(1)No first-year allowance shall be made in respect of expenditure on the provision of machinery or plant for leasing, whether in the course of a trade or otherwise, unless it appears that the machinery or plant will be used for a qualifying purpose in the requisite period and will not at any time in that period be used for any other purpose.
(2)Machinery or plant is used for a qualifying purpose at any time when—
(a)it is leased to a lessee who uses it for the purposes of a trade, otherwise than for leasing, and the circumstances are such that a first-year allowance could have been made to the lessee if he had bought the machinery or plant at that time and had incurred capital expenditure in doing so; or
(b)the person who incurred the expenditure uses it for short term leasing; or
(c)it is leased to a lessee who uses it for short-term leasing and either is resident in the United Kingdom or so uses it in the course of a trade carried on by him there; or
(d)the person who incurred the expenditure uses it for the purposes of a trade otherwise than for leasing.
(3)In subsection (2)(b) and (c) above “short-term leasing ” means leasing the machinery or plant in such a manner—
(a)that—
(i)the number of consecutive days for which it is leased to the same person will normally be less than thirty; and
(ii)the total number of days for which it is leased to the same person in any period of twelve months will normally be less than ninety; or
(b)that—
(i)the number of consecutive days for which it is leased to the same person will not normally exceed three hundred and sixty-five ; and
(ii)the aggregate of the periods for which it is leased in the requisite period to lessees not falling within subsection (2)(a) above will not exceed two years.
(4)For the purposes of subsection (3) above persons who are connected with each other shall be treated as the same person and where any machinery or plant is leased as one of a number of items which form part of a pool of items of the same or a similar description and are not separately identifiable all the items in the pool may be treated as used for short-term leasing within the meaning of that subsection if substantially the whole of the items in the pool are so used.
(5)Without prejudice to subsection (2) above, a ship is also used for a qualifying purpose at any time when it is let on charter in the course of a trade which consists of or includes operating ships if—
(a)the person carrying on the trade is resident in the United Kingdom or carries on the trade there ; and
(b)that person is responsible as principal (or appoints another person to be responsible in his stead) for navigating and managing the ship throughout the period of the charter and for defraying all expenses in connection with the ship throughout that period or substantially all such expenses other than those directly incidental to a particular voyage or to the employment of the ship during that period.
(6)Subsection (5) above shall with the necessary modifications apply also in relation to aircraft.
(7)Without prejudice to subsection (2) above, a transport container is also used for a qualifying purpose at any time when it is leased in the course of a trade which is carried on by a person who is resident in the United Kingdom or who carries on the trade there if—
(a)the trade consists of or includes the operation of ships or aircraft and the container is at other times used by that person in connection with the operation of ships or aircraft; or
(b)the container is leased under a succession of leases to different persons who, or most of whom, are not connected with each other.
(8)The requisite period is the period of four years beginning with the date on which the machinery or plant is first brought into use by the person who incurred the expenditure, except that where the machinery or plant ceases at any time before the end of those four years to belong to that person the requisite period shall end at that time.
(9)For the purposes of subsection (8) above machinery or plant shall be treated as continuing to belong to the person who incurred the expenditure so long as it belongs to—
(a)a person who is connected with him ; or
(b)a person who acquired it from him as a result of one or more disposals on the occasion of which, or each of which, the trade carried on by the person making the disposal was treated as continuing by virtue of section 154(2) or 155(1) of the Taxes Act;
and for any part of the requisite period for which the machinery or plant belongs to a person falling within paragraph (a) or (b) above that person shall be treated for the purposes of subsection (2)(b) and (d) above as the person who incurred the expenditure.
(10)For the purposes of subsection (2)(a) above there shall be disregarded paragraph 2(1) of Schedule 8 to the [1971 c. 68.] Finance Act 1971 and section 50 of the [1968 c. 3.] Capital Allowances Act 1968 as applied by paragraph 2(2) of that Schedule (which preclude the making of a first-year allowance where certain other allowances are available).
(11)This section does not preclude the making of a first-year allowance in respect of expenditure on the provision of machinery or plant if it is fixed to a building or land of which the person who incurs the expenditure is the lessor and the circumstances are such that a transfer of his interest in the building or land would operate to transfer his interest in the machinery or plant; and so much of the proviso to section 48(4) of the said Act of 1971 as relates to section 74(3) of the said Act of 1968 (restriction of relief for leased asset not used for trade) shall not apply to any allowance in respect of such expenditure.
