Part 1 Introduction

Chapter 1 Capital allowances: general

1 Capital allowances

(1)This Act provides for allowances in respect of capital expenditure (and for charges in connection with those allowances).

(2)The allowances for which this Act provides are those under—

(a)Part 2 (plant and machinery allowances);

[^F1 (aa)Part 2A (structures and buildings allowances);^F1]

^F2 (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F3 (ba)Part 3A (business premises renovation allowances)^F3]

^F4 (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F5 (ca). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d)Part 5 (mineral extraction allowances);

(e)Part 6 (research and development allowances);

(f)Part 7 (know-how allowances);

(g)Part 8 (patent allowances);

(h)Part 9 (dredging allowances);

(i)Part 10 (assured tenancy allowances).

(3)^F6This Act also provides for allowances in respect of contributions to expenditure incurred on plant or machinery... for the purposes of a mineral extraction trade or on dredging (see Part 11).

^F7 (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F7 (5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F81A Capital allowances and charges: cash basis

(1) This section applies in relation to a chargeable period for which the profits of a trade, profession, vocation or property business (“the relevant activity”) carried on by a person are calculated on the cash basis.

(2)The person is not entitled to any allowance or liable to any charge under this Act except as provided by subsections (4) and (7).

(3)No disposal value is to be brought into account except as provided by subsections (5) and (8).

(4)If, apart from subsection (2), the person would be entitled to an allowance in respect of expenditure incurred on the provision of a car or liable to a charge in connection with such an allowance, the person is so entitled or (as the case may be) so liable.

(5)If, apart from subsection (3), a disposal value would be brought into account in respect of a car, the disposal value is brought into account in respect of the car.

(6)Subsections (7) and (8) apply if—

(a)a person carrying on a relevant activity incurs qualifying expenditure relating to an asset at a time when the profits of that activity are not calculated on the cash basis,

(b)after incurring the expenditure, the person enters the cash basis for a tax year, and

(c)no deduction would be allowed in respect of the expenditure in calculating the profits of the relevant activity on the cash basis for that tax year, on the assumption that the expenditure was paid in that tax year.

(7)If, apart from subsection (2), the person would be liable to a charge in connection with allowances in respect of the qualifying expenditure mentioned in subsection (6), the person is so liable.

(8)If, apart from subsection (3), a disposal value would be brought into account in respect of the asset mentioned in subsection (6), the disposal value is brought into account in respect of the asset.

(9) For the purposes of this section a person carrying on a trade, profession or vocation “enters the cash basis” for a tax year if—

(a)[^F9 the cash basis applies^F9] in relation to the trade, profession or vocation for the tax year, and

(b)[^F10 the cash basis did not apply^F10] in relation to the trade, profession or vocation for the previous tax year.

(10) For the purposes of this section a person carrying on a property business “enters the cash basis” for a tax year if the profits of the business are calculated—

(a)on the cash basis for the tax year (see section 271D of ITTOIA 2005), and

(b)in accordance with GAAP (see section 271B of that Act) for the previous tax year.

(11)In this section—

[^F11 (za)references to a trade, profession or vocation in relation to which the cash basis applies are to a trade, profession or vocation the profits of which are required by virtue of section 24A(1) of ITTOIA 2005 to be calculated on the cash basis,^F11]

(a)references to calculating the profits of a trade, profession or vocation on the cash basis are to [^F12 doing so in accordance with section 24A of ITTOIA 2005^F12] , and

(b)references to calculating the profits of a property business on the cash basis are to be construed in accordance with section 271D of that Act (calculation of profits of property businesses on the cash basis).

(12)In this section—

• “ car ” has the same meaning as in Part 2 (see section 268A) ;

• “ disposal value ” means—

  (a)

  a disposal value for the purposes of Part 2, 4A, 5, 6, 7, 8 or 10, or

  (b)

  proceeds from a balancing event for the purposes of Part 3 or 3A;

• “ qualifying expenditure ” means qualifying expenditure within the meaning of any Part of this Act. ^F8]

2 General means of giving effect to capital allowances

(1)Allowances and charges are to be given effect—

(a)for income tax purposes, in calculating income for a chargeable period, and

(b)for corporation tax purposes, in calculating profits for a chargeable period.

(2) For the meaning of “ chargeable period ”, see section 6.

(3)Subsection (1) needs to be read with the following provisions about giving effect to allowances and charges—

• sections 247 to [^F13262^F13] (plant and machinery allowances);

• [^F14 sections 270HA to 270HI (structures and buildings allowances);^F14]

• ^F15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• [^F16 sections 360Z and 360Z1 (business premises renovation allowances)^F16]

• ^F17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• ^F18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• section 432 (mineral extraction allowances);

• section 450 (research and development allowances);

• section 463 (know-how allowances);

• sections 478 to 480 (patent allowances);

• section 489 (dredging allowances);

• section 529 (assured tenancy allowances).

(4) In subsection (1)(b) “ profits ” has the same meaning as in [^F19 Part 2 of CTA 2009 (see section 2(2) of that Act ) ^F19] .

3 Claims for capital allowances _cross-notes

(1)^F20No allowance is to be made under this Act... unless a claim for it is made.

(2)The claim must be included in a tax return.

