Finance Act 1971

10 (1) The following provisions of this paragraph shall have effect where capital expenditure exceeding £4,000 is incurred, or is treated under any provision of this Schedule as incurred, on the provision of a motor car for the purposes of a trade.

(2) It shall be assumed for the purposes of section 44 of this Act—

(a) that, immediately after the beginning of the chargeable period related to the incurring of the expenditure, the person carrying on the trade (hereafter called “the actual trade ”) brings the motor car into use for the purposes of a trade carried on by him separately from the actual trade and any other trade he may carry on,

(b) that the motor car is used for the purposes of the separate trade from then until it ceases altogether to be used for the purposes of the actual trade, and

(c) that the separate trade is permanently discontinued when the motor car ceases altogether to be used for the purposes of the actual trade ;

and, subject to sub-paragraphs (3) to (5) below, the allowance or charge under that section which, on these assumptions, would fall to be made for any chargeable period in the case of the separate trade shall be made for that period in the case of the actual trade.

(3) If on the assumptions in sub-paragraph (2) above a writing-down allowance would fall to be made for any chargeable period in the case of the separate trade, the amount thereof shall be treated as not exceeding—

(a) except in a case falling within paragraph (b) below, £1,000 or, if the period is part only of a year, a proportionate part of £1,000,

(b) if (by virtue of section 84 of the [1968 c. 3.] Capital Allowances Act 1968 as applied by this Schedule) the person carrying on the trade is regarded as having incurred a part only of the expenditure actually incurred on the provision of the motor car, a proportionate part of £1,000 or, if the period is part only of a year, that proportionate part proportionately reduced.

(4) Where the motor car ceases to be used for the purposes of the actual trade by reason of a transaction to which paragraph 3 of this Schedule applies—

(a) the disposal value to be brought into account under section 44 of this Act in the case of the separate trade shall be an amount equal to the price which the motor car would have fetched on a sale at the same time in the open market or, if less, the capital expenditure incurred, or treated as incurred, on the provision of the motor car by the person disposing of it, and

(b) the person acquiring the motor car shall be treated for the purposes of Chapter I of Part III of this Act as having incurred on its provision capital expenditure equal to that disposal value.

(5) If either of the following events occurs in relation to the motor car—

(a) it is used partly for the purposes of the actual trade and partly for other purposes, or

(b) while it is in use for the purposes of the actual trade, there is paid to the person carrying on the trade any sum which is in respect of, or takes account of, part of the wear and tear to it occasioned by that use,

neither paragraph 5 nor paragraph 6 of this Schedule shall apply, but, for the chargeable period related to the event and any subsequent period, instead of there being made in the case of the actual trade the allowance or charge which under the preceding provisions of this paragraph would fall to be made for that period in the case of the separate trade, there shall be made so much of that allowance or charge as, in accordance with the said paragraph 5 or 6, would be just and reasonable if it were one falling to be made for that period in the case of the notional trade referred to in that paragraph.