Capital Allowances Act 1990 (repealed)

Chapter VI U.K. Fixtures

Modifications etc. (not altering text)

C1 Pt. II modified (19.9.1994) by Coal Industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 22; S.I. 1994/2189, art. 2, Sch.

C2 Pt. 2 modified (with application in accordance with Sch. 12 para. 11(1) of the amending Act) by Finance Act 1997 (c. 16), Sch. 12 para. 11(3)(b) (with Sch. 12 paras. 13, 14)

51 Application and interpretation of Chapter VI. U.K.

(1) [F1 This Chapter applies to determine entitlement to allowances under this Part in respect of expenditure on the provision of machinery or plant that is, or becomes, a fixture]; and at any time when, by virtue of this Chapter, any machinery or plant is treated as belonging to any person, no other person shall be entitled to such an allowance in respect of it.

(2) In this Chapter—

• “equipment lessor”, “equipment lessee” and “equipment lease” have the meanings given by section 53;

• [F2 “fixture”, subject to subsection (2A) below, means machinery or plant that is so installed or otherwise fixed in or to a building or other description of land as to become, in law, part of that building or other land;]

• “interest in land” and “lease” shall be construed in accordance with subsection (3) below;

• “relevant land”, in relation to a fixture, means the building or other description of land of which the fixture becomes part;

• [F3 “return” means (subject to section 59C(10)) any return required to be made under the Taxes Management Act 1970 for income tax or corporation tax purposes.]

[F4 (2A) In this Chapter—

• “fixture” includes any boiler, or water-filled radiator, installed in a building as part of a space or water heating system; and

• “relevant land”, in relation to such a fixture, means the building in which it is so installed.]

(3) In this Chapter “interest in land” means—

(a) the fee simple estate in the land or an agreement to acquire that estate;

(b) in Scotland, the estate or interest of the proprietor of thedominium utile (or, in the case of property other than feudal property, of the owner) and any agreement to acquire such an estate or interest;

(c) any leasehold estate in, or in Scotland lease of, the land (whether in the nature of a head-lease, sub-lease or under-lease) and any agreement to acquire such an estate or, in Scotland, lease;

(d) an easement or servitude or any agreement to acquire an easement or servitude; and

(e) a licence to occupy land;

and, except in the context of leasing machinery or plant, any reference in the following provisions of this Chapter to a lease is a reference to such a leasehold estate or, in Scotland, lease as is mentioned in paragraph (c) above or to such an agreement as is mentioned in that paragraph (and, in relation to such an agreement, the expression “grant” shall be construed accordingly).

(4) If an interest in land is conveyed or assigned by way of security and subject to a right of redemption, then, so long as such a right subsists, the interest held by the creditor shall be treated for the purpose of this Chapter as held by the person having that right.

(5) Any reference in this Chapter to a person being entitled to an allowance in respect of any capital expenditure incurred on the provision of a fixture is a reference to a case where—

(a) that person is, for any chargeable period, entitled to a first-year allowance in respect of that expenditure; or

(b) [F5 that person is entitled to have that expenditure] taken into account in determining his qualifying expenditure for a chargeable period for the purposes of section 24(2), (3) and (5) (whether or not an allowance is made to him for that period),

and any reference to a chargeable period for which a person is so entitled is a reference—

(i) to the chargeable period referred to in paragraph (a) above; or

(ii) to the chargeable period referred to in paragraph (b) above; or

(iii) to any chargeable period which is subsequent to that referred to in paragraph (b) above but is not later than the chargeable period in which [F6 he would be required (disregarding section 24(7))] to bring the disposal value of the fixture concerned into account for the purposes mentioned in paragraph (b) above.

[F7 (5A) In this Chapter references to making a claim for an allowance in respect of any expenditure include references—

(a) to making a return in which the expenditure is taken into account, as expenditure on the provision of a fixture, in determining a person’s qualifying expenditure for the purposes of section 24, and

(b) to giving notice of any such amendment of a return as provides for that expenditure to be so taken into account.]