(12)Nothing in this section affects expenditure on the provision of vehicles if they are provided wholly or mainly for the use of persons in receipt of mobility allowance under the [1975 c. 14.] Social Security Act 1975 or the [1975 c. 15.] Social Security (Northern Ireland) Act 1975.
(1)Where section 64 above precludes the making of a first-year allowance in respect of expenditure incurred by a person on the provision of machinery or plant for leasing in the course of a trade, the following provisions shall have effect with respect to the allowances and charges to be made in the case of the trade (“the actual trade ”) under section 44 of the Finance Act 1971 (writing-down allowances and balancing adjustments).
(2)It shall be assumed for the purposes of the said section 44—
(a)that, immediately after the beginning of the chargeable period or its basis period in which the machinery or plant is brought into use, the person carrying on the trade brings the machinery or plant into use for the purposes of a trade carried on by him separately from the actual trade and any other trade carried on by him;
(b)that the machinery or plant 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 machinery or plant ceases altogether to be used for the purposes of the actual trade,
and the allowance or charge under that section which, on those assumptions and having regard to subsections (3) and (4) below, 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 an allowance under the said section 44 falling by virtue of this section to be made for any chargeable period in the case of the actual trade is not claimed, or is reduced in amount in accordance with a requirement under the proviso to subsection (2) of that section, then, in determining the allowance or charge under that section which would fall to be made for any subsequent chargeable period in the case of the separate trade, any allowance falling to be made in the case of that trade for the first-mentioned chargeable period shall be treated as not claimed or, as the case may be, proportionately reduced.
(4)Where in the case of any person the said section 44 applies in accordance with this section to different items of machinery or plant it shall apply as if the separate trade for which each item is treated as used were the same trade, and accordingly that trade shall not by virtue of subsection (2)(c) above be treated as permanently discontinued until all those items cease altogether to be used for the purposes of the actual trade.
(5)Where the said section 44 has effect in accordance with this section in respect of expenditure incurred by a person providing machinery or plant for the purposes of a trade, then, if the machinery or plant is disposed of by him to a person who is connected with him and the disposal is not on an occasion on which the trade is treated as continuing by virtue of section 154(2), 155(1) or 252 of the Taxes Act or paragraph 13 of Schedule 8 to the said Act of 1971—
(a)the disposal value to be brought into account under the said section 44 in the case of the separate trade shall be of an amount equal to the price which the machinery or plant 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 machinery or plant by the person disposing of it; and
(b)the person acquiring it shall be treated for the purposes of Chapter I of Part III of the said Act of 1971 as having incurred on its provision expenditure equal to that disposal value.
(6)This section applies also where section 64 above would have precluded the making of a first-year allowance in respect of any expenditure if the making of such an allowance in respect of the expenditure were not already precluded by paragraph 3 of Schedule 8 to the said Act of 1971 ; but this section does not apply to machinery or plant in relation to which the said section 44 applies in accordance with paragraph 5, 6 or 10 of that Schedule.
(1)Where a first-year allowance has been made in respect of expenditure incurred in providing machinery or plant and the machinery or plant is at any time in the requisite period used otherwise than for a qualifying purpose—
(a)an amount equal to the excess relief shall, in relation to the person to whom the machinery or plant then belongs, be treated as if it were a balancing charge to be made on him for the chargeable period in which, or in the basis period for which, the machinery or plant is first so used ; and
(b)section 44 of the [1971 c. 68.] Finance Act 1971 (as it has effect in accordance with section 65 above) shall apply as if that amount were qualifying expenditure of that person for the next chargeable period and, for the purpose of bringing any disposal value into account, as if the machinery or plant had always been used for the purposes of the separate trade.
(2)The excess relief is the excess, if any, of—
(a)the first-year allowance made in respect of the expenditure and any writing-down allowance or allowances made in respect of it for the chargeable period related to the incurring of the expenditure and any subsequent chargeable period up to and including that mentioned in subsection (1)(a) above, over
(b)the maximum writing-down allowance or allowances that could have been made in respect of it for those chargeable periods if the first-year allowance had not and could not have been made.
(3)Where as a result of a requirement under section 41(3) of the said Act of 1971 (reduction of first-year allowances) an aggregate amount of first-year allowances in respect of different items of machinery or plant is reduced there shall be treated for the purposes of subsection (2) above as having been made in respect of each item a reduction proportionate to the capital expenditure on the provision of that item.