[^F21 (2ZZA)Any claim for a first-year allowance under section 45O (expenditure on plant and machinery for use in [^F22 special tax sites^F22] ) must include, or be accompanied by, such information as Her Majesty's Revenue and Customs may require.^F21]

[^F23 (2ZA)Any claim for an allowance under Part 2A (structures and buildings allowances) [^F24 —

(a)^F24] must be separately identified as such in the return[^F25 , and

(b)where it relates to [^F26 special tax site qualifying expenditure^F26] (as defined in section 270BNA), must include, or be accompanied by, such information as Her Majesty's Revenue and Customs may require.^F25,F23]]

[^F27 (2A)Any claim for an allowance under Part 3A (business premises renovation allowances) must be separately identified as such in the return.^F27]

^F28 (2B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) In this Act “ tax return ” means—

(a)for income tax purposes, a return required to be made under TMA 1970, and

(b)for corporation tax purposes, a company tax return required to be made under Schedule 18 to FA 1998 (company tax returns, assessments and related matters).

(4)Subsection (2) does not apply for income tax purposes to a claim for an allowance under—

(a)section 258 (claim for allowance in respect of special leasing of plant or machinery),

^F29 (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)section 479 (claim for patent allowance in respect of non-trading expenditure),

which is instead subject to section 42 of TMA 1970 (procedure for making claims and claims not included in returns).

(5)Subsection (2) does not apply for corporation tax purposes to a claim for an allowance under—

(a)section 260(3)(b) (claim to carry back allowance in respect of special leasing of plant or machinery), or

^F30 (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

which is instead subject to paragraphs 54 to 60 of Schedule 18 to FA 1998 (general provisions as to claims).

(6)This section is subject to section 42(6) and (7) of TMA 1970 (special provisions relating to partnerships).

4 Capital expenditure _cross-notes

(1) In this Act “ capital expenditure ” and “ capital sums ” are used in the sense given in this section.

(2) “ Capital expenditure ” and “ capital sums ” do not include, in relation to a person incurring the expenditure or paying the sums—

(a)^F31any expenditure or sum that may be deducted in calculating the profits or gains of a trade, profession or vocation or property business carried on by the person, ...

[^F32 (aa)any cash basis expenditure, other than expenditure incurred on the provision of a car, or^F32]

[^F33 (b)any expenditure or sum that may be allowed as a deduction under a relevant provision from the taxable earnings from an employment or office held by the person.^F33]

[^F34 (2ZA)In subsection (2)(aa)—

• “ cash basis expenditure ” means any expenditure incurred—

  (a)

  in the case of a trade, profession or vocation, at a time when [^F35 the cash basis applies^F35] in relation to the trade, profession or vocation [^F36 (see section 24A of ITTOIA 2005)^F36] , or

  (b)

  in the case of a property business, in a tax year for which the profits of the business are calculated on the cash basis (see section 271D of that Act); and

• “ car ” has the same meaning as in Part 2 (see section 268A) . ^F34]

[^F37 (2A)In subsection (2)—

“ relevant provision ” means any of the following—

(a)section 262;

(b) section 232 of ITEPA 2003 (giving effect to mileage allowance relief);

(c)Chapters 2 to 6 of Part 5 of that Act (general deductions allowed from earnings); and

[^F38 (d) sections 188 to 194of FA 2004 (contributions under registered pension schemes), and^F38]

“ taxable earnings ” has the meaning given by section 10 of ITEPA 2003. ^F37]

(3) “ Capital expenditure ” and “ capital sums ” do not include, in relation to a recipient of the expenditure or sums—

(a)any amounts that are to be added in calculating the profits or gains of a trade, profession or vocation or property business carried on by the recipient, or

(b)any amounts that are [^F39earnings^F39] of an employment or office held by the recipient.

(4) “ Capital expenditure ” and “ capital sums ” do not include, in relation to—

(a)a person incurring the expenditure or paying the sums, or

(b)a recipient of the expenditure or sums,

any expenditure or sum in the case of which a deduction of income tax falls or may fall to be made under [^F40Chapter 6 of Part 15 of ITA 2007 (deduction from annual payments or patent royalties) or under section 906 of that Act (certain royalties etc where usual place of abode of owner is abroad)^F40] .

^F41 (5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 When capital expenditure is incurred _cross-notes

(1)For the purposes of this Act, the general rule is that an amount of capital expenditure is to be treated as incurred as soon as there is an unconditional obligation to pay it.

(2)The general rule applies even if the whole or a part of the expenditure is not required to be paid until a later date.

(3)There are the following exceptions to the general rule.

(4)If under an agreement—

(a)the capital expenditure is expenditure on the provision of an asset,

(b)an unconditional obligation to pay an amount of the expenditure comes into being as a result of the giving of a certificate or any other event,

(c)the giving of the certificate, or other event, occurs within the period of one month after the end of a chargeable period, and

(d)at or before the end of that chargeable period, the asset has become the property of, or is otherwise under the agreement attributed to, the person subject to the unconditional obligation to pay,

the expenditure is to be treated as incurred immediately before the end of that chargeable period.

