 para. 14 of the amending Act) by Finance Act 2008 (c. 9), Sch. 26 para. 3

Writing-down and balancing allowances and balancing chargesU.K.

55 Determination of entitlement or liabilityU.K.

(1)Whether a person is entitled to a writing-down allowance or a balancing allowance, or liable to a balancing charge, for a chargeable period is determined separately for each pool of qualifying expenditure and depends on—

(a)the available qualifying expenditure in that pool for that period (“AQE”), and

(b)the total of any disposal receipts to be brought into account in that pool for that period (“TDR”).

(2)If AQE exceeds TDR, the person is entitled to a writing-down allowance or a balancing allowance for the period.

(3)If TDR exceeds AQE, the person is liable to a balancing charge for the period.

(4)The entitlement under subsection (2) is to a writing-down allowance except for the final chargeable period when it is to a balancing allowance.

(5)The final chargeable period is given by section 65.

(6)Subsection (2) is subject to [F241section 104F (special rate cars: discontinued activity continued by relevant company) and] section 110(1) (overseas leasing: allowances prohibited in certain cases).

Textual Amendments

F241Words in s. 55(6) inserted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 16 (with Sch. 11 paras. 30-32)

56 Amount of allowances and chargesU.K.

(1)The amount of the writing-down allowance to which a person is entitled for a chargeable period is [F24218%] of the amount by which AQE exceeds TDR.

[F243(1A)But in relation to qualifying expenditure incurred wholly for the purposes of a ring fence trade in respect of which tax is chargeable under [F244section 330(1) of CTA 2010] (supplementary charge in respect of ring fence trades), the amount of the writing-down allowance to which a person is entitled for a chargeable period is 25% of the amount by which AQE exceeds TDR.]

(2)[F245Subsections (1) and (1A) are] subject to—

[F246(za)section 56A (small main pools and special rate pools),]

[F247(a)section 104D (special rate expenditure: [F248[F2496%] or] 10%), and]

(b)section 109 (overseas leasing: 10%).

(3)If the chargeable period is more or less than a year, the amount is proportionately increased or reduced.

(4)If the qualifying activity has been carried on for part only of the chargeable period, the amount is proportionately reduced.

(5)A person claiming a writing-down allowance may require the allowance to be reduced to a specified amount.

(6)The amount of the balancing charge to which a person is liable for a chargeable period is the amount by which TDR exceeds AQE.

(7)The amount of the balancing allowance to which a person is entitled for the final chargeable period is the amount by which AQE exceeds TDR.

Textual Amendments

F242Word in s. 56(1) substituted (with effect in accordance with s. 10(8)-(13) of the amending Act) by Finance Act 2011 (c. 11), s. 10(2)

F243S. 56(1A) inserted (with effect in accordance with s. 80(8)-(12) of the amending Act) by Finance Act 2008 (c. 9), s. 80(3)

F244Words in s. 56(1A) substituted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 326 (with Sch. 2)

F245Words in s. 56(2) substituted (with effect in accordance with s. 80(8) of the amending Act) by Finance Act 2008 (c. 9), s. 80(4)

F246S. 56(2)(za) inserted (with effect in accordance with s. 81(5) of the amending Act) by Finance Act 2008 (c. 9), s. 81(2)

F247S. 56(2)(a) substituted (with effect in accordance with Sch. 26 para. 14 of the amending Act) by Finance Act 2008 (c. 9), Sch. 26 para. 4

F248Words in s. 56(2)(a) inserted (with effect in accordance with s. 10(8)-(13) of the amending Act) by Finance Act 2011 (c. 11), s. 10(4)(b)

F249Word in s. 56(2)(a) substituted (with effect in accordance with s. 31(4)(8) of the amending Act) by Finance Act 2019 (c. 1), s. 31(3)(a)

[F25056AWriting-down allowances for small poolsU.K.

(1)This section applies in relation to the main pool and the special rate pool.

(2)Where the amount by which AQE exceeds TDR is less than or equal to the small pool limit, the amount of the writing-down allowance to which a person is entitled for a chargeable period is the amount by which AQE exceeds TDR.

(3)The small pool limit is £1,000, except that—

(a)if the chargeable period is more or less than a year, it is proportionately increased or reduced, and

(b)if the qualifying activity has been carried on for part only of the chargeable period, it is proportionately reduced.

(4)A person claiming a writing-down allowance under this section may require the allowance to be reduced to a specified amount.

(5)The Treasury may by order substitute for the amount for the time being specified in subsection (3) such other amount as it thinks fit.

(6)An order under subsection (5) may make such incidental, supplemental, consequential and transitional provision as the Treasury thinks fit.]

Textual Amendments

F250S. 56A inserted (with effect in accordance with s. 81(5) of the amending Act) by Finance Act 2008 (c. 9), s. 81(3)

Available qualifying expenditureU.K.

57 Available qualifying expenditureU.K.

(1)The general rule is that a person’s available qualifying expenditure in a pool for a chargeable period consists of—

(a)any qualifying expenditure allocated to the pool for that period in accordance with section 58, and

(b)any unrelieved qualifying expenditure carried forward in the pool from the previous chargeable period under section 59.

(2)A person’s available qualifying expenditure in a pool for a chargeable period also includes any amount allocated to the pool for that period under—

  • section 26(3) (net costs of demolition);

  • section 86(2) or 87(2) (allocation of expenditure in short-life asset pool);

  • section 111(3) (overseas leasing: standard recovery mechanism);

  • section 129(1), 132(2), 133(3) or 137 (provisions relating to operation of single ship pool and deferment of balancing charges in respect of ships);

  • [F251section 161C(2)(decommissioning expenditure incurred by person carrying on trade of oil extraction);]

  • section 165(3) ([F252general decommissioning expenditure] incurred after cessation of ring fence trade);

  • section 206(3) (plant or machinery used partly for purposes other than those of the qualifying activity);

  • section 211(4) (partial depreciation subsidy paid).

(3)A person’s available qualifying expenditure does not include any expenditure excluded by—

  • section 8(4) or 9(1) (rules against double relief);

  • [F253section 70DA (transfer and long funding leaseback);]

  • [F254sections 165A to 165E (restrictions on allowances: anti-avoidance);]

  • section 166(2) (transfers of interests in oil fields: anti-avoidance);

  • section 185(2), 186(2)[F255, 186A(2)] or 187(2) (restrictions where other claims made in respect of fixture);

  • section 218(1), [F256218ZA(1) or (3),] F257... 228(2)[F258, 229A], 242(2), or 243(2) (general anti-avoidance provisions).

(4)Subsection (1) is also subject to section 220 (allocation to chargeable periods of expenditure incurred on plant or machinery for leasing under finance lease).

Textual Amendments

F251Words in s. 57(2) inserted (with effect as mentioned in Sch. 20 para. 9(1)-(4)(8) of the amending Act) by Finance Act 2001 (c. 9), s. 68, Sch. 20 para. 5(2)

F252Words in s. 57(2) substituted (with effect in accordance with s. 109(7) of the amending Act) by Finance Act 2008 (c. 9), Sch. 34 para. 4

F253Words in s. 57(3) inserted (with effect in accordance with Sch. 32 para. 17 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 14

F254Words in s. 57(3) inserted (with effect in accordance with Sch. 32 para. 8 of the amending Act) by Finance Act 2013 (c. 29), Sch. 32 para. 4

F255Words in s. 57(3) inserted (with effect in accordance with Sch. 10 para. 12 of the amending Act) by Finance Act 2012 (c. 14), Sch. 10 para. 8

F256Words in s. 57(3) inserted (with effect in accordance with Sch. 9 para. 9(1)(3) of the amending Act) by Finance Act 2012 (c. 14), Sch. 9 para. 2

F257Word in s. 57(3) omitted (with effect in accordance with Sch. 20 para. 6(19) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 20 para. 6(4)

F258Words in s. 57(3) inserted (with effect in accordance with Sch. 32 para. 22 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 20

58 Initial allocation of qualifying expenditure to poolsU.K.

(1)The following rules apply to the allocation of a person’s qualifying expenditure to the appropriate pool.

(2)An amount of qualifying expenditure is not to be allocated to a pool for a chargeable period if that amount has been taken into account in determining the person’s available qualifying expenditure for an earlier chargeable period.

(3)Qualifying expenditure is not to be allocated to a pool for a chargeable period before that in which the expenditure is incurred.

(4)Qualifying expenditure is not to be allocated to a pool for a chargeable period unless the person owns the plant or machinery at some time in that period.

[F259(4A)If an annual investment allowance is made to a person for a chargeable period—

(a)the AIA qualifying expenditure in respect of which the allowance is made must be allocated to the appropriate pool (or pools) in that chargeable period, and

(b)the available qualifying expenditure in a pool to which the expenditure (or some of it) is allocated is reduced by the amount of that expenditure.]

(5)If a first-year allowance is made in respect of an amount of first-year qualifying expenditure—

(a)subject to subsection (6), none of that amount is to be allocated to a pool for the chargeable period in which the expenditure is incurred, and

(b)the amount that may be allocated to a pool for any chargeable period is limited to the balance left after deducting the first-year allowance.

(6)If—

(a)a first-year allowance is made in respect of an amount of first-year qualifying expenditure,

(b)a disposal event occurs in respect of the plant or machinery in any chargeable period, and

(c)none of the balance left after deducting the first-year allowance has been allocated to a pool for an earlier chargeable period,

the balance (or some of it) must be allocated to a pool for the chargeable period in which the disposal event occurs.

