Finance Act 1984

Section 58.

SCHEDULE 12 INITIAL AL10WANCES AND FIRST-YEAR AL10WANCES

PART I Withdrawal of Allowances

Initial allowances for industrial buildings and structures

1 (1) In section 1(2) of the [1968 c. 3.] Capital Allowances Act 1968 (rate of initial allowances for capital expenditure on the construction of industrial buildings or structures) for the words " three-quarters" there shall be substituted,—

(a) with respect to capital expenditure incurred after 13th March 1984 and before 1st April 1985, the words " one half" ; and

(b) with respect to capital expenditure incurred on or after 1st April 1985 and before 1st April 1986, the words "one quarter " ;

and no initial allowance shall be made in respect of expenditure incurred on or after 1st April 1986.

(2) Nothing in sub-paragraph (1) above applies to capital expenditure which—

(a) is incurred after 13th March 1984 and before 1st April 1987 ; and

(b) consists of the payment of sums under a contract entered into on or before 13th March 1984 by the person incurring the expenditure.

(3) Sub-paragraphs (1) and (2) above shall be construed as if they were contained in Part I of the [1968 c. 3.] Capital Allowances Act 1968 except that—

(a) expenditure shall not be treated for the purposes of those sub-paragraphs as having been incurred after the date on which it was in fact incurred by reason only of section 1(6) of that Act (expenditure incurred before a trade begins); and

(b) expenditure falling within subsection (1)(b) of section 5 of that Act (purchase price of building or structure bought unused) shall be treated for the purposes of those sub-paragraphs as having been incurred at the latest time when any expenditure falling within subsection (1)(a) of that section (expenditure on the construction of the building or structure) was incurred.

First-year allowances for machinery and plant

2 (1) In section 42(1) of the [1971 c. 68.] Finance Act 1971 (rate of first-year allowance for capital expenditure incurred on provision of machinery or plant) for the words " the whole " there shall be substituted,—

(a) with respect to capital expenditure incurred after 13th March 1984 and before 1st April 1985, the words "three-quarters" ; and

(b) with respect to capital expenditure incurred on or after 1st April 1985 and before 1st April 1986, the words "one half " ;

and no first-year allowance shall be made in respect of expenditure incurred on or after 1st April 1986.

(2) Nothing in sub-paragraph (1) above applies to capital expenditure which—

(a) is incurred after 13th March 1984 and before 1st April 1987 ; and

(b) consists of the payment of sums under a contract entered into on or before 13th March 1984 by the person incurring the expenditure or by a person whose contractual obligations that person has assumed with a view to entering into leasing arrangements.

(3) For the purposes of sub-paragraph (2)(b) above, a person incurring expenditure on the provision of machinery or plant (in this sub-paragraph referred to as " the lessor ") shall be taken to have assumed, with a view to entering into leasing arrangements, the contractual obligations of a person who entered into a contract for the provision of that machinery or plant (in this sub-paragraph referred to as " the lessee ") if, and only if,—

(a) arrangements exist under which the lessor will lease the machinery or plant to the lessee ; and

(b) the obligations of the lessee under the contract either have been taken over by the lessor or have been discharged on the lessor's entering into a new contract for the provision of the machinery or plant concerned ;

and, where there is such a new contract as is referred to in paragraph (b) above, sums paid under that contract shall be treated for the purposes of sub-paragraph (2)(b) above and Part II of this Schedule as paid under the contract referred to in that sub-paragraph.

(4) Sub-paragraphs (1) to (3) above shall be construed as if they 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 those sub-paragraphs 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.

Initial allowances in respect of dwelling-houses let on assured tenancies

3 (1) In paragraph 1(2) of Schedule 12 to the [1982 c. 39.] Finance Act 1982 (rate of initial allowance in respect of qualifying dwelling-house on the construction of which capital expenditure is incurred) for the words " three-quarters " there shall be substituted,—

(a) with respect to capital expenditure incurred after 13th March 1984 and before 1st April 1985, the words " one half " ; and

(b) with respect to capital expenditure incurred on or after 1st April 1985 and before 1st April 1986, the words " one quarter " ;

and no initial allowance shall be made in respect of expenditure incurred on or after 1st April 1986.