(5)If under an agreement an amount of capital expenditure is not required to be paid until a date more than 4 months after the unconditional obligation to pay has come into being, the amount is to be treated as incurred on that date.

(6)If under an agreement—

(a)there is an unconditional obligation to pay an amount of capital expenditure on a date earlier than accords with normal commercial usage, and

(b)the sole or main benefit which might have been expected to be obtained thereby is that the amount would be treated, under the general rule, as incurred in an earlier chargeable period,

the amount is to be treated as incurred on the date on or before which it is required to be paid.

(7)This section—

(a)is subject to any provision of this Act which has the effect that expenditure is to be treated as incurred on a date later than would result from the application of this section, and

(b)does not apply to expenditure treated as incurred as a result of a person incurring an additional VAT liability.

6 Meaning of “chargeable period”

(1) In this Act “ chargeable period ” means—

(a)for income tax purposes, a period of account, or

(b)for corporation tax purposes, an accounting period of a company.

(2) “ Period of account ” means—

(a)in the case of a person entitled to an allowance or liable to a charge in calculating the profits of his trade, profession or vocation, a period for which accounts are drawn up for the purposes of the trade, profession or vocation, and

(b)in the case of any other person entitled to an allowance or liable to a charge, a tax year.

(3)Subsection (2)(a) is subject to subsections (4) to (6).

(4)If—

(a)two periods of account overlap, or

(b)one period of account includes another,

the period common to both is to be treated as part of the first period of account only.

(5)If there is a gap between two periods of account, the gap is to be treated as part of the first period of account.

(6)If a period of account would (apart from this subsection) be longer than 18 months, that period must be treated as divided into separate periods of account—

(a)the first beginning with the start date of the original period, and

(b)each subsequent one beginning with an anniversary of that date,

so as to ensure that none of the periods of account is longer than 12 months.

[^F42CHAPTER 1A Trades attracting Northern Ireland rate of corporation tax

6A “NIRE company” and “ [^F43SME (Northern Ireland employer) company^F43] ”

In this Act—

• “ NIRE company ” means a company that is a Northern Ireland company for the purposes of Part 8B of CTA 2010 by virtue of [^F44 the SME (election) condition or ^F44] the large company condition in section 357KA of that Act ;

• [^F45 “ SME (Northern Ireland employer) company ” ^F45] means a company that is a Northern Ireland company for the purposes of Part 8B of CTA 2010 by virtue of the [^F46 SME (Northern Ireland employer) condition ^F46] in section 357KA of that Act .

6B “Northern Ireland firm” etc

(1)This section has effect for the purposes of this Act.

(2) “ Northern Ireland firm ” has the meaning given by section 357WA of CTA 2010.

(3) If section 357WC of CTA 2010 (Northern Ireland profits etc of firm determined under Chapter 6 of Part 8B of that Act ) applies to a Northern Ireland firm for a chargeable period, the partnership is a “Northern Ireland Chapter 6 firm” for any purpose for which that section applies.

(4) If section 357WD of CTA 2010 (Northern Ireland profits etc of firm determined under Chapter 7 of Part 8B of that Act ) applies to a Northern Ireland firm for a chargeable period, the partnership is a “Northern Ireland Chapter 7 firm” for any purpose for which that section applies.

6C “NI rate activity”

(1) In this Act “ NI rate activity ” means—

(a)a qualifying trade carried on by [^F47 an SME (Northern Ireland employer) company^F47] , except to the extent that it is an excluded activity,

(b)a qualifying trade, other than an excluded financial trade, carried on by a NIRE company, to the extent that the trade—

(i)is carried on through a Northern Ireland regional establishment of the company, and

(ii)does not consist of an excluded activity,

(c)the back-office activities of an excluded financial trade carried on by [^F48 an _dfnSME (Northern Ireland employer) company^F48] which has made an election for the purposes of section 357KB(2) of CTA 2010,

(d)the back-office activities of an excluded financial trade carried on by a NIRE company which has made an election for the purposes of section 357KB(2) of CTA 2010, to the extent that those activities are carried on through the Northern Ireland regional establishment of the company,

(e)a qualifying partnership trade carried on by a Northern Ireland Chapter 6 firm, except to the extent that it is an excluded activity,

(f)a qualifying partnership trade, other than an excluded financial trade, carried on by a Northern Ireland Chapter 7 firm, to the extent that the trade—

(i)is carried on through a Northern Ireland regional establishment of the partnership, and

(ii)does not consist of an excluded activity,

(g)the back-office activities of an excluded financial trade carried on by a Northern Ireland Chapter 6 firm which has made an election for the purposes of section 357WB(2) of CTA 2010, or

(h)the back-office activities of an excluded financial trade carried on by a Northern Ireland Chapter 7 firm which has made an election for the purposes of section 357WB(2) of CTA 2010, to the extent that those activities are carried on through the Northern Ireland regional establishment of the partnership.

(2)In subsection (1)—

• “ back-office activities ” has the same meaning as in Part 8B of CTA 2010 (see section 357XI of that Act );

• “ excluded financial trade ” means a trade that is an excluded trade for the purposes of Part 8B of CTA 2010 merely because it falls within one or more of the following provisions of that Act—

  (a)

  section 357XB (lending and investment),

  (b)

  section 357XC (investment management), or

  (c)

  section 357XE (re-insurance trade);

• “ 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 );

• “ qualifying partnership trade ” has the same meaning as in Part 8B of CTA 2010 (see section 357WB of that Act );

• “ qualifying trade ” has the same meaning as in Part 8B of CTA 2010 (see section 357KB of that Act ).