(7)Subsection (6) applies even if the balance is nil (because of a 100% first-year allowance).

(8)The appropriate pool” means whichever pool is applicable under the provisions of this Part apart from this section.

Textual Amendments

F259S. 58(4A) inserted (with effect in accordance with Sch. 24 para. 23 of the amending Act) by Finance Act 2008 (c. 9), Sch. 24 para. 5

59 Unrelieved qualifying expenditureU.K.

(1)A person has unrelieved qualifying expenditure to carry forward from a chargeable period if for that period—

[F260(a)]AQE exceeds TDR[F261, and

( b)where section 56A(2) applies, the person does not claim a writing-down allowance of the amount by which AQE exceeds TDR.]

(2)The amount of the unrelieved qualifying expenditure is—

(a)the excess less the writing-down allowance made for the period, or

(b)if no writing-down allowance is claimed for the period, the excess.

(3)No amount may be carried forward as unrelieved qualifying expenditure from the final chargeable period.

[F262(4)If a person carrying on a trade, profession or vocation enters the cash basis for a tax year, [F263any cash basis deductible amount may not be carried forward as unrelieved qualifying expenditure in a pool for the trade, profession or vocation] from the chargeable period ending [F264in the previous tax year (or, if there is more than one such period, the latest of them)].

[F265(4A)If a person carrying on a property business enters the cash basis for a tax year, any cash basis deductible amount may not be carried forward as unrelieved qualifying expenditure in a pool for a relevant qualifying activity from the chargeable period which is the previous tax year.]

F266(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F267(5A)A “cash basis deductible amount” means any amount of unrelieved qualifying expenditure for which a deduction would be allowed in calculating the profits of the trade, profession, vocation or property business (as the case may be) on the cash basis on the assumption that the expenditure was paid in the tax year for which the person enters the cash basis.]

(6)Where a person has unrelieved qualifying expenditure to carry forward from a chargeable period that is not expenditure allocated to a single asset pool, [F268any cash basis deductible amount] is to be determined on such basis as is just and reasonable in all the circumstances.

[F269(7)Subsections (9), (10) and (11) of section 1A (capital allowances and charges: cash basis) apply for the purposes of this section as they apply for the purposes of that section.]

(7A)In subsection (4A) “relevant qualifying activity” means—

(a)in relation to a UK property business, an ordinary UK property business and a UK furnished holiday lettings business, and

(b)in relation to an overseas property business, an ordinary overseas property business and an EEA furnished holiday lettings business.]

[F270(8)Subsection (9) applies if—

(a)a person carrying on a trade, profession or vocation incurs expenditure in relation to a vehicle,

(b)at the end of F271... a tax year, the person has unrelieved qualifying expenditure incurred in relation to the vehicle to carry forward from the chargeable period ending [F272in that tax year (or, if there is more than one such period, the latest of them)] (“the relevant chargeable period”), [F273and]

(c)in calculating the profits of a trade, profession or vocation of a person for the following tax year, a deduction is made under section 94D of ITTOIA 2005 in respect of expenditure incurred in relation to the vehicle, F274...

F274(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9)None of the unrelieved qualifying expenditure incurred in relation to the vehicle may be carried forward as unrelieved qualifying expenditure from the relevant chargeable period.

[F275(9A)Subsection (9B) applies if—

(a)a person carrying on a property business incurs expenditure in relation to a vehicle,

(b)at the end of a tax year, the person has unrelieved qualifying expenditure incurred in relation to the vehicle to carry forward from the chargeable period ending with that tax year (“the relevant chargeable period”), and

(c)in calculating the profits of a property business of a person for the following tax year, a deduction is made under section 94D of ITTOIA 2005 (as applied by section 271E of that Act) in respect of expenditure incurred in relation to the vehicle.

(9B)None of the unrelieved qualifying expenditure incurred in relation to the vehicle may be carried forward as unrelieved qualifying expenditure from the relevant chargeable period.]

(10)Where a person has unrelieved qualifying expenditure to carry forward from a chargeable period that is not expenditure allocated to a single asset pool, the amount of the unrelieved qualifying expenditure incurred in relation to the vehicle is to be determined on such basis as is just and reasonable in all the circumstances.]

Textual Amendments

F260Word in s. 59(1) inserted (with effect in accordance with s. 81(5) of the amending Act) by Finance Act 2008 (c. 9), s. 81(4)(a)

F261Words in s. 59(1) inserted (with effect in accordance with s. 81(5) of the amending Act) by Finance Act 2008 (c. 9), s. 81(4)(b)

F262S. 59(4)-(7) inserted (with effect in accordance with Sch. 4 paras. 56, 57 of the amending Act) by Finance Act 2013 (c. 29), Sch. 4 para. 47

F263Words in s. 59(4) substituted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 52(2)

F264Words in s. 59(4) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2022 (c. 3), Sch. 1 paras. 34(2), 61(1)

F265S. 59(4A) inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 52(3)

F266S. 59(5) omitted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 52(4)

F267S. 59(5A) inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 52(5)

F268Words in s. 59(6) substituted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 52(6)

F269S. 59(7)(7A) substituted for s. 59(7) (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 52(7)

F270S. 59(8)-(10) inserted (with effect in accordance with Sch. 5 para. 6 of the amending Act) by Finance Act 2013 (c. 29), Sch. 5 para. 5(3)

F271Words in s. 59(8)(b) omitted (for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2022 (c. 3), Sch. 1 paras. 34(3)(a), 61(1)

F272Words in s. 59(8)(b) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2022 (c. 3), Sch. 1 paras. 34(3)(b), 61(1)

F273Word in s. 59(8)(b) inserted (with effect in accordance with s. 36(7) of the amending Act) by Finance Act 2018 (c. 3), s. 36(6)(a)(i)

F274S. 59(8)(d) and preceding word omitted (with effect in accordance with s. 36(7) of the amending Act) by virtue of Finance Act 2018 (c. 3), s. 36(6)(a)(ii)

F275S. 59(9A)(9B) inserted (with effect in accordance with s. 36(8) of the amending Act) by Finance Act 2018 (c. 3), s. 36(6)(b)

Modifications etc. (not altering text)

C25S. 59(1)(2) applied by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 240C(6) (as inserted (with effect in accordance with Sch. 4 paras. 56, 57 of the amending Act) by Finance Act 2013 (c. 29), Sch. 4 para. 38)

C26S. 59(4) excluded by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 240C(5A) (as inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 7(7))

[F276Special balancing charge in cases of full expensing etcU.K.

Textual Amendments

F276Ss. 59A-59C and cross-heading inserted (22.2.2024) by Finance (No. 2) Act 2023 (c. 30), s. 7(6) (as amended by Finance Act 2024 (c. 3), s. 1(2))

59ADisposal of assets where first-year allowance made under section 45S for expenditure which is not special rate expenditureU.K.

(1)This section applies if a first-year allowance has been made to a company in respect of first-year qualifying expenditure under section 45S which is not special rate expenditure.

(2)If the company is required to bring a disposal value into account for an accounting period by reference to the plant or machinery on which the expenditure is incurred, the company is liable to a balancing charge for that period (whether or not it is also liable to any other balancing charge for that period).

(3)The amount of the balancing charge is the relevant proportion of the disposal value; and the relevant proportion is determined by dividing—

(a)the amount of the expenditure that was the subject of the allowance, by

(b)the total amount of expenditure that has been the subject of that or any other first-year allowance or has been allocated to a pool for that or any other accounting period.

(4)In relation to the accounting period for which the disposal value is brought into account, TDR (see section 55(1)(b)) for the pool to which the expenditure that was the subject of the allowance was allocated is to be reduced by the amount of the balancing charge.

59BDisposal of assets where first-year allowance made under section 45S for expenditure which is special rate expenditureU.K.

(1)This section applies if a first-year allowance has been made to a company in respect of first-year qualifying expenditure under section 45S which is special rate expenditure.

(2)If the company is required to bring a disposal value into account for an accounting period by reference to the plant or machinery on which the expenditure is incurred, the company is liable to a balancing charge for that period (whether or not it is also liable to any other balancing charge for that period).

(3)The amount of the balancing charge is the relevant proportion of the disposal value; and the relevant proportion is determined by—

(a)dividing the amount of the expenditure that was the subject of the allowance by two, and

(b)dividing the result of that division by the total amount of expenditure that has been the subject of that or any other first-year allowance or has been allocated to a pool for that or any other accounting period.

(4)In relation to the accounting period for which the disposal value is brought into account, TDR (see section 55(1)(b)) for the pool to which the expenditure that was the subject of the allowance was allocated is to be reduced by the amount of the balancing charge.

59CSections 59A and 59B: tax avoidance arrangementsU.K.

(1)This section applies if arrangements are entered into the main purpose, or one of the main purposes, of which is—

(a)to secure that a balancing charge under section 59A or 59B is not chargeable on a company, or

(b)to secure a reduction in the amount, or a change in the timing, of a balancing charge under section 59A or 59B which is chargeable on a company.

(2)Sections 59A and 59B are to have effect as if the arrangements had not been entered into.

(3)In this section “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).]

Disposal events and disposal values: generalU.K.

60 Meaning of “disposal receipt” and “disposal event”U.K.

(1)In this Part “disposal receipt” means a disposal value that a person is required to bring into account in accordance with—

(a)sections 61, 62 and 63 (disposal events, disposal values and the general limit on the amount of a disposal value),

(b)any of the provisions of this Part listed in section 66, or

(c)[F277section 614BS of ITA 2007] or [F278section 918 of CTA 2010 (cases where expenditure taken into account under Part 2, 5 or 8 of this Act) or] any other enactment,

when read with sections 64 and 264(3) (cases in which no disposal value need be brought into account).