(2) Nothing in sub-paragraph (1) above applies to capital expenditure which—

(a) is incurred after 13th March 1984 and before 1st April 1987 ; and

(b) consists of the payment of sums under a contract entered into on or before 13th March 1984 by the person incurring the expenditure.

(3) Sub-paragraphs (1) and (2) above shall be construed as if they were contained in Schedule 12 to the Finance Act 1982 except that expenditure falling within sub-paragraph (1)(b) of paragraph 8 of that Schedule (purchase price of building bought unused) shall be treated for the purposes of those sub-paragraphs as having been incurred at the latest time when any expenditure falling within sub-paragraph (1)(a) of that paragraph (expenditure on the construction of the building) was incurred.

PART II Supplementary

Transitional relief for regional projects

4 (1) The provisions of Part I of this Schedule do not apply to so much of any expenditure as is certified by the Secretary of State for the purposes of this paragraph to be expenditure which, in his opinion, qualifies for a regional development grant or a grant under Part IV of the relevant Order and consists of the payment of sums on a project—

(a) either in an area which on 13th March 1984 was a development area, within the meaning of the [1982 c. 52.] Industrial Development Act 1982, or in Northern Ireland ; and

(b) in respect of which a written offer of financial assistance under section 7 or section 8 of that Act was made on behalf of the Secretary of State in the period beginning on 1st April 1980 and ending on 13th March 1984 or in respect of which a written offer of financial assistance was made in that period by the Highlands and Islands Development Board.

(2) The provisions of Part I of this Schedule do not apply to so much of any expenditure as is certified by the Department of Economic Development in Northern Ireland for the purposes of this paragraph to be expenditure which, in the opinion of that Department, qualifies for a grant under Part IV of the relevant Order and consists of the payment of sums on a project—

(a) in Northern Ireland ; and

(b) in respect of which a written offer of financial assistance under Article 7 or Article 8 of the relevant Order was made on behalf of a Department of the Government of Northern Ireland in the period beginning on 1st April 1980 and ending on 13th March 1984 or in respect of which a written offer of financial assistance was made in that period by the Local Enterprise Development Unit.

(3) In this paragraph—

• "regional development grant" means a grant under Part II of the Industrial Development Act 1982 ;

• " the relevant Order" means the [S.I. 1982/1083 (N.I. 15).] Industrial Development (Northern Ireland) Order 1982 ; and any reference to a particular provision of that Act or Order includes a reference to the corresponding provision of any Act or Order which was in force before and repealed by the said Act or Order of 1982.

Spreading of expenditure under certain contracts

5 (1) Where in circumstances falling within paragraph 8 below a person incurs such capital expenditure as is referred to in section 1 of the [1968 c. 3.] Capital Allowances Act 1968 under a contract—

(a) which is entered into after 13th March 1984 and on or before 31st March 1986, and

(b) which either specifies no date on or by which the contractual obligations must be fully performed or specifies such a date which is after 31st March 1985,

Chapter I of Part I of that Act shall have effect in relation to the capital expenditure so incurred subject to the following provisions of this paragraph.

(2) In this Part of this Schedule, in relation to a contract falling within sub-paragraph (1) above,—

• " the contract date " means the date on which the contract is entered into;

• " the contract price " means the total capital expenditure on the construction of the building or structure concerned which the person referred to in sub-paragraph (1) above is to incur pursuant to the contract;

• " the completion date " means the date specified as mentioned in sub-paragraph (1)(b) above or, if no date is so specified, 31st March 1987 ; and

• " the maximum allowable expenditure " shall be construed in accordance with paragraph 9 below.

(3) In respect of capital expenditure incurred in either of the financial years 1984 and 1985 under a contract falling within sub-paragraph (1) above, the initial allowance under section 1 of the [1968 c. 3.] Capital Allowances Act 1968 shall not exceed the fraction appropriate under paragraph 1 above of the maximum allowable expenditure for that year.

(4) So much (if any) of the capital expenditure incurred in the financial year 1984 under a contract falling within sub-paragraph (1) above as exceeds the maximum allowable expenditure for that year shall be deemed for all purposes of Chapter I of Part I of the Capital Allowances Act 1968 to be incurred on 1st April 1985.