(4)For the purposes of subsection (2) above the writing-down allowance or allowances that were made or would have been made in respect of any item of machinery or plant shall be determined as if that item were the only item of machinery or plant in relation to which the said section 44 had effect.
(5)Where the person to whom any machinery or plant belongs at a time when it is first used otherwise than for a qualifying purpose has acquired it as a result of a transaction which was, or a series of transactions each of which was, between connected persons and a first-year allowance in respect of expenditure on the provision of the machinery or plant has been made to any of those persons—
(a)subsection (2) above shall have effect as if it referred to that first-year allowance and to the expenditure in respect of which it was made ;
(b)for the purposes of that subsection any consideration paid or received on a disposal of the machinery or plant between connected persons shall be disregarded; and
(c)if a balancing allowance or balancing charge is made in respect of the machinery or plant there shall be made such adjustments of the total relief falling to be taken into account under paragraph (a) of that subsection as are just and reasonable in the circumstances ;
but this subsection does not apply where section 154(2), 155(1) or 252(2) of the Taxes Act or paragraph 13(a) and (b) of Schedule 8 to the said Act of 1971 (succession to trades) applied on the occasion of the transaction or transactions in question.
(6)Where the person to whom any machinery or plant belongs at such a time as is mentioned in subsection (5) above acquired it as there mentioned and—
(a)a first-year allowance in respect of expenditure on the provision of the machinery or plant could have been made to any of the connected persons but was not claimed or was disclaimed ; and
(b)a balancing allowance is made to any of those persons in respect of that expenditure,
this section shall with the necessary modifications apply as it applies where a first-year allowance has been made.
(7)If at any time in the requisite period a new ship is used otherwise than for a qualifying purpose, then, without prejudice to the other provisions of this section—
(a)no allowance shall be made in respect of it under subparagraph (2)(c) of paragraph 8 of Schedule 8 to the said Act of 1971 for the chargeable period in which it is first so used or for any subsequent chargeable period; and
(b)section 44 of that Act (as it has effect in accordance with section 65 above) shall apply as if the amount of any allowance in respect of the ship which has been postponed under that paragraph and not made were qualifying expenditure for the next chargeable period after that in which the ship is first so used.
(1)A claim by a person other than a company for a first-year allowance in respect of expenditure to which section 64 above applies, and a return by a company of profits in the computation of which a deduction is made on account of such an allowance, shall be accompanied by a certificate—
(a)stating that the machinery or plant in question will be used for a qualifying purpose in the requisite period, will not be used for any other purpose in that period and has not been used for any other purpose in any part of that period which has already elapsed ; and
(b)containing a description of the machinery or plant in question or, if the claim or deduction relates to more than one item of machinery or plant and those items are of different kinds, a description of the different kinds and the amount claimed or deducted in respect of each of them.
(2)Where a person other than a company has claimed a first-year allowance in respect of any expenditure, or a deduction on account of such an allowance has been made in computing profits in respect of which a return has been made by a company, and the machinery or plant in question is at any time in the requisite period used otherwise than for a qualifying purpose, the person to whom it then belongs shall give written notice of that fact to the inspector, specifying the use to which the machinery or plant has been put; and, subject to subsection (3) below, any such notice shall—
(a)be given within three months after the end of the chargeable period or its basis period in which the machinery or plant is first used as aforesaid ; and
(b)relate to all the items of machinery or plant (if more than one) in respect of which that person is required to give a notice under this subsection in respect of that period.
(3)If at the end of the three months mentioned in paragraph (a) of subsection (2) above the person concerned does not know and cannot reasonably be expected to know that any item of machinery or plant in respect of which he is required to give a notice under that subsection has been used otherwise than for a qualifying purpose he shall in respect of that item give the notice within thirty days of his coming to know that it has been so used.
(4)Where a first-year allowance has been made in respect of any expenditure, the inspector may by notice in writing require—
(a)any person to whom the machinery or plant belongs or has belonged, or who is or has been in possession of it under a lease, during the requisite period; and
(b)the personal representatives of any such person,
to furnish him, within such period (not being less than thirty days) as may be specified in the notice, with such information as he may require and the person to whom the notice is addressed has or can reasonably obtain about the leasing of the machinery or plant or the use to which it is being or has been put.
(1)The foregoing provisions of this Chapter shall have effect in accordance with this section where machinery or plant is leased to two or more persons jointly.