(2)In this Part “disposal event” means any event of a kind that requires a disposal value to be brought into account under this Part (whether under section 61(1) or otherwise).

(3)If—

(a)qualifying expenditure has been allocated to a pool, and

(b)more than one disposal event occurs in respect of the plant or machinery,

a disposal value is required to be brought into account in the pool in connection with the first event only.

(4)In subsection (3) “disposal event” does not include a disposal event arising under—

  • section 72 (computer software),

  • sections 140 and 143 (attribution of deferred balancing charge), or

  • section 238(2) (additional VAT rebates).

Textual Amendments

F277Words in s. 60(1)(c) substituted (1.4.2010) (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 234 (with Sch. 9 paras. 1-9, 22)

F278Words in s. 60(1)(c) inserted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 327 (with Sch. 2)

61 Disposal events and disposal valuesU.K.

(1)A person who has incurred qualifying expenditure is required to bring the disposal value of the plant or machinery into account for the chargeable period in which—

(a)the person ceases to own the plant or machinery;

(b)the person loses possession of the plant or machinery in circumstances where it is reasonable to assume that the loss is permanent;

(c)the plant or machinery has been in use for mineral exploration and access and the person abandons it at the site where it was in use for that purpose;

(d)the plant or machinery ceases to exist as such (as a result of destruction, dismantling or otherwise);

(e)the plant or machinery begins to be used wholly or partly for purposes other than those of the qualifying activity;

[F279(ee)the plant or machinery begins to be leased under a long funding lease (see Chapter 6A);]

(f)the qualifying activity is permanently discontinued.

(2)The disposal value to be brought into account depends on the disposal event, as shown in the Table—

Table

Disposal values: general

1. Disposal event2. Disposal value
1. Sale of the plant or machinery, except in a case where item 2 [F280or 2A] applies.

The net proceeds of the sale, together with—

(a)

any insurance money received in respect of the plant or machinery as a result of an event affecting the price obtainable on the sale, and

(b)

any other compensation of any description so received, so far as it consists of capital sums.

2. Sale of the plant or machinery where—

(a)

the sale is at less than market value,

(b)

there is no charge to tax under [F281ITEPA 2003], and

(c)

the condition in subsection (4) is met by the buyer.

The market value of the plant or machinery at the time of the sale.

[F2822A. Sale of the plant or machinery where—

(a)

the sale is at less than market value,

(b)

the condition in subsection (4A) is met by the seller, and

(c)

the condition in subsection (4B) is met by the buyer.

The market value of the plant or machinery at the time of the sale.]
3. Demolition or destruction of the plant or machinery.

The net amount received for the remains of the plant or machinery, together with—

(a)

any insurance money received in respect of the demolition or destruction, and

(b)

any other compensation of any description so received, so far as it consists of capital sums.

4. Permanent loss of the plant or machinery otherwise than as a result of its demolition or destruction.Any insurance money received in respect of the loss and, so far as it consists of capital sums, any other compensation of any description so received.
5. Abandonment of the plant or machinery which has been in use for mineral exploration and access at the site where it was in use for that purpose.Any insurance money received in respect of the abandonment and, so far as it consists of capital sums, any other compensation of any description so received.
[F2835A. Commencement of the term of a long funding finance lease of the plant or machinery.

The greater of—

(a)

the market value of the plant or machinery at the commencement of the term of the lease, and

(b)

the qualifying lease payments.]

[F2845B. Commencement of the term of a long funding operating lease of the plant or machinery.An amount equal to the market value of the plant or machinery at the commencement of the term of the lease.]
6. Permanent discontinuance of the qualifying activity followed by the occurrence of an event within any of items 1 to [F2855B].The disposal value for the item in question.
[F2866A. Disposal event to which section 62A applies.The relevant transition value (see section 62A).]
7. Any event not falling within any of items 1 to [F2876A].The market value of the plant or machinery at the time of the event.

(3)The amounts referred to in column 2 of the Table are those received by the person required to bring the disposal value into account.

(4)The condition referred to in item 2 of the Table is met by the buyer if—

(a)the buyer’s expenditure on the acquisition of the plant or machinery cannot be qualifying expenditure under this Part or Part 6 (research and development allowances), or

(b)the buyer is a dual resident investing company which is connected with the seller.

[F288(4A)The condition referred to in paragraph (b) of item 2A in the Table is met by the seller if—

(a)the seller is—

(i)a company, or

(ii)a partnership whose partners include one or more companies, and

(b)before the sale the plant or machinery is used wholly or partly for the purposes of a qualifying activity that is not an NI rate activity.

(4B)The condition referred to in paragraph (c) of item 2A in the Table is met by the buyer if—

(a)the buyer is [F289an SME (Northern Ireland employer) company], a NIRE company or a Northern Ireland firm in the chargeable period of the buyer in which the plant or machinery is bought,

(b)the buyer's expenditure on the acquisition of the plant or machinery is qualifying expenditure under this Part or Part 6 (research and development allowances), and

(c)the plant or machinery is used by the buyer wholly or partly for the purposes of an NI rate activity.]

(5)In this section “mineral exploration and access” has the same meaning as in Chapter 13 (provisions affecting the mining and oil industries) and Part 5 (mineral extraction allowances).

[F290(5A)In item 5A of the Table “qualifying lease payments” means the minimum payments under the lease (including any initial payment), excluding the following—

(a)so much of any payment as, under generally accepted accounting practice, falls (or would fall) to be treated as the gross return on investment in respect of the lease,

(b)so much of any payment as represents charges for services, and

(c)so much of any payment as represents qualifying UK or foreign tax (within the meaning of section 70YE) to be paid by the lessor.]

F291(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F291(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F291(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F291(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F279S. 61(1)(ee) inserted (with effect in accordance with Sch. 8 para. 15 of the amending Act) by Finance Act 2006 (c. 25), Sch. 8 para. 5(2)

F280Words in s. 61(2) inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 1 para. 6(2)(a)

F281Words in s. 61(2) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 249 (with Sch. 7)

F282Words in s. 61(2) inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 1 para. 6(2)(b)

F283Words in s. 61(2) substituted (with effect in accordance with Sch. 32 para. 5(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 1(2)

F284Words in s. 61(2) Table inserted (with effect in accordance with Sch. 8 para. 15 to the amending Act) by Finance Act 2006 (c. 25), Sch. 8 para. 5(3)

F285Word in s. 61(2) substituted (with effect in accordance with Sch. 8 para. 15 of the amending Act) by Finance Act 2006 (c. 25), Sch. 8 para. 5(4)

F286S. 61 Table Item 6A inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 16, 31

F287Word in s. 61 Table Item 7 substituted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 16, 31

F288S. 61(4A)(4B) inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 1 para. 6(3)

F289Words in s. 61(4B)(a) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 24(d)

F290S. 61(5A) inserted (with effect in accordance with Sch. 32 para. 5(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 1(3)

F291S. 61(6)-(9) omitted (with effect in accordance with Sch. 32 para. 5(1) to the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 32 para. 1(4)

Modifications etc. (not altering text)

C27 S. 61 modified (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 para. 9(4) (with s. 38(2) ); S.I. 2004/2575 , art. 2(1) , Sch. 1

C29S. 61 modified (E.W.S.) (24.7.2005) by Railways Act 2005 (c. 14), s. 60(2), Sch. 10 para. 22; S.I. 2005/1909, art. 2, Sch.

C30S. 61(2)-(4) excluded (E.W.S.) (8.6.2005) by Railways Act 2005 (c. 14), s. 60(2), Sch. 10 para. 14(2)(a); S.I. 2005/1444, art. 2(1), Sch. 1

62 General limit on amount of disposal valueU.K.

(1)The amount of any disposal value required to be brought into account by a person in respect of any plant or machinery is limited to the qualifying expenditure incurred by the person on its provision.

(2)Subsection (3) applies if a person who is required to bring a disposal value into account has acquired the plant or machinery as a result of a transaction which was, or a series of transactions each of which was, between connected persons.

(3)The amount of the disposal value is limited to the amount of the qualifying expenditure on the provision of the plant or machinery incurred by whichever party to the transaction, or to any of the transactions, incurred the greatest such expenditure.

(4)This section is subject to section 239 (limit on disposal value where additional VAT rebate or rebates has or have been made in respect of original expenditure).

[F29262ACases in which disposal value is transition valueU.K.

(1)Subject as follows, this section applies where an election under section 18A of CTA 2009 has effect in relation to a company and the operation of section 15(2A) brings about a disposal event consisting of plant or machinery beginning to be used for purposes other than those of a qualifying activity.

(2)Where this section applies to a disposal event, the disposal value is the transition value.

(3)The transition value is such amount as gives rise to neither a balancing allowance nor a balancing charge.

(4)This section does not apply if—

(a)the qualifying expenditure in respect of the plant or machinery, or of the group of assets of which it forms part at any time during a relevant accounting period, exceeds £5 million, and

(b)the company has used the plant or machinery otherwise than for the purposes of a permanent establishment in a territory outside the United Kingdom at any time during a relevant preceding accounting period.

(5)For the purposes of subsection (4)(a) plant or machinery used together constitutes a group of assets.

(6)In subsection (4) “relevant preceding accounting period” means the accounting period in which the election under section 18A is made or an earlier accounting period ending less than 6 years before the end of that accounting period.]