6D NI rate activity treated as separate trade

(1)For the purposes of this Act, the NI rate activity carried on by [^F49 an _dfnSME (Northern Ireland employer) company^F49] or a NIRE company is to be treated as a separate trade, distinct from any other activities carried on by the company as part of the trade.

(2)For the purposes of the corporate partner calculation, the NI rate activity carried on by a Northern Ireland firm is to be treated as a separate trade, distinct from any other activities carried on by the firm as part of the trade.

(3) In this Act “ the corporate partner calculation ”, in relation to a trade carried on by a Northern Ireland firm, means the determination of the allowances and charges to which effect is to be given under this Act in determining under subsection (3) or (4) of section 1259 of CTA 2009 (calculation of firm's profits and losses) the amount of the profits of the trade chargeable to corporation tax.

6E Giving effect to allowances and charges: NI rate activity cases

(1)This section applies if [^F50 an _dfnSME (Northern Ireland employer) company^F50] or a NIRE company is entitled or liable to—

(a)an allowance or charge under Part 2 (plant and machinery allowances) where the qualifying activity is a trade,

[^F51 (aa)an allowance under Part 2A (structures and buildings allowances),^F51]

(b)an allowance or charge under Part 3A (business premises renovation allowances),

(c)an allowance or charge under Part 5 (mineral extraction allowances),

(d)an allowance or charge under Part 6 (research and development), or

(e)an allowance under Part 9 (dredging allowances).

(2)For the purposes of the corporate partner calculation, this section also applies if a Northern Ireland firm is entitled or liable to an allowance or charge falling within any of subsection (1)(a) to (e).

(3)The allowance or charge is to be given effect in calculating the profits of the trade, by treating—

(a)the allowance as an expense of the trade, and

(b)the charge as a receipt of the trade.

(4)If the allowance or charge relates to an _dfnNI rate activity, it is treated for the purposes of Part 8B of CTA 2010 (trading profits taxable at the Northern Ireland rate) as forming part of the Northern Ireland profits or Northern Ireland losses of the trade.

(5)If the allowance or charge relates to a main rate activity, it is treated for the purposes of Part 8B of CTA 2010 as forming part of the mainstream profits or mainstream losses of the trade.

(6)In this section—

(a) “ the trade ” means the trade carried on by the company or partnership (disregarding for this purpose section 6D), and

(b) “ main rate activity ” means so much of the trade as is not an NI rate activity. ^F42]

Chapter 2 Exclusion of double relief

7 No double allowances

(1)If an allowance is made under any Part of this Act to a person in respect of capital expenditure, no allowance is to be made to him under any other Part in respect of—

(a)that expenditure, or

(b)the provision of any asset to which that expenditure related.

[^F52 (1A)In subsection (1), the reference to capital expenditure includes a reference to expenditure that is treated as capital expenditure for the purposes of section 270BJ(1) (structures and buildings allowances: expenditure on renovation, conversion and incidental repairs).^F52]

(2)This section does not apply in relation to Parts 7 and 8 (know-how and patent allowances).

8 No double relief through pooling under Part 2 (plant and machinery allowances)

(1)Subsection (2) applies if, under Part 2—

(a)any capital expenditure has been allocated to a pool, and

(b)an allowance or charge has been made to or on any person in respect of the pool.

(2)The person to or on whom the allowance or charge has been made is not entitled to an allowance under any Part other than Part 2 in respect of—

(a)the expenditure allocated to the pool, or

(b)the provision of any asset to which the allocated expenditure related.

(3)Subsection (4) applies if under any Part other than Part 2 an allowance has been made to a person in respect of any capital expenditure.

(4)The person to whom the allowance has been made is not entitled to allocate to any pool—

(a)that expenditure, or

(b)any expenditure on the provision of any asset to which the expenditure mentioned in paragraph (a) related.

(5)This section does not apply in relation to Parts 7 and 8 (know-how and patent allowances).

9 Interaction between fixtures claims and other claims

(1)A person is not entitled to make a fixtures claim in respect of any capital expenditure relating to an asset if—

(a)any person entitled to do so has at any previous time claimed an allowance under any Part other than Part 2, and

(b)the claim was for an allowance in respect of capital expenditure relating, in whole or part, to the asset.

(2)Subsection (1) does not prevent a person making a fixtures claim in respect of capital expenditure if—

(a)the only previous claim was under Part 3 [^F53, 3A^F53] or 6 (industrial buildings and research and development allowances), and

(b)section 186(2) [^F54, 186A(2)^F54] or 187(2) (limit on amount of expenditure that may be taken into account) applies to that expenditure.

(3)If a person entitled to do so has made a fixtures claim in respect of capital expenditure relating to an asset, no one is entitled to an allowance on a later claim under any Part other than Part 2 in respect of any capital expenditure relating to the asset.