(2)Subsection (2)(a) of section 64 above shall not apply at any time when the machinery or plant is leased as aforesaid but if the lessees use the machinery or plant for the purposes of a trade or trades, otherwise than for leasing, it shall be regarded as used for a qualifying purpose if and to the extent to which it appears that the profits or gains of the trade or trades arising throughout the requisite period (or the period of the lease, if shorter) will be chargeable to income tax or corporation tax.
(3)Where by virtue of subsection (2) above a first-year allowance may be made in respect of part only of the expenditure on the provision of any machinery or plant, then, whether or not the machinery or plant continues to be leased as aforesaid, section 44 of the [1971 c. 68.] Finance Act 1971 (writing-down allowances and balancing adjustments) and sections 65 and 66 above shall have effect as if—
(a)that part were expenditure on the provision of a separate item of machinery or plant; and
(b)the remainder were expenditure on the provision of another item of machinery or plant;
and there shall be made all such apportionments as are necessary in consequence of this subsection.
(4)Where by virtue of subsection (2) above a first-year allowance has been made in respect of the whole or part of the expenditure on the provision of any machinery or plant and at any time in the requisite period while it is leased as aforesaid no lessee uses it for the purpose of a trade or trades the profits or gains of which are chargeable to income tax or corporation tax, section 66 above shall have effect as if the machinery or plant or, as the case may be, the separate item referred to in subsection (3) (a) above had at that time been used otherwise than for a qualifying purpose.
(5)Where by virtue of subsection (2) above a first-year allowance has been made in respect of the whole or part of the expenditure on the provision of any machinery or plant and at the end of the requisite period the machinery or plant is leased as aforesaid but subsection (4) above has not had effect, then, if it appears that the extent to which the machinery or plant has been used for the purposes of such trade or trades as aforesaid is less than that by reference to which the amount of the first-year allowance was determined—
(a)section 66 above shall have effect as if a part of the expenditure corresponding to the reduction in the extent of such use were expenditure on the provision of a separate item of machinery or plant used otherwise than for a qualifying purpose on the last day of that period; and
(b)any disposal value subsequently brought into account in respect of the machinery or plant under section 44 of the said Act of 1971 shall, instead of being apportioned in accordance with subsection (3) above, be apportioned by reference to the extent of such use as determined at the end of that period.
(6)Where the claim or deduction referred to in subsection (1) of section 67 above relates to a first-year allowance which by virtue of subsection (2) above is in respect of part only of any expenditure, the certificate required by the said subsection (1) shall include a statement of the extent to which the profits or gains referred to in subsection (2) above will be chargeable to tax as there mentioned.
(7)In subsection (2) of section 67 above the reference to machinery or plant being used otherwise than for a qualifying purpose shall include a reference to machinery or plant being treated as so used by virtue of subsection (4) above.
(8)Where a first-year allowance has been made in respect of expenditure on the provision of machinery or plant otherwise than by virtue of subsection (2) above and the machinery or plant is subsequently leased in the requisite period to two or more persons jointly, subsections (4), (5) and (7) above shall apply as if the first-year allowance had been made by virtue of subsection (2) above and had been so made in respect of the whole of the expenditure.
The machinery or plant in relation to which section 44 of the [1971 c. 68.] Finance Act 1971 (writing-down allowances and balancing adjustments) has effect in accordance with section 65 above shall include any vehicle in respect of which the making of a first year allowance is precluded by section 43 of that Act other than a vehicle to which paragraph 10 of Schedule 8 to that Act applies.
(1)There shall be disregarded for the purposes of section 169 of the Taxes Act (set-off against general income) any allowances made to an individual under Chapter I of Part III of the [1971 c. 68.] Finance Act 1971 in respect of expenditure incurred on the provision of machinery or plant for leasing in the course of a trade unless—
(a)the trade is carried on by him for a continuous period of at least six months in, or beginning or ending in, the year of loss as defined in that section ; and
(b)he devotes substantially the whole of his time to carrying it on throughout that year or if it is set up or permanently discontinued (or both) in that year, for a continuous period of at least six months beginning or ending in that year.
(2)Subsection (1) above shall apply also to expenditure incurred by an individual on the provision for the purposes of a trade carried on by him of an asset which is not to be leased if payments in the nature of royalties or licence fees are to accrue from rights granted by him in connection with that asset.
(3)In the proviso to section 48(4) of the said Act of 1971 (allowances in respect of expenditure on machinery or plant let otherwise than in the course of a trade)—
(a)after the words “Provided that” there shall be inserted the words “the proviso to subsection (1) of the said section 71 shall not apply to an allowance made by virtue of section 46(1) above and ”; and
(b)for the words “the proviso to subsection (1) of the said section 71 or, as the case may be, subsection (4) of the said section 74 ” there shall be substituted the words “subsection (3) of the said section 74 ”.