Textual Amendments

F292S. 62A inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 17, 31 (with Sch. 13 para. 36)

63 Cases in which disposal value is nilU.K.

(1)If a person disposes of plant or machinery by way of gift in circumstances such that there is a charge to tax under [F293ITEPA 2003], the disposal value of the plant or machinery is nil.

(2)If a person carrying on a relevant qualifying activity makes a gift of plant or machinery used in the course of the activity—

(a)to a [F294charitable trust F295...],

[F296(aa)to a charitable company F297...,

(ab)to a registered club within the meaning of Chapter 9 of Part 13 of CTA 2010 (community amateur sports clubs),]

(b)to a body listed in [F298section 468 of CTA 2010] (various heritage bodies and museums), or

(c)for the purposes of a designated educational establishment within the meaning of [F299section 110 of ITTOIA 2005 or] [F300section 106 of CTA 2009] (gifts to educational establishments),

the disposal value of the plant or machinery is nil.

(3)In subsection (2) “relevant qualifying activity” means a qualifying activity consisting of—

(a)a trade,

(b)an ordinary [F301UK] [F302property] business,

(c)a [F303UK furnished] holiday lettings business,

(d)an [F304ordinary overseas] property business, F305...

[F306(da)an EEA furnished holiday lettings business, or]

(e)a profession or vocation.

(4)Subsection (2) [F307

(a)]needs to be read with [F308section 109 of ITTOIA 2005 and] [F309section 108 of CTA 2009] (which provide for a charge to tax if subsection (2) applies in circumstances in which the donor or a connected person receives a benefit attributable to the gift)[F310, and

(b)is subject to section 809ZM of ITA 2007 and section 939F of CTA 2010 (removal of tax relief in respect of tainted charity donations etc).]

(5)If expenditure is treated under section 27(2) (expenditure on thermal insulation, safety measures, etc.) as having been incurred on plant or machinery, the disposal value of the plant or machinery is nil.

Textual Amendments

F293 Words in s. 63(1) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1) , s. 723 , Sch. 6 para. 250 (with Sch. 7 )

F294Words in s. 63(2)(a) substituted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 328(a) (with Sch. 2)

F295Words in s. 63(2)(a) omitted (with effect in accordance with art. 12 of the commencing S.I.) by virtue of Finance Act 2010 (c. 13), Sch. 6 paras. 16(a)34(2); S.I. 2012/736, art. 12

F296S. 63(2)(aa)(ab) inserted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 328(b) (with Sch. 2)

F297Words in s. 63(2)(aa) omitted (with effect in accordance with art. 12 of the commencing S.I.) by virtue of Finance Act 2010 (c. 13), Sch. 6 paras. 16(b)34(2); S.I. 2012/736, art. 12

F298Words in s. 63(2)(b) substituted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 328(c) (with Sch. 2)

F299 Words in s. 63(2)(c) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5) , s. 883(1) , Sch. 1 para. 535(2) (with Sch. 2 )

F300Words in s. 63(2)(c) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 482(2) (with Sch. 2 Pts. 1, 2)

F301Word in s. 63(3)(b) inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(10)(a)

F302 Word in s. 63(3)(b) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5) , s. 883(1) , Sch. 1 para. 535(3) (with Sch. 2 )

F303Words in s. 63(3)(c) substituted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(10)(b)

F304Words in s. 63(3)(d) substituted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(10)(c)

F305Word in s. 63(3)(d) omitted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 14 para. 12(10)(d)

F306S. 63(3)(da) inserted (with effect in accordance with Sch. 14 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 14 para. 12(10)(d)

F307Words in s. 63(4) renumbered as s. 63(4)(a) (with effect in accordance with Sch. 3 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 3 para. 4(a)

F309Words in s. 63(4) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 482(3) (with Sch. 2 Pts. 1, 2)

F310S. 63(4)(b) and word inserted (with effect in accordance with Sch. 3 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 3 para. 4(b)

Modifications etc. (not altering text)

C31S. 63(2) modifed (with effect as mentioned in s. 58(4) of the amending Act) by Finance Act 2002 (c. 23), s. 58, Sch. 18 para. 9(3)(c)

64 Case in which no disposal value need be brought into accountU.K.

(1)A person is not required to bring a disposal value into account in a pool for a chargeable period in respect of plant or machinery if none of the qualifying expenditure is or has been taken into account in a claim in determining the person’s available qualifying expenditure in the pool for that or any previous chargeable period.

(2)Subsection (3) applies if—

(a)a person (“C”) has incurred qualifying expenditure on plant or machinery,

(b)C acquired the plant or machinery as a result of a transaction which was, or a series of transactions each of which was, between connected persons,

(c)any connected person (apart from C) who was a party to the transaction, or one of the series of transactions, is or has been required to bring a disposal value into account as a result of the transaction,

(d)a disposal event (“the relevant disposal event”) occurs in respect of the plant or machinery at a time when it is owned by C, and

(e)none of C’s qualifying expenditure is or has been taken into account in a claim in determining C’s available qualifying expenditure for the chargeable period in which the relevant disposal event occurs or any previous chargeable period.

(3)If this subsection applies—

(a)subsection (1) does not apply in relation to the relevant disposal event, and

(b)C’s qualifying expenditure is to be treated as allocated to the appropriate pool for the chargeable period in which the relevant disposal event occurs.

(4)In subsection (3)—

(a)qualifying expenditure” means, if a first-year allowance has been made to C, the amount (including a nil amount) remaining after deducting the allowance, and

(b)the appropriate pool” means whichever pool is applicable in relation to C under the provisions of this Part.

(5)A person takes expenditure into account in a claim if he takes it into account—

(a)in a tax return;

(b)by giving notice of an amendment of a tax return;

(c)in any other claim under this Part.

[F31164ALeased assets: arrangements reducing disposal value of assetU.K.

(1)Where—

(a)plant or machinery (“the asset”) is subject to a lease,

(b)a disposal event occurs with the result that a disposal value in respect of the asset is to be brought into account under Item 1, 2 or 7 of the Table in section 61(2), and

(c)arrangements have been entered into that have the effect of reducing the disposal value of the asset in so far as it is attributable to rentals payable under the lease,

the disposal value is to be determined as if the arrangements had not been entered into.

(2)Subsection (1) does not apply if—

(a)the arrangements take the form of a transfer of relevant receipts within section 809AZA of ITA 2007 and the relevant amount has been treated as income under section 809AZB of that Act, or

(b)the arrangements take the form of a transfer of relevant receipts within section 752 of CTA 2010 and the relevant amount has been treated as income under section 753 of that Act.]

Textual Amendments

F311S. 64A inserted (8.4.2010) (with effect in accordance with Sch. 5 para. 3(2) to the amending Act) by Finance Act 2010 (c. 13), Sch. 5 para. 3(1)

The final chargeable periodU.K.

65 The final chargeable periodU.K.

(1)The final chargeable period for—

(a)the main pool, or

[F312(b)a special rate pool,]

is the chargeable period in which the qualifying activity is permanently discontinued.

(2)The final chargeable period for a single asset pool is the first chargeable period in which any disposal event given in section 61(1) occurs.

(3)Subsection (2) is subject to—

  • [F313section] 206(4) (no final chargeable period merely because plant or machinery begins to be used partly for purposes other than those of qualifying activity);

  • sections 86(2) and 87(2) (ending of short-life asset pool at [F314relevant] cut-off without final chargeable period);

  • section 132(2) (no final chargeable period for single ship pool).

(4)The final chargeable period for a class pool under section 107 (overseas leasing) is the chargeable period at the end of which the circumstances are such that there can be no more disposal receipts in any subsequent chargeable period.

Textual Amendments

F312S. 65(1)(b) substituted (with effect in accordance with Sch. 26 para. 14 of the amending Act) by Finance Act 2008 (c. 9), Sch. 26 para. 5

F313Word in s. 65(3) substituted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1), 29(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 17 (with Sch. 11 paras. 30-32)

F314Word in s. 65(3) substituted (19.7.2011) by Finance Act 2011 (c. 11), s. 12(3)

List of provisions outside this Chapter about disposal valuesU.K.

66 List of provisions outside this Chapter about disposal valuesU.K.

The provisions of this Part referred to in section 60(1)(b) are—

section 68hire-purchase etc.: disposal value on cessation of notional ownership
[F315section 70E long funding leases: disposal events and disposal values]
sections 72 and 73grant of new software right: disposal value
F316. . .F316. . .
sections 88 and 89short-life assets: disposal at under-value or to connected person
[F317section 104E special rate expenditure: avoidance cases]
sections 108, 111 and 114overseas leasing: disposal values in various cases
sections 132 and 143ships: ship used for overseas leasing etc.; attribution of amount where balancing charge deferred
section 171oil production sharing contracts: disposal values on cessation of ownership
sections 196 and 197fixtures: disposal values on cessation of notional ownership and in avoidance cases
section 208effect of significant reduction in use of plant or machinery for purposes of qualifying activity
[F318section 208A cars: disposal value in avoidance cases]
section 211effect of payment of partial depreciation subsidy
F319. . .F319. . .
[F320section 218ZB disposal of plant or machinery in avoidance cases]
[F321sections 228K to 228M Disposal of plant or machinery subject to lease where income retained]
section 229hire-purchase: disposal values in finance leasing and anti-avoidance cases
sections 238 and 239additional VAT rebates

Textual Amendments

F315Words in s. 66 inserted (with effect in accordance with Sch. 32 para. 8 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 6

F316S. 66 entry omitted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1), 29(2) to the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 18(a) (with Sch. 11 paras. 30-32)

F317Words in s. 66 substituted (with effect in accordance with Sch. 26 para. 14 of the amending Act) by Finance Act 2008 (c. 9), Sch. 26 para. 6

F318Words in s. 66 inserted (with effect in accordance with Sch. 11 paras. 26, 27, 28(1) to the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 18(b) (with Sch. 11 paras. 30-32)

F319S. 66 entry omitted (with effect in accordance with Sch. 20 para. 6(19) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 20 para. 6(5)

F320Words in s. 66 inserted (with effect in accordance with s. 70(11) of the amending Act) by Finance Act 2016 (c. 24), s. 70(10)

F321Words in s. 66 inserted (with effect in accordance with s. 84(5)(6) of the amending Act) by Finance Act 2006 (c. 25), s. 84(2)

[F322Application of Chapter to person leaving cash basisU.K.