(6) All such assessments and adjustments of assessments shall be made as may be necessary to give effect to the provisions of this Chapter.

[F8 (6A) Where a person who has made a return becomes aware that anything contained in that return has, after being made, become incorrect by reason of—

(a) the making an election under section 59B, or

(b) the operation, in his case, of section 56A(1), section 56B(1) or section 59C(3),

he shall, within three months of first becoming so aware, give notice to an officer of the Board of the amendments that are necessitated in his return in the light of the matter of which he has become aware.]

(7) Where any question arises as to whether any machinery or plant has become, in law, part of a building or other land and that question is material with respect to the liability to tax (for whatever period) of two or more persons, that question shall be determined, for the purposes of the tax of all those persons, by the Special Commissioners who shall determine the question in like manner as if it were an appeal, except that, for the purposes of the determination, all those persons shall be entitled to appear and be heard by, or to make representations in writing to, the Special Commissioners.

[F9 (8) Nothing in this Chapter affects the entitlement of any person to an allowance by virtue of section 154 (allowances in respect of contributions to capital expenditure).]

Textual Amendments

F1 Words in s. 51(1) substituted (retrospectively) by Finance Act 2000 (c. 17), s. 78(2)(6)

F2 Words in s. 51(2) substituted (retrospectively) by Finance Act 2000 (c. 17), s. 78(3)(6)

F3 Words in s. 51(2) inserted (with effect in accordance with Sch. 16 para. 2(6) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 2(1)

F4 S. 51(2A) inserted (retrospectively) by Finance Act 2000 (c. 17), s. 78(4)(6)

F5 Words in s. 51(5)(b) substituted (with effect in accordance with Sch. 16 para. 2(6) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 2(2)(a)

F6 Words in s. 51(5)(iii) substituted (with effect in accordance with Sch. 16 para. 2(6) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 2(2)(b)

F7 S. 51(5A) inserted (with effect in accordance with Sch. 16 para. 2(6) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 2(3)

F8 S. 51(6A) inserted (with effect in accordance with Sch. 16 para. 2(6) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 2(4) (with Sch. 16 para. 2(7))

F9 S. 51(8) substituted (retrospectively) by Finance Act 2000 (c. 17), s. 78(5)(6)

52 Expenditure incurred by holder of interest in land. U.K.

(1) Subject to subsection (2) below, in any case where—

(a) a person incurs capital expenditure on the provision of machinery or plant either for the purposes of a trade carried on by him or for leasing otherwise than in the course of a trade, and

(b) the machinery or plant becomes a fixture, and

(c) at the time the machinery or plant becomes a fixture he has an interest in the relevant land,

then, subject to sections 53 and 57, on and after that time the fixture shall be treated for the purposes of this Part as belonging to the person concerned in consequence of his incurring the expenditure.

(2) If, in respect of the same fixture, there are two or more persons with different interests in the relevant land to whom, by virtue of subsection (1) above, the fixture would (apart from this subsection) be treated as belonging for the purposes of this Part, the only interest which shall be taken into account under that subsection is—

(a) if one of the interests is an interest falling within section 51(3)(d), that interest;

(b) if paragraph (a) above does not apply but one of the interests is an interest falling within section 51(3)(e), that interest; and

(c) in any other case—

(i) except in Scotland, that interest which is not in reversion (at law or in equity and whether directly or indirectly) on any other interest in the relevant land which is held by any of the persons referred to above; and

(ii) in Scotland, that of whichever of those persons has, or last had, the right of use of the relevant land.