(4)A person makes a fixtures claim in respect of expenditure if he makes a claim (in the sense given in section 202(3)) under Chapter 14 of Part 2 in respect of the expenditure as expenditure on the provision of a fixture.

10 Interpretation

(1) In this Chapter “ capital expenditure ” includes any contribution to capital expenditure.

(2)For the purposes of this Chapter—

(a)expenditure relates to an asset only if it relates to its provision, and

(b)the provision of an asset includes its construction or acquisition.

Part 2 Plant and machinery allowances _cross-notes

Chapter 1 Introduction

11 General conditions as to availability of plant and machinery allowances

(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 on

[^F55 (1)^F55] 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.

[^F56 (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 _dfnNI 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 _dfnNI 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 ). ^F56]

13 Use for qualifying activity of plant or machinery provided for other purposes _cross-notes

(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)^F57The amount to be deducted is any amount that under section 218... 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).

[^F5813A Use for other purposes of plant or machinery previously used for long funding leasing

(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.^F58]

^F5913B Use for other purposes of plant or machinery: property businesses

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

14 Use for qualifying activity of plant or machinery which is a gift

(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 2 Qualifying activities

15 Qualifying activities

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

(a)a trade,

(b)[^F60 a^F60][^F61 UK^F61][^F62 property^F62] business,

^F63 (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d)an ^F64[^F65... overseas^F65] property business,

^F66 (da). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e)a profession or vocation,

(f)a concern listed in [^F67section 12(4) of ITTOIA 2005 or^F67][^F68 section 39(4) of CTA 2009^F68] (mines, transport undertakings etc.),

[^F69 (g)managing the investments of a company with investment business,^F69]

(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.

[^F70 (2ZA)Where an activity of a company is treated by subsection (1) of section 6D (_dfnNI 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.^F70]

[^F71 (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.^F71]

[^F72 (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.^F72]

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

(a)[^F73 a^F73][^F74 UK^F74][^F75 property^F75] business,

(b)an ^F76[^F77... overseas^F77] 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).

^F8016 Ordinary [^F78UK^F78] [^F79property^F79] businesses

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

^F8017 [^F81UK furnished^F81] holiday lettings businesses

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

^F8017A Ordinary overseas property business

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

^F8017B EEA furnished holiday lettings businesses

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

18. Managing the investments of a company with investment business

(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 [^F82section 1219 of CTA 2009^F82] .

(2) In this Part “company with investment business” has the meaning given by [^F83 section 1218B ^F83] of CTA 2009.

19 Special leasing of plant or machinery

(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 [^F84long-term business^F84] —

(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.

20 Employments and offices

(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 [^F85 section 15 of ITTOIA 2005 ^F85] (divers and diving supervisors in the North Sea etc.).

(2)Subsection (3) applies if the [^F86earnings^F86] for any duties of an employment or office [^F87fall within section 22 or 26 of ITEPA 2003^F87] .

(3)This Part applies in relation to—

(a)[^F88 those earnings^F88] , or

(b)any [^F89other taxable earnings (as defined by section 10 of ITEPA 2003)^F89] of the employment or office,

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

Chapter 3 Qualifying expenditure

Buildings, structures and land

21 Buildings

(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.

(4) This section is subject to section 23 [^F90 (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) ^F90] .

22 Structures, assets and works

(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.

(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 [^F91 (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) ^F91] .

23 Expenditure unaffected by sections 21 and 22

(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—

• ^F92 section 28 (thermal insulation of ...buildings);

• ^F93 ...

• ^F94 ...

• ^F95 ...

• ^F96 ...

• section 33 (personal security);

• [^F97 section 33A (integral features);^F97]

• section 71 (software and rights to software);

• section [^F98143 of ITTOIA 2005 or section^F98] 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.

(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.)).

24 Interests in land

(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 machinery

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 costs

26 Demolition costs

(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) ( [^F102general decommissioning expenditure^F102] before cessation of ring fence trade: election for special allowance) [^F103and sections 165A to 165E (restrictions on allowances: anti-avoidance).^F103]

Expenditure on thermal insulation [^F104and personal security^F104]

27 Application of Part to thermal insulation [^F105and personal security^F105]

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

(a)it is expenditure to which [^F106section 28 or 33^F106] 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.

28 ^F107 Thermal insulation of ... buildings

(1)This section applies to expenditure if a person carrying on a qualifying activity [^F108other than [^F109 a UK^F109] property business or [^F110 an overseas^F110] property business^F108] has incurred it in adding insulation against loss of heat to [^F111a^F111] building occupied by him for the purposes of [^F112the qualifying activity^F112] .

(2)This section also applies to expenditure if a person carrying on a qualifying activity consisting of [^F113a UK^F113][^F114 property^F114] business [^F115or [^F116 an overseas^F116] property business^F115] has incurred it in adding insulation against loss of heat to [^F117a^F117] building let by him in the course of the business.

[^F118 (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 [^F119 section 251 of CTA 2009^F119] , 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.^F118]

^F120 (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F12129 Fire safety

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

^F12230 Safety at designated sports grounds

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

^F12331 Safety at regulated stands at sports grounds

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

^F12432 Safety at other sports grounds

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

33 Personal security

(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.