Textual Amendments

F322S. 66A and cross-heading inserted (with effect in accordance with Sch. 4 paras. 56, 57 of the amending Act) by Finance Act 2013 (c. 29), Sch. 4 para. 48

66APersons leaving cash basisU.K.

[F323(1)This section applies if—

(a)a person carrying on a trade, profession, vocation or property business (“the business”) leaves the cash basis in a chargeable period,

(b)the person has incurred expenditure at a time when the profits of the business are calculated on the cash basis,

(c)some or all of the expenditure was brought into account in calculating the profits of the business on the cash basis, and

(d)the expenditure would have been qualifying expenditure if the profits of the business had not been calculated on the cash basis at the time the expenditure was incurred.]

(2)In this section—

(a)the “relieved portion” of the expenditure is the [F324higher of the following]

(i)[F325the amount of that expenditure for which] a deduction was allowed in calculating the profits of the trade, profession[F326, vocation or property business], or

(ii)[F325the amount of that expenditure for which] a deduction would have been so allowed if the expenditure had been incurred wholly and exclusively for the purposes of the trade, profession[F326, vocation or property business];

(b)the “unrelieved portion” of the expenditure is any remaining amount of the expenditure.

(3)For the purposes of determining any entitlement of the person to an annual investment allowance or a first-year allowance, the person is to be treated as incurring the unrelieved portion of the expenditure in the chargeable period.

(4)For the purposes of determining the person's available qualifying expenditure in a pool for the chargeable period (see section 58)—

(a)the whole of the expenditure must be allocated to the appropriate pool (or pools) in that chargeable period, and

(b)the available qualifying expenditure in a pool to which the expenditure (or some of it) is allocated is reduced by the relieved portion of that expenditure.

(5)For the purposes of determining any disposal receipts (see section 60), the expenditure incurred by the person is to be regarded as qualifying expenditure.

(6)For the purposes of this section a person carrying on a trade, profession or vocation leaves the cash basis in a chargeable period if—

(a)immediately before the beginning of the chargeable period [F327the cash basis applied] in relation to the trade, profession or vocation, and

(b)[F328the cash basis does not apply] in relation to the trade, profession or vocation for the chargeable period.

[F329(7)For the purposes of this section a person carrying on a property business leaves the cash basis in a chargeable period (“tax year X”) if the profits of the business are calculated—

(a)in accordance with GAAP (see section 271B of ITTOIA 2005) for tax year X, and

(b)on the cash basis (see section 271D of that Act) for the previous tax year.

(8)Subsection (11) of section 1A (capital allowances and charges: cash basis) applies for the purposes of this section as it applies for the purposes of that section.]]

Textual Amendments

F323S. 66A(1) substituted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 53(2)

F324Words in s. 66A(2)(a) substituted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 53(3)(a)

F325Words in s. 66A(2)(a)(i)(ii) inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 53(3)(b)

F326Words in s. 66A(2)(a) substituted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 53(3)(c)

F327Words in s. 66A(6)(a) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 10 paras. 41(a), 47 (with Sch. 10 paras. 48-50)

F328Words in s. 66A(6)(b) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 10 paras. 41(b), 47 (with Sch. 10 paras. 48-50)

F329S. 66A(7)(8) inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 53(4)

[F330Effect of changes in Northern Ireland status of SME company or SME partnershipU.K.

Textual Amendments

F330Ss. 66B-66E and cross-heading inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 1 para. 7

66B SME company entering NI corporation tax regimeU.K.

(1)This section applies if—

(a)in a chargeable period beginning after the commencement day (“the relevant period”) a company is [F331an SME (Northern Ireland employer) company],

(b)the company was neither [F332an SME (Northern Ireland employer) company] nor a NIRE company in the previous chargeable period, and

(c)the company has not become [F333an SME (Northern Ireland employer) company] in the relevant period as a result of an election under section 357KB(2) of CTA 2010 (back-office activities of financial trades).

(2)The fact that assets which continue to be used in the relevant period for the purposes of the trade actually carried on by the company are as a result of section 15(2ZA) treated as ceasing to be used for the purposes of a main rate activity and beginning to be used for the purposes of an NI rate activity does not give rise to a disposal event within 61(1)(e) or (f).

(3)If during the relevant period the only qualifying activity carried on by the company is an NI rate activity, the amount of any unrelieved qualifying expenditure in any main pool or special rate pool falling to be carried forward to the relevant period is to be treated as relating to plant and machinery used for the purposes of the NI rate activity.

(4)If during the relevant period the company carries on both an NI rate activity and a main rate activity—

(a)the amount of any unrelieved qualifying expenditure in any main pool falling to be carried forward under section 59 to the relevant period is to be apportioned on a just and reasonable basis to become—

(i)a main pool that is to be treated as relating to plant and machinery used for the purposes of the NI rate activity, and

(ii)a main pool that is to be treated as relating to plant and machinery used for the purposes of the main rate activity, and

(b)the amount of any unrelieved qualifying expenditure in any special rate pool falling to be carried forward under section 59 to the relevant period is to be apportioned on a just and reasonable basis to become—

(i)a special rate pool that is to be treated as relating to plant and machinery used for the purposes of the NI rate activity, and

(ii)a special rate pool that is to be treated as relating to plant and machinery used for the purposes of the main rate activity.

(5)Main rate activity” means the company's trade except so far as it is an NI rate activity.

(6)The commencement day” has the meaning given by section 5(4) of the Corporation Tax (Northern Ireland) Act 2015.

Textual Amendments

F331Words in s. 66B(1)(a) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 24(e)

F332Words in s. 66B(1)(b) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 24(e)

F333Words in s. 66B(1)(c) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 24(e)

66C SME partnership entering NI corporation tax regimeU.K.

For the purposes of the corporate partner calculation, section 66B applies in relation to a partnership as if—

(a)references to a company were references to a partnership,

(b)references to [F334an SME (Northern Ireland employer) company] were references to a Northern Ireland Chapter 6 firm,

(c)the reference to a NIRE company were a reference to a Northern Ireland Chapter 7 firm,

(d)the reference to section 357KB(2) of CTA 2010 were a reference to section 357WB(2) of that Act, and

(e)the reference to section 15(2ZA) were a reference to section 15(2ZB).

Textual Amendments

F334Words in s. 66C(b) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 24(f)

66D SME company leaving NI corporation tax regimeU.K.

(1)This section applies if—

(a)in a chargeable period beginning after the commencement day (“the relevant period”) a company is neither [F335an SME (Northern Ireland employer) company] nor a NIRE company,

(b)the company was [F336an SME (Northern Ireland employer) company] in the previous chargeable period, and

(c)during the relevant period the company carries on a qualifying activity.

(2)The fact that assets which continue to be used in the relevant period for the purposes of the trade actually carried on are as a result of section 15(2ZA) treated as ceasing to be used for the purposes of an NI rate activity and beginning to be used for the purposes of the qualifying activity mentioned in subsection (1)(c) does not give rise to a disposal event within 61(1)(e) or (f).

(3)Any unrelieved qualifying expenditure which—

(a)relates to plant or machinery used for the purposes of an NI activity, and

(b)falls to be carried forward to the relevant period,

is to be treated as relating to the qualifying activity that the company carries on in the relevant period.

(4)The commencement day” has the meaning given by section 5(4) of the Corporation Tax (Northern Ireland) Act 2015.

Textual Amendments

F335Words in s. 66D(1)(a) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 24(g)

F336Words in s. 66D(1)(b) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 24(g)

66E SME partnership leaving NI corporation tax regimeU.K.

For the purposes of the corporate partner calculation, section 66D applies in relation to a partnership as if—

(a)references to a company were references to a partnership,

(b)references to [F337an SME (Northern Ireland employer) company] were references to a Northern Ireland Chapter 6 firm,

(c)the reference to a NIRE company were a reference to a Northern Ireland Chapter 7 firm, and

(d)the reference to section 15(2ZA) were a reference to section 15(2ZB).]

Textual Amendments

F337Words in s. 66E(b) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 24(h)

Chapter 6U.K. Hire-purchase etc. and plant or machinery provided by lessee

Hire-purchase and similar contractsU.K.

67 Plant or machinery treated as owned by person entitled to benefit of contract, etc.U.K.

(1)This section applies if—

(a)a person carrying on a qualifying activity [F338or corresponding overseas activity] incurs capital expenditure on the provision of plant or machinery for the purposes of the qualifying activity [F338or corresponding overseas 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.

[F339This subsection has effect subject to, and in accordance with, subsections (2A) to (2C).]

[F340(2A)If the contract is one which, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as a lease, subsection (2B) applies.