(5) So much (if any) of the aggregate of—

(a) the capital expenditure incurred in the financial year 1985 under a contract falling within sub-paragraph (1) above, and

(b) any excess relating to that contract which, by virtue of sub-paragraph (4) above, is deemed to be incurred in that financial year,

as exceeds the maximum allowable expenditure for that financial year shall be deemed for all purposes of Chapter I of Part I of the Capital Allowances Act 1968 to be incurred on 1st April 1986.

(6) This paragraph shall be construed as if it were contained in Chapter I of Part I of the Capital Allowances Act 1968 except that—

(a) expenditure shall not be treated for the purposes of this paragraph as having been incurred after the date on which it was in fact incurred by reason only of section 1(6) of that Act; and

(b) expenditure falling within subsection (1)(b) of section 5 of that Act shall be treated for the purposes of this paragraph as having been incurred at the latest time when any expenditure falling within subsection (1)(a) of that section was incurred.

6 (1) Where in circumstances falling within paragraph 8 below a person carrying on a trade incurs capital expenditure on the provision of machinery or plant for the purposes of that trade under a contract—

(a) which is entered into after 13th March 1984 and on or before 31st March 1986, and

(b) which provides that he shall or may become the owner of the machinery or plant on or before the performance of the contract, and

(c) which either specifies no date on or by which the contractual obligations must be fully performed or specifies such a date which is after 31st March 1985,

Chapter I of Part III of the [1971 c. 68.] Finance Act 1971 shall have effect in relation to the capital expenditure so incurred subject to the following provisions of this paragraph.

(2) In this Part of this Schedule, in relation to a contract falling within sub-paragraph (1) above,—

• " the contract date " means the date on which the contract is entered into ;

• " the contract price " means the total capital expenditure on the provision of the machinery or plant which the person referred to in sub-paragraph (1) above is to incur pursuant to the contract;

• " the completion date " means the date specified as mentioned in sub-paragraph (1)(c) above or, if no date is so specified, 31st March 1987 ; and

• " the maximum allowable expenditure " shall be construed in accordance with paragraph 9 below.

(3) The provisions of this paragraph do not apply in relation to capital expenditure to which section 45(1)(b) of the Finance Act 1971 (machinery and plant on hire-purchase etc.) applies.

(4) In respect of capital expenditure incurred in either of the financial years 1984 and 1985 under a contract falling within sub-paragraph (1) above, the first-year allowance under section 42(1) of the Finance Act 1971 shall not exceed the fraction appropriate under paragraph 2 above of the maximum allowable expenditure for that year.

(5) So much (if any) of the capital expenditure incurred in the financial year 1984 under a contract falling within sub-paragraph (1) above as exceeds the maximum allowable expenditure for that year shall be deemed for all purposes of Chapter I of Part III of the Finance Act 1971 to be incurred on 1st April 1985.

(6) So much (if any) of the aggregate of—

(a) the capital expenditure incurred in the financial year 1985 under a contract falling within sub-paragraph (1) above, and

(b) any excess relating to that contract which, by virtue of sub-paragraph (5) above, is deemed to be incurred in that financial year,

as exceeds the maximum allowable expenditure for that financial year shall be deemed for all purposes of Chapter I of Part III of the [1971 c. 68.] Finance Act 1971 to be incurred on 1st April 1986.

(7) This paragraph shall be construed as if it were contained in Chapter I of Part III of the Finance Act 1971 except that expenditure shall not be treated for the purposes of this paragraph 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 began.

7 (1) Where in circumstances falling within paragraph 8 below an approved body incurs such capital expenditure as is referred to in paragraph 1(1) of Schedule 12 to the [1982 c. 39.] Finance Act 1982 under a contract—

(a) which is entered into after 13th March 1984 and on or before 31st March 1986, and

(b) which either specifies no date on or by which the contractual obligations must be fully performed or specifies such a date which is after 31st March 1985,

that Schedule shall have effect in relation to the capital expenditure so incurred subject to the following provisions of this paragraph.

