Part 2

Plant and machinery allowances
Chapter 5

Allowances and charges

Application of Chapter to person leaving cash basis

Persons leaving cash basis
66A
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
higher of the following
—
i
the amount of that expenditure for which
a deduction was allowed in calculating the profits of the trade, profession
, vocation or property business
, or
ii
the 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
, 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
the cash basis applied
in relation to the trade, profession or vocation, and
b
the cash basis does not apply
in relation to the trade, profession or vocation for the chargeable period.
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.
Pt. 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)
S. 45H(2) modified (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14) , Sch. 30 para. 7
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
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
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
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
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
Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 19
Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 35
Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 paras. 36, 37
Pt. 2 modified (21.7.2009) by Finance Act 2009 (c. 10), s. 24
Pt. 2 modified (17.7.2013) by Finance Act 2013 (c. 29), s. 73(7)-(11) (with s. 73(6))
S. 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
S. 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)
S. 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)
Words 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)
Words 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)
Words 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)
Pt. 2 modified (10.6.2021) by Finance Act 2021 (c. 26), s. 9(1)(a)
Pt. 2 modified (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), s. 7
Words 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)
Words 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)