(2B)Where that is the case, the plant or machinery is to be treated under subsection (2) as owned by the person at any time only if the contract [F341

(a)falls (or would fall) to be treated by that person in accordance with generally accepted accounting practice as a finance lease, or

(b)if that person is a lessee under a right-of-use lease, would fall to be treated in that person's accounts as a finance lease were that person required under generally accepted accounting practice to determine whether the lease falls to be so treated.]

(2C)Where at any time the plant or machinery—

(a)is not treated under subsection (2) as owned by the person, but

(b)would be treated under that subsection as owned by the person, but for subsection (2B),

the plant or machinery is nevertheless to be treated under subsection (2) as not owned by any other person at that time.]

(3)At the time when the plant or machinery is brought into use for the purposes of the qualifying activity [F338or corresponding overseas 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.

[F342(6)If—

(a)a person enters into two or more agreements, and

(b)those agreements are such that, if they together constituted a single contract, the condition in subsection (1)(b) would be met in relation to that person and that contract,

the agreements are to be treated for the purposes of this section as parts of a single contract.

In this subsection, any reference to an agreement includes a reference to an undertaking, whether or not legally enforceable.]

[F343(7)] This section is subject to section 69 (hire-purchase and fixtures) and subsection (3) is subject to section 229 (anti-avoidance).

[F344(8)In this section “corresponding overseas activity” means an activity that would be a qualifying activity if the person carrying it on were resident in the United Kingdom.]

Textual Amendments

F338Words in s. 67 inserted (with effect in accordance with Sch. 9 para. 12(8) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 12(2)

F339Words in s. 67(2) inserted (with effect in accordance with Sch. 9 para. 12(8) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 12(3)

F340S. 67(2A)-(2C) inserted (with effect in accordance with Sch. 9 para. 12(8) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 12(4)

F341Words in s. 67(2B) substituted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 1(2)

F342S. 67(6) inserted (with effect in accordance with Sch. 9 para. 12(8) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 12(6)

F343S. 67(7) renumbered (with effect in accordance with Sch. 9 para. 12(8) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 12(5)

F344S. 67(8) inserted (with effect in accordance with Sch. 9 para. 12(8) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 12(7)

Modifications etc. (not altering text)

C32S. 67 applied (with modifications) (10.6.2021) by Finance Act 2021 (c. 26), s. 9(8)

68 Disposal value on cessation of notional ownershipU.K.

(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 fixturesU.K.

(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 lesseeU.K.

70 Plant or machinery provided by lesseeU.K.

(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).

[F345Lessees under long funding leasesU.K.

Textual Amendments

F345Ss. 70A-70E and cross-heading inserted (with effect in accordance with Sch. 8 para. 15 of the amending Act) by Finance Act 2006 (c. 25), Sch. 8 para. 6

70AEntitlement to capital allowancesU.K.

(1)This section applies if a person carrying on a qualifying activity incurs expenditure (whether or not of a capital nature) on the provision of plant or machinery for the purposes of the qualifying activity under a long funding lease.

(2)In the application of this Part in the case of that person, the plant or machinery is to be treated as owned by him at any time when he is the lessee under the long funding lease.

That is so whether or not the lease also falls to be regarded as a long funding lease in the application of this Part in the case of the lessor.

(3)The person is to be treated for the purposes of this Part as having incurred capital expenditure on the provision of the plant or machinery as follows.

(4)The capital expenditure is to be treated as incurred at the commencement of the term of the long funding lease.

(5)The amount of the capital expenditure varies, according to whether the long funding lease is—

(a)a long funding operating lease (subsection (6)), or

(b)a long funding finance lease (subsection (7)).

(6)If the long funding lease is a long funding operating lease, the amount of the capital expenditure is to be found in accordance with section 70B.

(7)If the long funding lease is a long funding finance lease, the amount of the capital expenditure is to be found in accordance with section 70C.

(8)See Chapter 6A for interpretation of this section.

70BLong funding operating lease: amount of capital expenditureU.K.

(1)This section applies by virtue of section 70A(6).

(2)If the long funding lease is a long funding operating lease, the amount of the capital expenditure is the market value of the plant or machinery at the later of—

(a)the commencement of the term of the lease;

(b)the date on which the plant or machinery is first brought into use for the purposes of the qualifying activity.

(3)This section is to be construed as one with section 70A.

70CLong funding finance lease: amount of capital expenditureU.K.

(1)This section has effect by virtue of section 70A(7) for the purpose of determining the amount of the capital expenditure in the case of a long funding finance lease.

(2)If the lease is one which, under generally accepted accounting practice, falls (or would fall) to be treated as a loan, this section applies as if the lease were one which, under generally accepted accounting practice, fell to be treated as a finance lease.

(3)The amount of the capital expenditure is the total of—

(a)commencement PVMLP (see subsection (4)), and

(b)if subsection (6) applies, the unrelievable pre-commencement rentals (“UPR”),

but subject, in a case falling within subsection (7), to the restriction imposed by subsection (8).

(4)Commencement PVMLP is the amount that would fall to be recognised as the present value, at the appropriate date, of the minimum lease payments (see section 70YE) if appropriate accounts were prepared by the person.

[F346(4A)But where the minimum lease payments include a relievable amount, the present value of that amount must be excluded in determining the commencement PVMLP.

(4B)An amount (“amount X”) is a relievable amount if—

(a)an arrangement is in place under which all or part of any residual amount (as defined in section 70YE) is guaranteed by the lessee or a person connected with the lessee,

(b)amount X is within the minimum lease payments because of that arrangement (see subsection (1)(a) of that section), and

(c)it is reasonable to assume that, were amount X to be incurred under the arrangement, relief would be available as a result (beyond relief, by virtue of this section and section 70E, because amount X is within those minimum lease payments).

(4C)In deciding for the purposes of subsection (4B)(c) whether relief would be available as a result, no account is to be taken of—

(a)any part of the arrangement other than the part by virtue of which all or part of the residual amount is guaranteed, or

(b)any other arrangement connected with the arrangement or forming part of a set of arrangements that includes the arrangement.]

(5)For the purposes of subsection (4)—

  • “appropriate accounts” are accounts prepared in accordance with generally accepted accounting practice on the date on which that amount is first recognised in the books or other financial records of the person;

  • “the appropriate date” is the later of—

    (a)

    the commencement of the term of the lease;

    (b)

    the date on which the plant or machinery is first brought into use for the purposes of the qualifying activity.

(6)This subsection applies if—

(a)the person has paid rentals under the lease before the commencement of the term of the lease, and

(b)in the case of some or all of those rentals, relief otherwise than by virtue of this subsection—

(i)is not available, and

(ii)if the case is one where the plant or machinery was not used for the purposes of a qualifying activity in the period before the commencement of the term of the lease, would not have been available had the plant or machinery been used in that period for the purposes of a qualifying activity,

and in any such case UPR is the amount of the rentals for which relief is not, and (in a case falling within paragraph (b)(ii)) would not have been, so available.

(7)Subsection (8) applies if the main purpose, or one of the main purposes, of entering into—

(a)the lease,

(b)a series of transactions of which the lease is one, or

(c)any of the transactions in such a series,

is to obtain allowances under this Part in respect of an amount of capital expenditure that materially exceeds the market value of the leased asset at the commencement of the term of the lease.

(8)In any such case, the amount of the capital expenditure described in subsection (3) is to be restricted to an amount equal to the market value of the asset at the commencement of the term of the lease.

(9)In this section “relief” means relief by way of—

(a)an allowance under this Act,

(b)a deduction in computing profits for the purposes of income tax or corporation tax,

(c)a deduction from total profits or total income for the purposes of either of those taxes.

(10)This section is to be construed as one with section 70A.

Textual Amendments

F346S. 70C(4A)-(4C) inserted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2011 (c. 11), s. 33(2)

70DLong funding finance lease: additional expenditure: allowances for lesseeU.K.

(1)This section applies where the following conditions are met—

(a)a person is the lessee of plant or machinery under a long funding finance lease,

(b)as a result of section 70A, the person falls to be regarded as having incurred qualifying expenditure on the provision of the plant or machinery, and

(c)the lessor incurs expenditure in relation to the plant or machinery,

(d)as a result of the lessor incurring the expenditure, there is in the case of the lessee an increase (the “relevant increase”) in the present value of the minimum lease payments.

[F347(1A)Any increase attributable to a relievable amount is to be ignored for the purposes of subsection (1)(d).

(1B)Subsections (4B) and (4C) of section 70C apply (with any necessary modifications) for the purposes of this section as for the purposes of that section.]

(2)If the lease is one which, under generally accepted accounting practice, falls (or would fall) to be treated as a loan, this section applies as if the lease were one which, under generally accepted accounting practice, fell to be treated as a finance lease.

(3)The person is to be treated for the purposes of this Part as having incurred further capital expenditure on the provision of the plant or machinery as follows.

(4)The person is to be treated as having incurred the expenditure on the date of first recognition.

(5)The amount of the expenditure is the amount that would fall to be recognised as the amount of the relevant increase if appropriate accounts were prepared by the person.

(6)For that purpose, “appropriate accounts” are accounts prepared in accordance with generally accepted accounting practice on the date of first recognition.

(7)For the purposes of this section, the “date of first recognition” is the date on which the relevant increase is first recognised in the books or other financial records of the person.

(8)This section is to be construed as one with section 70A.

Textual Amendments

F347S. 70D(1A)(1B) inserted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2011 (c. 11), s. 33(3)

[F34870DATransfer and long funding leaseback: restrictions on lessee's allowancesU.K.