(4)Where relief has been given in a case to which this section applies it shall be withdrawn by the making of an assessment under Case VI of Schedule D.
(5)References in this section to the carrying on of a trade by an individual are to his carrying it on either alone or in partnership.
(6)This section is without prejudice to section 41 of the [1976 c. 40.] Finance Act 1976.
(1)If a person carrying on a trade has on or after 1st September 1972 incurred expenditure for the purposes of the trade in altering or replacing premises which immediately before that date were in use as authorised quarantine premises and—
(a)the expenditure was incurred in order to comply with requirements imposed by law for the use of premises on or after that date as authorised quarantine premises ; and
(b)an allowance or deduction in respect of the expenditure could not, apart from this section, be made in taxing the trade or computing the profits or gains arising from it,
Chapter I of Part III of the [1971 c. 68.] Finance Act 1971 shall apply as if the expenditure were capital expenditure incurred on the provision of machinery or plant for the purposes of the trade, as if the machinery or plant had in consequence of his incurring the expenditure belonged to him and had been in use for the purposes of the trade and as if the disposal value of the machinery or plant were nil.
(2)In subsection (1) above “authorised quarantine premises ” means premises authorised under the [1950 c. 36.] Diseases of Animals Act 1950 to be used for the detention and isolation of animals in quarantine.
(3)All such adjustments shall be made by discharge or repayment of tax as may be required for giving effect to the relief available under this section.
(4)Any disclaimer or claim under section 41(3) of the said Act of 1971 in respect of relief available under this section, and any claim for relief (or additional relief) under any other provision of the Tax Acts which is made in consequence of the relief available under this section, shall not be out of time if made within twelve months after the passing of this Act.
(1)Subject to subsection (5) below, sections 64 to 69 above apply to expenditure incurred on or after 1st June 1980 except that those sections do not affect expenditure incurred by a person on the provision of machinery or plant if the expenditure consists of the payment of sums payable under a contract entered into by him before 27th March 1980 and the machinery or plant is brought into use not later than 27th March 1982.
(2)Those sections apply also to expenditure incurred by a person before 1st June 1980 if the expenditure—
(a)is on the provision of machinery or plant which does not belong to him before that date ; and
(b)consists of the payment of sums payable under a contract entered into by him on or after 27th March 1980 with a connected person.
(3)Section 70 above applies to expenditure incurred on or after 27th March 1980 except that that section does not affect expenditure incurred by a person on the provision of machinery or plant if the expenditure consists of the payment of sums payable under a contract entered into by him before that date and the machinery or plant is brought into use not later than 27th March 1982.
(4)Part I of Schedule 12 to this Act shall have effect for restricting first-year allowances in respect of certain expenditure incurred on or after 24th October 1979 and before 1st June 1980 but that Part does not affect expenditure incurred by a person on the provision of machinery or plant if the expenditure consists of the payment of sums payable under a contract entered into by him before the said 24th October and the machinery or plant is brought into use not later than 24th October 1981.
(5)Part II of Schedule 12 to this Act shall have effect for excluding from section 64 above certain expenditure incurred before 1st June 1986 and for restricting first-year allowances in respect of that expenditure.
(1)The Tax Acts shall have effect as if the foregoing provisions of this Chapter and the provisions of Schedule 12 to this Act were contained in Chapter I of Part III of the [1971 c. 68.] Finance Act 1971 except that expenditure shall not be treated for the purposes of section 72 above as having been incurred after the date on which it was in fact incurred by reason only of so much of section 50(4) of that Act as relates to expenditure incurred before a trade begins.
(2)References in those provisions to a lease include references to a sub-lease and references to a lessor or lessee shall be construed accordingly.
(3)For the purposes of those provisions letting a ship on charter or any other asset on hire shall be regarded as leasing it if, apart from this subsection, it would not be so regarded.
(4)In those provisions “qualifying purpose ” and “requisite period ” have the meanings given in section 64 above.
(5)Without prejudice to section 47 of the said Act of 1971 (application to activities other than trades) references in those provisions to the use of machinery or plant for the purposes of a trade include references to its use for any purpose in connection with which a first-year allowance can be given by virtue of that section.
(6)Section 533 of the Taxes Act (connected persons) applies for the purposes of those provisions.