^F125 (7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(a)a trade,

(b)[^F126 a^F126][^F127 UK^F127][^F128 property^F128] business,

^F129 (c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d)^F132an ^F130[^F131... overseas^F131] property business, ...

^F133 (da). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e)a profession or vocation.

[^F134Expenditure on integral features^F134]

[^F13433A Expenditure on provision or replacement of integral features _cross-notes

(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.

33B Meaning of “replacement” in section 33A

(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.^F134]

Exclusion of certain types of expenditure

34 Expenditure by MPs and others on accommodation

(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.

[^F13534A Expenditure on plant or machinery for long funding leasing not qualifying expenditure

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).^F135]

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

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

(a)[^F136 a^F136][^F137 UK^F137][^F138 property^F138] business,

(b)an ^F139[^F140... overseas^F140] 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.

[^F14136 Restriction on qualifying expenditure in case of employment or office

(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 . ^F141]

37 Exclusion where sums payable in respect of depreciation

(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.

Expenditure is not qualifying expenditure if it is incurred on—

[^F142 (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).^F142]

[^F14338ZA Vehicles for which deductions allowed at fixed rate under Part 2 of ITTOIA 2005

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).^F143]

[^F144Chapter 3A AIA qualifying expenditure

38A AIA qualifying expenditure

(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.

38B General exclusions applying to section 38A

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 [^F145 268A^F145] ).

• General exclusion 3

  The expenditure is incurred wholly for the purposes of a ring fence trade in respect of which tax is chargeable under [^F146 section 330(1) of CTA 2010^F146] (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).^F144]

Chapter 4 First-year qualifying expenditure

General

39 First-year allowances available for certain types of qualifying expenditure only

A first-year allowance is not available unless the qualifying expenditure is first-year qualifying expenditure under [^F147any of the following provisions^F147] —

Types of expenditure which may qualify for first-year allowances

^F16240 Expenditure incurred for Northern Ireland purposes by small or medium-sized enterprises

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

^F16241 Miscellaneous exclusions from section 40 (expenditure for Northern Ireland purposes etc.)

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

^F16242 Exclusion of plant or machinery partly for use outside Northern Ireland

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

^F16243 Effect of plant or machinery subsequently being primarily for use outside Northern Ireland

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

^F16344 Expenditure incurred by small or medium-sized enterprises

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

^F16445 ICT expenditure incurred by small enterprises

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

^F16545A Expenditure on energy-saving plant or machinery

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

^F16545AA Section 45A exclusion: feed-in tariffs and renewable heat incentives

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

^F16545B Certification of energy-saving plant and machinery

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

^F16545C Energy-saving components of plant or machinery

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

45D Expenditure on cars with low carbon dioxide emissions

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

(a)it is incurred in [^F166the relevant period,^F166]

(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,

[^F167 (c)the car—

(i)is electrically-propelled, or

(ii)has low CO₂ emissions, and^F167]

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

^F168 (1A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F169 (1B) The “relevant period” is the period beginning with 17 April 2002 and ending with—

(a)in the case of expenditure incurred by a company within the charge to corporation tax, 31 March 2026, and

(b)in the case of expenditure incurred by a person within the charge to income tax, 5 April 2026.

(1C)The Treasury may by regulations amend subsection (1B) so as to extend the relevant period.^F169]

(2) For the purposes of this section [^F170a car has low CO₂ emissions if it^F170] 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 [^F171a qualifying emissions certificate.^F171]

(4) The second condition is that the applicable CO ₂ emissions figure [^F172in relation to^F172] the car does not exceed [^F1730^F173] grams per kilometre driven.

^F174 (5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F174 (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[^F175 is to a car within the meaning of section 268A, except that it^F175] —

(a)^F176includes a reference to a mechanically propelled road vehicle of a type commonly used as a hackney carriage, ...

^F176 (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F177 (9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F177 (10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F178 (11)In this section—

• “applicable CO ₂ emissions figure” and “qualifying emissions certificate” have the meanings given in section 268C;

• “ electrically-propelled ” has the meaning given in section 268B. ^F178]

[^F17945DA Expenditure on zero-emission goods vehicles

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

(a)it is incurred in the period of [^F180 15 years^F180] 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).

[^F181 (1A)The Treasury may by order amend subsection (1)(a) so as to extend the period specified.^F181]

(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 CO ₂ 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.

45DB Exclusions from allowances under section 45DA

(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 [^F182 an undertaking in difficulty for the purposes of the General Block Exemption Regulation^F182] ;

(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 [^F183 Regulation (EU) No 1379/2013 of the European Parliament and of the Council^F183] , 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 ^F184... State aid, other than an allowance under this Part, or

(b)a grant or subsidy, other than a ^F184... 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 ^F185....

(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 [^F186 ( EU ) No 651/2014 ^F186] (General block exemption Regulation) [^F187 as it had effect in the United Kingdom immediately before IP completion day ^F187] ;

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

• ^F188 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “ 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.

[^F189 (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. ^F189]

(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),

[^F190 (c)Regulation (EU) No 1379/2013 of the European Parliament and of the Council,^F190]

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

(e)the Treaty on the Functioning of the European Union.^F179]

[^F19145E Expenditure on plant or machinery for gas refuelling station

(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 [^F192 2025^F192] ,

(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).