(1)This section applies where—

(a)a person (“S”) transfers plant or machinery to another person (“B”),

(b)at any time after the date of the transfer, the plant or machinery is available to be used by S, or a person (other than B) who is connected with S (“CS”), under a plant or machinery lease, and

(c)that lease is a long funding lease.

(2)No annual investment allowance or first-year allowance is to be made in respect of the expenditure of S or CS under the lease.

(3)The amount, if any, by which E exceeds D is to be left out of account in determining the available qualifying expenditure of S or CS.

(4)E is the capital expenditure of S or CS on the provision of the plant or machinery under the long funding lease.

(5)If S is required to bring a disposal value into account under this Part because of the transfer referred to in subsection (1)(a), D is that disposal value.

[F349(5A)D is nil if—

(a)S is not required to bring a disposal value into account under this Part because of the transfer referred to in subsection (1)(a), and

(b)at any time before that transfer S or a linked person became owner of the plant or machinery without incurring either capital expenditure or qualifying revenue expenditure on its provision.]

(6)Otherwise, D is whichever of the following is the smallest—

(a)the market value of the plant or machinery;

(b)if S incurred capital expenditure on the provision of the plant or machinery before the transfer referred to in subsection (1)(a), the amount of that expenditure;

(c)if a person connected with S incurred capital expenditure on the provision of the plant or machinery before that transfer, the amount of that expenditure.

(7)Section 70Y(3) applies to references in this section to a transfer of plant or machinery by a person.

(8)For the purposes of this section a transfer involving the grant of a lease takes place on the commencement of the term of the lease.

[F350(9)“Linked person”, in relation to plant or machinery, means a person—

(a)who owned the plant or machinery at any time before the transfer referred to in subsection (1)(a), and

(b)who was connected with S at any time between—

(i)the time when the person became owner of the plant or machinery, and

(ii)the time of the transfer referred to in subsection (1)(a).

(10)Expenditure on the provision of plant or machinery is “qualifying revenue expenditure” if it is expenditure of a revenue nature—

(a)that is at least equal to the amount of expenditure that would reasonably be expected to have been incurred on the provision of the plant or machinery in a transaction between persons dealing with each other at arm's length in the open market, or

(b)that is incurred by the manufacturer of the plant or machinery and is at least equal to the amount that it would have been reasonable to expect to have been the normal cost of manufacturing the plant or machinery.]]

Textual Amendments

F348S. 70DA inserted (with effect in accordance with Sch. 32 para. 17 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 15

F349S. 70DA(5A) inserted (with effect in accordance with Sch. 10 para. 2(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 10 para. 2(2)

F350S. 70DA(9)(10) inserted (with effect in accordance with Sch. 10 para. 2(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 10 para. 2(3)

70EDisposal events and disposal valuesU.K.

(1)This section applies where—

(a)a person is the lessee of plant or machinery under a long funding lease,

(b)as a result of section 70A, the person falls to be regarded as having incurred qualifying expenditure on the provision of the plant or machinery, and

[F351(c)a relevant event occurs.]

[F352(1A)A relevant event occurs if—

(a)the lease terminates,

(b)the plant or machinery begins to be used wholly or partly for purposes other than those of the qualifying activity, or

(c)the qualifying activity is permanently discontinued.]

(2)In the case of that person—

(a)the [F353relevant event] is a disposal event, and

(b)the person is required to bring into account a disposal value for the chargeable period in which that disposal event occurs.

[F354(2A)The amount of the disposal value is—

where—

  • QE is the person's qualifying expenditure on the provision of the plant or machinery,

  • QA is the qualifying amount (see subsections (2B) to (2E)), and

  • [F355R is the sum of—

    [a]

    any relevant rebate (see subsections (2F) and (2G)), and

    [b]

    any other relevant lease-related payment (see subsections (2FA) and (2G)).]

(2B)In the case of a long funding operating lease, “the qualifying amount” means the aggregate amount of the reductions made under F356... section 148I of ITTOIA 2005 [F357 or section 379 of CTA 2010] for periods of account in which the person was the lessee.

(2C)In the case of a long funding finance lease, “the qualifying amount” means the aggregate of—

(a)the payments made to the lessor by the person under the lease (including any initial payment), and

(b)the payments made to the lessor by the person under a guarantee of any residual amount (as defined in section 70YE) [F358other than any relievable payment],

subject to subsection (2D).

(2D)The following are excluded from the “qualifying amount” under subsection (2C)—

(a)so much of any payment as, in accordance with generally accepted accounting practice, falls (or would fall) to be shown in the person's accounts as finance charges[F359, or interest expenses,] in respect of the lease,

(b)so much of any payment as represents charges for services, and

(c)so much of any payment as represents qualifying UK or foreign tax (within the meaning of section 70YE) to be paid by the lessor.

[F360(2DA)A payment (“payment X”) is a relievable payment if—

(a)an arrangement is in place under which all or part of any residual amount (as defined in section 70YE) is guaranteed by the lessee or a person connected with the lessee,

(b)payment X is within the minimum lease payments because of that arrangement (see subsection (1)(a) of that section), and

(c)it is reasonable to assume that relief would be available as a result of making payment X (beyond relief, by virtue of section 70C or 70D and this section, because payment X is within those minimum lease payments).

(2DB)For the purposes of subsection (2DA)(c)—

(a)relief” has the meaning given in section 70C, and

(b)subsection (4C) of that section applies as it applies for the purposes of subsection (4B)(c) of that section.]

(2E)In the case of a long funding finance lease that is not a transaction at arm's length, “the qualifying amount” includes only so much of the amounts described in subsection (2C) as would reasonably be expected to have been paid if the lease had been such a transaction.

(2F)Relevant rebate” means—

(a)in a case falling within subsection (1A)(a), any amount calculated by reference to the termination value that is payable for the benefit (directly or indirectly) of the person or another person connected with that person, or

(b)in a case falling within subsection (1A)(b) or (c), any such amount that would have been so payable if, when the relevant event occurred, the lease had terminated and the plant or machinery had been sold for its market value at that time.

[F361(2FA)Relevant lease-related payment” means any payment which—

(a)is payable at any time for the benefit (directly or indirectly) of the lessee or a person connected with the lessee,

(b)is connected with the long funding lease, or with any arrangement connected with that lease, and

(c)is not—

(i)an initial payment or any other payment made to the lessor by the lessee under the lease,

(ii)a payment made to the lessor by the lessee under a guarantee of any residual amount (as defined in section 70YE),

(iii)an initial payment or any other payment made under a relevant superior lease to the person who is the lessor under that lease by the person who is the lessee under that lease, or

(iv)a payment to the seller of the proceeds of a sale of the plant or machinery to which subsection (2FC) applies,

if, and to the extent that, the payment is not otherwise brought into account for tax purposes as income or a disposal receipt by the person for whom the benefit is payable (or would not be if that person were within the charge to tax).

(2FB)For the purposes of subsection (2FA)—

  • payment” includes the provision of any benefit, the assumption of any liability and any other transfer of money's worth (and “payable” is to be construed accordingly);

  • relevant superior lease” means any lease of the plant or machinery to which the long funding lease mentioned in subsection (1)(a) is inferior.

(2FC)This subsection applies to a sale of the plant or machinery if—

(a)a person has entered into a relevant transaction with another person in respect of the plant or machinery for the purposes of Chapter 17 of this Part (see section 213) and the sale is within section 213(1)(a),

(b)the plant or machinery is within section 216(1)(b) (sale and lease back), and

(c)the conditions in section 227(2) are met.]

[F362(2G)In the case of a lease that is not a transaction at arm's length, “relevant rebate” and “relevant lease-related payment” include any amount that would reasonably be expected to have fallen within subsection (2F) or, as the case may be, (2FA) if the lease had been such a transaction.]

(2H)The amount of the disposal value brought into account under this section cannot be less than nil.]

(9)If the [F363relevant event] gives rise to a disposal event in the case of the person apart from this section, that disposal event is to be ignored.

(10)This section is to be construed as one with section 70A.]

Textual Amendments

F351S. 70E(1)(c) substituted (with effect in accordance with Sch. 32 para. 8 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 7(2)

F352S. 70E(1A) inserted (with effect in accordance with Sch. 32 para. 8 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 7(3)

F353Words in s. 70E(2)(a) substituted (with effect in accordance with Sch. 32 para. 8 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 7(4)

F354S. 70E(2A)-(2H) substituted for s. 70E(3)-(8) (with effect in accordance with Sch. 32 para. 8 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 7(5)

F355Words in s. 70E(2A) substituted (with effect in accordance with s. 46(5) of the amending Act) by Finance Act 2012 (c. 14), s. 46(2)

F356Words in s. 70E(2B) repealed (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 329(a), Sch. 3 Pt. 1 (with Sch. 2)

F357Words in s. 70E(2B) inserted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 329(b) (with Sch. 2)

F358Words in s. 70E(2C)(b) inserted (with effect in accordance with s. 33(7) of the amending Act) by Finance Act 2011 (c. 11), s. 33(4)

F359Words in s. 70E(2D)(a) inserted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 1(3)

F360S. 70E(2DA)(2DB) inserted (with effect in accordance with s. 33(7) of the amending Act) by Finance Act 2011 (c. 11), s. 33(5)

F361Ss. 70E(2FA)-(2FC) inserted (with effect in accordance with s. 46(5) of the amending Act) by Finance Act 2012 (c. 14), s. 46(3)

F362S. 70E(2G) substituted (with effect in accordance with s. 46(5) of the amending Act) by Finance Act 2012 (c. 14), s. 46(4)

F363Words in s. 70E(9) substituted (with effect in accordance with Sch. 32 para. 8 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 7(6)

[F364Chapter 6AU.K.Interpretation of provisions about long funding leases

Textual Amendments

F364Pt. 2 Ch. 6A inserted (with effect in accordance with Sch. 8 para. 15 of the amending Act) by Finance Act 2006 (c. 25), Sch. 8 para. 7

Modifications etc. (not altering text)

C33Pt. 2 Ch. 6A applied (21.7.2008) by Finance Act 2008 (c. 9), Sch. 20 para. 11(12)

C34Pt. 2 Ch. 6A applied (21.7.2009) by Finance Act 2009 (c. 10), Sch. 33 para. 9(c)

C35Pt. 2 Ch. 6A applied (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), ss. 381(1), 1184(1) (with Sch. 2)

C36Pt. 2 Ch. 6A modified (10.6.2021) by Finance Act 2021 (c. 26), s. 17

IntroductoryU.K.