(2) In this Part of this Schedule, in relation to a contract falling within sub-paragraph (1) above,—

• " the contract date " means the date on which the contract was entered into;

• " the contract price " means the total capital expenditure on the construction of the building concerned which die approved body referred to hi sub-paragraph (1) above is to incur pursuant to the contract;

• " the completion date " means the date specified as mentioned in sub-paragraph (1)(b) above or, if no date is so specified, 31st March 1987 ; and

• " the maximum allowable expenditure " shall be construed in accordance with paragraph 9 below.

(3) In respect of capital expenditure incurred in either of the financial years 1984 and 1985 under a contract falling within sub-paragraph (1) above, the initial allowance under paragraph 1 of Schedule 12 to the Finance Act 1982 shall not exceed the fraction appropriate under paragraph 3 above of the maximum allowable expenditure for that year.

(4) So much (if any) of the capital expenditure incurred in the financial year 1984 under a contract falling within sub-paragraph (1) above as exceeds the maximum allowable expenditure for that year shall be deemed for all purposes of Schedule 12 to the Finance Act 1982 to be incurred on 1st April 1985.

(5) So much (if any) of the aggregate of—

(a) the capital expenditure incurred in the financial year 1985 under a contract falling within sub-paragraph (1) above, and

(b) any excess relating to that contract which, by virtue of sub-paragraph (4) above, is deemed to be incurred in that financial year,

as exceeds the maximum allowable expenditure for that financial year shall be deemed for all purposes of Schedule 12 to the [1982 c. 39.] Finance Act 1982 to be incurred on 1st April 1986.

(6) This paragraph shall be construed as if it were contained in Schedule 12 to the Finance Act 1982 except that expenditure falling within sub-paragraph (1)(b) of paragraph 8 of that Schedule shall foe treated for the purposes of this paragraph as having been incurred at the latest time when any expenditure falling within sub-paragraph (1)(a) of that paragraph was incurred.

8 (1) The circumstances referred to in sub-paragraph (1) of each of paragraphs 5 to 7 above is that the sole or main benefit which (apart from this Part of this Schedule) might have been expected to be gained by incurring the expenditure at the time at which it was incurred was either—

(a) the securing of an initial allowance or first-year allowance in respect of the expenditure, rather than a writing-down allowance ; or

(b) the securing of a higher rate of initial or first-year allowance in respect of the expenditure.

(2) In sub-paragraph (1) above—

• " initial allowance " means an initial allowance under section 1 of the [1968 c. 3.] Capital Allowances Act 1968 or Schedule 12 to the Finance Act 1982 ; and

• " first-year allowance " means a first-year allowance under section 41 of the [1971 c. 68.] Finance Act 1971.

9 (1) References in paragraphs 5 to 7 above to the maximum allowable expenditure for each of the financial years 1984 and 1985 shall be construed in accordance with this paragraph.

(2) For each contract falling within sub-paragraph (1) of any of paragraphs 5 to 7 above, the maximum allowable expenditure shall be that fraction of the contract price of which—

(a) the numerator,—

(i) for the financial year 1984, is the number of complete months in the period beginning on the contract date and ending on 31st March 1985 ; and

(ii) for the financial year 1985, is 12 or, if it is less, the number of complete months in the period beginning on the contract date and ending on 31st March 1986; and

(b) the denominator is the number of complete months in the period beginning on the contract date and ending on the completion date or, if it is earlier, 31st March 1987.

10 (1) Where, by virtue of paragraph 5(4), paragraph 6(5) or paragraph 7(4) above, a portion of any expenditure which is incurred by any person in the financial year 1984 is deemed to be incurred on 1st April 1985, so much of that expenditure as is not deemed to be incurred on that date shall be apportioned to the chargeable periods or their basis periods which begin or end in the financial year 1984 on a time basis according to the respective lengths of those periods which fall within that financial year.

(2) Where, by virtue of paragraph 5(5), paragraph 6(6) or paragraph 7(5) above, a portion of the aggregate of any capital expenditure incurred and deemed to be incurred by any person in the financial year 1985 is deemed to be incurred on 1st April 1986, so much of that aggregate expenditure as is not deemed to be incurred on that date shall be apportioned to the chargeable periods or their basis periods which begin or end in the financial year 1985 on the like time basis as is specified in sub-paragraph (1) above.