[^F193 (1A)The Treasury may by order amend subsection (1)(a) so as to extend the period specified.^F193]

(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[^F194 , biogas^F194] 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[^F194 , biogas^F194] or hydrogen fuel includes—

(a)any storage tank for natural gas [^F194 , biogas^F194] or hydrogen fuel,

(b)any compressor, pump, control or meter used for or in connection with refuelling vehicles with natural gas[^F194 , biogas^F194] or hydrogen fuel, and

(c)any equipment for dispensing natural gas[^F194 , biogas^F194] or hydrogen fuel to the fuel tank of a vehicle.

(4)For the purposes of this section—

• [^F195 “ biogas ” means gas produced by the anaerobic conversion of organic matter and used for propelling vehicles; ^F195]

• “ gas refuelling station ” means any premises, or that part of any premises, where vehicles are refuelled with natural gas [^F194 , biogas ^F194] 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. ^F191]

[^F19645EA Expenditure on plant or machinery for electric vehicle charging point

(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 [^F197 2026^F197] , and

(b)in the case of expenditure incurred by a person within the charge to income tax, 5 April [^F198 2026^F198] .

(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. ^F196]

[^F19945F Expenditure on plant and machinery for use wholly in a ring fence trade

(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 [^F200 section 330(1) of CTA 2010 ^F200] (supplementary charge in respect of ring fence trades). ^F199]

[^F20145G Plant or machinery used for less than five years in a ring fence trade

(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 [^F202 an officer of Revenue and Customs^F202] 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. ^F201]

^F20345H Expenditure on environmentally beneficial plant or machinery

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

^F20345I Certification of environmentally beneficial plant and machinery

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

^F20345J Environmentally beneficial components of plant or machinery

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

[^F20445K Expenditure on plant and machinery for use in designated assisted areas

(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 ^F205... beginning with [^F206 the date on which the area is (or is treated as) designated under subsection (2)(a)^F206] [^F207 and ending with whichever is the later of the day immediately before the eighth anniversary of that date or 31st March 2021^F207] ,

(c)Conditions A to E are met.

[^F208 (1A)The Treasury may by order amend subsection (1)(b) so as to extend the period specified.^F208]

(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.

[^F209 (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). ^F209]

(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).

45L Exclusion of plant or machinery partly for use outside designated assisted areas

(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.

45M Exclusions from allowances under section 45K

(1)Expenditure incurred by a person is not first-year qualifying expenditure under section 45K if it is within subsection (2), (4), [^F210 (7) or (7A)^F210] .

(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 [^F211 an undertaking in difficulty for the purposes of the General Block Exemption Regulation^F211] ;

(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 [^F212 Regulation (EU) No 1379/2013 of the European Parliament and of the Council^F212] ,

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

[^F213 (ba)in the transport sector or related infrastructure,

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

(bc)relating to the development of broadband networks,^F213]

(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.

[^F214 (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.^F214]

(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.

^F215 (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.

[^F216 (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.^F216]

(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 ”, [^F217 has ^F217] the same meaning as in the General Block Exemption Regulation;

• “ General Block Exemption Regulation ” means Commission Regulation [^F218 ( EU ) No 651/2014 ^F218] (General block exemption Regulation) [^F219 as it had effect in the United Kingdom immediately before IP completion day ^F219] ;

• “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),

[^F220 (c)Regulation (EU) No 1379/2013 of the European Parliament and of the Council,^F220]

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

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

45N Effect of plant or machinery subsequently being primarily for use outside designated assisted areas

(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 [^F221 relevant area^F221] 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 [^F222 a relevant^F222] 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.

[^F223 (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.^F223]

(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.^F204]

[^F22445O Expenditure on plant and machinery for use in [^F225special tax sites^F225]

(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 [^F225 special tax site^F225] .

(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 [^F226 the 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)^F226] .

(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 [^F225 special tax sites^F225] ),

• [^F227 section 45R (effect of failing to comply with ongoing requirements) and regulations under that section, and^F227]

• section 46 (general exclusions).

45P Power to amend conditions

(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 [^F225 special tax site^F225] .

(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.

45Q Exclusion of plant or machinery partly for use outside [^F225special tax sites^F225]

(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 [^F225 special tax site^F225] , 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 [^F225 special tax site ^F225] ( [^F228 the “non-qualifying part” of ^F228] the expenditure).

(2)The [^F229 non-qualifying part^F229] of the expenditure is not first-year qualifying expenditure under section 45O.

(3)For the purposes of this section, the [^F230 non-qualifying part^F230] 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.

45R Effect of [^F231failing to comply with ongoing requirements^F231]

(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 [^F225 special tax site^F225] , or

(b)the plant or machinery is held for use otherwise than primarily in an area which was a [^F225 special tax site^F225] 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.

[^F232 (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.^F232]

(4)All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (1) [^F233 or regulations under subsection (3A)^F233] .