70FIntroductoryU.K.

This Chapter makes provision for the interpretation of this Part so far as relating to long funding leases.

Meaning of “long funding lease” etcU.K.

70G“Long funding lease”U.K.

(1)A “long funding lease” is a funding lease (see section 70J) which meets the following conditions—

(a)it is not a short lease (see section 70I),

(b)it is not an excluded lease of background plant or machinery for a building (see section 70R),

(c)it not excluded by section 70U (plant or machinery leased with land: low percentage value).

(2)Where, at the commencement of the term of a plant or machinery lease, the plant or machinery—

(a)is not being used for the purposes of a qualifying activity carried on by the person concerned, but

(b)subsequently begins to be used for the purposes of a qualifying activity carried on by that person,

the plant or machinery lease is a long funding lease if the condition in subsection (3) is met.

(3)The condition is that (apart from section 70H) the plant or machinery lease would have been a long funding lease at its inception had the plant or machinery been used at that time for the purposes of a qualifying activity carried on by the person concerned.

(4)This section is subject, in the case of the lessee, to—

(a)section 70H (requirement for tax return treating lease as long funding lease);

(b)section 70Q (leases excluded by right of lessor etc to claim capital allowances).

(5)See also paragraph 91A of Schedule 22 to [F365FA] 2000 (tonnage tax: certain leases to be treated as not being long funding leases).

Textual Amendments

F365Word in s. 70G(5) substituted (21.7.2009) by Finance Act 2009 (c. 10), s. 126(5)(a)

70HLessee: requirement for tax return treating lease as long funding leaseU.K.

(1)A lease is not a long funding lease in the case of the lessee unless he makes a tax return for the initial period on the basis that he falls to be taxed in respect of the lease in accordance with the provisions of—

F366(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)Chapter 10A of Part 2 of ITTOIA 2005 (long funding leases: income tax) [F367or

(c)Chapter 2 of Part 9 of CTA 2010 (long funding leases of plant or machinery)].

[F368(1A)Subsection (1) does not apply in respect of a lease of plant or machinery (“lease A”) if, at any time in the relevant period—

(a)the lessee is the lessor of a lease of any of that plant or machinery (“lease B”), and

(b)lease B is a long funding lease.

(1B)In subsection (1A) “the relevant period” means the period—

(a)beginning with the inception of lease A, and

(b)ending with the making of the tax return for the initial period (or, if that return is amended, the making of the last amendment).]

[F369(1C)In a case in which paragraphs (a) and (b) of subsection (1) of section 70DA (leaseback of plant or machinery) are satisfied, subsection (1) of this section does not apply to the lease referred to in section 70DA(1)(b).]

(2)Where, in the case of a lease, a person has made a tax return for the initial period—

(a)on the basis that he falls to be taxed in respect of the lease in accordance with those provisions, or

(b)on the basis that he does not fall to be so taxed,

he may not make a claim [F370under the recovery provisions for relief in respect of an amount paid or liable to be paid that is excessive by reason of] the tax return having been made on that basis.

(3)In this section—

  • [F371“the recovery provisions”] means—

    (a)

    [F372Schedule 1AB to] the Taxes Management Act 1970; or

    (b)

    paragraph 51 of Schedule 18 to [F373FA] 1998;

  • “the initial period” is the first accounting period or, as the case may be, tax year in which there is a difference in the amount of the profits or losses falling to be shown in the return, according to whether the lease is a long funding lease or not;

  • tax return” means—

    (a)

    a company tax return under paragraph 3 of Schedule 18 to [F373FA] 1998, or

    (b)

    a return under section 8 of the Taxes Management Act 1970 (income tax: personal return).

Textual Amendments

F366S. 70H(1)(a) repealed (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 330(a), Sch. 3 Pt. 1 (with Sch. 2)

F367S. 70H(1)(c) and preceding word inserted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 330(b) (with Sch. 2)

F368S. 70H(1A)(1B) inserted (with effect in accordance with Sch. 20 para. 8(2) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 8(1)

F369S. 70H(1C) inserted (with effect in accordance with Sch. 32 para. 17 to the amending Act) by Finance Act 2009 (c. 10), Sch. 32 para. 16

F370Words in s. 70H(2) substituted (with effect in accordance with s. 100(2) of the amending Act) by Finance Act 2009 (c. 10), Sch. 52 para. 9(2)

F371Words in s. 70H(3) substituted (with effect in accordance with s. 100(2) of the amending Act) by Finance Act 2009 (c. 10), Sch. 52 para. 9(3)(a)

F372Words in s. 70H(3) substituted (with effect in accordance with s. 100(2) of the amending Act) by Finance Act 2009 (c. 10), Sch. 52 para. 9(3)(b)

F373Word in s. 70H(3) substituted (21.7.2009) by Finance Act 2009 (c. 10), s. 126(5)(a)

70I“Short lease”U.K.

(1)Construe “short lease” in accordance with this section.

(2)A lease whose term is [F3747] years or less is a short lease.

F375(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F375(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F375(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F375(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F375(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F375(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9)Where—

(a)a person leases an asset to another (“S”) under a lease that would, apart from this subsection, be a short lease,

(b)the inception of that lease is on or after 7th April 2006,

(c)at or about the time of the inception of that lease, arrangements are entered into for the asset to be leased to one or more other persons under one or more other leases, and

(d)in the aggregate, the term of the lease to S and the terms of the leases to such of those other persons as are connected with S exceed [F3767] years,

the lease to S is not a short lease.

[F377(9A)Where plant or machinery is the subject of a lease and finance leaseback (as defined in section 228A)—

(a)the finance lease mentioned in section 228A(2)(c), and

(b)any other finance lease forming part of the arrangements for the lease and finance leaseback (except the lease referred to in section 228A(2)(a)),

is not a short lease (if it otherwise would be).]

[F378(10)Where plant or machinery is the subject of a sale and finance leaseback (as defined in section 221), any finance lease of a kind mentioned in section 221(1)(c) is not a short lease (if it otherwise would be).

(11)But, if the conditions set out in section 227(2) are met, B and S (within the meaning of section 221) may make an election the effect of which is that—

(a)subsection (10) above does not apply,

(b)section 228(2) and (3) apply in relation to B (but this does not prevent section 225 from applying), and

(c)section 228(5) applies in relation to S.

(12)Subsections (4) to (6) of section 227 apply in relation to elections under this section as they apply in relation to elections under that section.]

Textual Amendments

F374Word in s. 70I(2) substituted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 8(1)(a)

F375Ss. 70I(3)-(8) omitted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 14 para. 8(1)(b)

F376Word in s. 70I(9)(d) substituted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 8(1)(a)

F377S. 70I(9A) inserted (with effect in accordance with Sch. 20 para. 7(2) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 7(1)

F378Ss. 70I(10)-(12) inserted (with effect in accordance with Sch. 20 para. 6(19) of the amending Act) by Finance Act 2008 (c. 9), Sch. 20 para. 6(6) (with Sch. 20 para. 6(20))

70J“Funding lease”U.K.

(1)A “funding lease” is a plant or machinery lease (see section 70K) which at its inception meets one or more of the following tests—

(a)the finance lease test (see section 70N),

(b)the lease payments test (see section 70O),

(c)the useful economic life test (see section 70P).

[F379(1A)A plant or machinery lease is also a “funding lease” if the plant or machinery is cushion gas.]

(2)[F380Subsections (1) and (1A) are] subject to the following provisions of this section.

(3)A plant or machinery lease is not a funding lease if—

(a)section 67 applies (plant or machinery treated as owned by person entitled to benefit of contract, etc), and

(b)the lease is the contract mentioned in that section.

(4)A plant or machinery lease is not a funding lease if—

(a)before the commencement of the term of the lease, the lessor has leased the plant or machinery under one or more other plant or machinery leases,

(b)in the aggregate, the terms of those other leases exceed 65% of the remaining useful economic life of the plant or machinery at the commencement of the term of the earliest of them, and

(c)none of those earlier leases was a funding lease.

(5)For the purposes of subsection (4), all persons who were lessors of the plant or machinery before 1st April 2006 are to be treated as if they were the same person as the first lessor of the plant or machinery on or after that date.

(6)A plant or machinery lease is not a funding lease in the case of the lessor if—

(a)before 1st April 2006, the plant or machinery had, for a period or periods totalling at least 10 years, been the subject of one or more leases, and

(b)the lessor under the plant or machinery lease was also lessor of the plant or machinery on the last day before 1st April 2006 on which the plant or machinery was the subject of a lease.

[F381(7)