(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 [^F234 or of regulations under subsection (3A)^F234] , 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 [^F235 or of regulations under subsection (3A)^F235] .^F224]

[^F23645S Expenditure on plant or machinery in other cases

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).^F236]

[^F23645T Exclusion of expenditure incurred under disqualifying arrangements

(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). ^F236]

46 ^F237 General exclusions ... _cross-notes

(1)Expenditure within any of the general exclusions in subsection (2) is not first-year qualifying expenditure under [^F238any of the following provisions^F238] —

• ^F239 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• ^F240 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• ^F239 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• ^F241 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• [^F242 section 45D (expenditure on cars with low CO₂ emissions),^F242]

• [^F243 section 45DA (expenditure on zero-emission goods vehicles), ^F243]

• ^F245[^F244 section 45E (expenditure on plant or machinery for gas refuelling station)^F244] , ...

• [^F246 section 45EA (expenditure on plant or machinery for electric vehicle charging point)^F246]

• [^F247 section 45F (expenditure on plant and machinery for use wholly in a ring fence trade)^F247]

  ^F241 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• [^F248 section 45K (expenditure on plant and machinery for use in designated assisted areas).^F248]

• [^F249 section 45O (expenditure on plant and machinery for use in [^F250 special tax sites^F250] ).^F249]

• [^F251 section 45S (expenditure on plant or machinery in other cases)^F251]

(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 [^F252268A^F252] ).

• ^F253 ...

• ^F254 ...

• 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

  [^F255 Any^F255] of the following sections applies—

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

  • [^F256 section 13A (use for other purposes of plant or machinery provided for long funding leasing);^F256]

  • 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).

[^F257 (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.^F257]

[^F258 (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.^F258]

^F259 (5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F259 (6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expenditure of small or medium-sized enterprises

^F26047 Expenditure of small or medium-sized enterprises: companies

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

^F26048 Expenditure of small or medium-sized enterprises: businesses

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

^F26049 Whether company is a member of a large or medium-sized group

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

Supplementary

50 Time when expenditure is incurred

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.

^F26151 Disclosure of information between UK tax authorities

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

Chapter 5 Allowances and charges _cross-notes

[^F262Annual investment allowance

51A Entitlement to annual investment allowance _cross-notes

(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 [^F263 £1,000,000^F263] .

(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 [^F264 greater^F264] 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),

[^F265 section 70DA(2) (transfer and long funding leaseback: no annual investment allowance for lessee),^F265]

(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[^F266 , 229A(2)^F266] and 241 (anti-avoidance: no allowance in certain cases),

and needs to be read with section 236 (additional VAT liabilities).

51B First restriction: companies

(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.

51C Second restriction: groups of companies

(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.

51D Third restriction: groups of companies under common control

(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 .

51E Fourth restriction: other companies under common control

(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).

51F Companies and groups: meaning of “control”

(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 .

51G Companies and groups: meaning of “related”

(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 [^F267 in EU law ^F267] ), 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.

51H Fifth restriction: qualifying activities under common control

(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).

51I Qualifying activities: meaning of control

(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.

51J Qualifying activity: meaning of “related”

(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.

[^F26851JA Sixth restriction: allocation where profits chargeable at NI rate

(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 _dfnNI 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—

51K Operation of annual investment allowance where restrictions apply

(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.

51L Special provision for short chargeable periods

(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.

51M Special provision for long chargeable periods

(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).

51N Special provision for long chargeable periods: supplementary

(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).^F262]

First-year allowances

52 First-year allowances

(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—

^F282 ...

[^F283 (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.^F283]

(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—

• [^F284 section 70DA(2) (transfer and long funding leaseback: no first-year allowance for lessee),^F284]

• section 205 (reduction of first-year allowance if plant or machinery provided partly for purposes other than those of qualifying activity),

• ^F285 section 210 (reduction of first-year allowance if it appears that a partial depreciation subsidy is or will be payable), ...

• [^F286 section 212T (cap on first-year allowances: zero-emission goods vehicles), ^F287...^F286]

• [^F288 section 212U (cap on first-year allowances: expenditure on plant and machinery for use in designated assisted areas), and ^F288]

• ^F290 sections 217 [^F289, 229A(2) ^F289] ... and 241 (anti-avoidance: no first-year allowance in certain cases).

[^F291Prevention of double relief^F291]

52A Prevention of double relief

A person may not [^F292claim— ^F292]

[^F292 (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.^F292]

Pooling

53 Pooling of qualifying expenditure

(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 pools

(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—

• ^F293 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ;

• 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—

• [^F294 section 104C (special rate expenditure); ^F294]

• 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.

Writing-down and balancing allowances and balancing charges

55 Determination of entitlement or liability

(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 [^F295section 104F (special rate cars: discontinued activity continued by relevant company) and^F295] section 110(1) (overseas leasing: allowances prohibited in certain cases).

56 Amount of allowances and charges

(1)The amount of the writing-down allowance to which a person is entitled for a chargeable period is [^F29618%^F296] of the amount by which AQE exceeds TDR.

[^F297 (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 [^F298 section 330(1) of CTA 2010^F298] (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.^F297]

(2)[^F299 Subsections (1) and (1A) are^F299] subject to—

[^F300 (za)section 56A (small main pools and special rate pools),^F300]

[^F301 (a)section 104D (special rate expenditure: [[^F302,F303 6%^F303] or^F302] 10%), and^F301]

(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.

[^F30456A Writing-down allowances for small pools