53 Expenditure incurred by equipment lessor. U.K.

(1) [F10 Subject to subsections (1A) to (1C) below,] in any case where—

(a) a person (“the equipment lessor") incurs capital expenditure on the provision of machinery or plant for leasing, and

(b) an agreement is entered into for the lease, directly or indirectly from the equipment lessor, of the machinery or plant (otherwise than as part of the relevant land) to another person (“the equipment lessee”) for the purposes of a trade [F11 which is or is to be] carried on by the equipment lessee or for leasing otherwise than in the course of a trade, and

[F12 (ba) that agreement is not an agreement for the lease of the machinery or plant for use in a dwelling-house, and

(bb) the equipment lessee is within the charge to tax in the United Kingdom on the profits of, as the case may be—

(i) the trade for the purposes of which he has entered into that agreement, or

(ii) the leasing of the machinery or plant by him to another,

and]

(c) the machinery or plant becomes a fixture, and

(d) if the expenditure referred to in paragraph (a) above had been incurred by the equipment lessee, [F13 the equipment lessee would, by virtue of section 52, have been entitled to an allowance in respect of the expenditure, as expenditure incurred on the provision of that fixture, and]

(e) the equipment lessor and the equipment lessee elect that this section should apply,

then, subject to section 57, on and after the time at which the expenditure is incurred the fixture shall be treated for the purposes of this Part as belonging to the equipment lessor in consequence of his incurring the expenditure.

[F14 (1A) Where the condition specified in paragraph (b) of subsection (1) above is satisfied in any case by reference to an agreement entered into for the purposes of a trade which the equipment lessee has not begun to carry on at the time of the agreement, that subsection shall have effect in that case as if the reference in the words after paragraph (e) to the time at which the expenditure is incurred were a reference to whichever is the later of that time and the time when the equipment lessee begins to carry on that trade.

(1B) Where the conditions set out in subsection (1C) below are satisfied in any case, subsection (1) above shall have effect in that case as if the following were omitted, that is to say—

(a) in paragraph (b), the words from “for the purposes of” to “course of a trade”; and

(b) paragraphs (bb) and (d).

(1C) Those conditions are as follows—

(a) that the machinery or plant becomes a fixture by virtue of being fixed to land that is neither a building nor part of a building;

(b) that the equipment lessee has an interest in that land at the time when he takes possession of the machinery or plant under the agreement for the lease of it;

(c) that, under the terms of that agreement, the equipment lessor is entitled to sever the machinery or plant, at the end of the period for which it is leased, from the land to which it is fixed at that time;

(d) that, under the terms of that agreement, the machinery or plant will belong to the equipment lessor on its severance from that land in accordance with that agreement;

(e) that the nature of the machinery or plant and the way in which it is fixed to land are such that its use on one set of premises does not, to any material extent, prevent it from being used, once severed, for the same purposes on a different set of premises; and

(f) that the agreement for the lease of the machinery or plant is such as falls, for the purposes of the accounts of equipment lessors who are companies incorporated in a part of the United Kingdom, to be treated, in accordance with normal accountancy practice, as an operating lease.]

(2) An election under this section shall be made by notice to [F15 an officer of the Board] given before the expiry of the period [F16 specified in subsection (2A) below]; but no election may be made under this section if the equipment lessor and the equipment lessee are connected with each other within the terms of section 839 of the principal Act.

[F17 (2A) The period mentioned in subsection (2) above is—

(a) for the purposes of income tax, the period ending with the first anniversary of the 31st January next following the year of assessment in which ends the chargeable period related to the incurring of the expenditure referred to in subsection (1)(a) above;

(b) for the purposes of corporation tax, the period of two years beginning at the end of the chargeable period related to the incurring of the expenditure referred to in subsection (1)(a) above.]

(3) Where an election has been made under this section with respect to a fixture, nothing in section 52 shall have the effect of treating the fixture for the purposes of this Part as belonging to the equipment lessee.

(4) In this Chapter “equipment lease” means such an agreement as is mentioned in subsection (1)(b) above or a lease entered into pursuant to such an agreement.

Textual Amendments

F10 Words in s. 53(1) inserted (with effect in accordance with Sch. 16 para. 3(6) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 3(1)

F11 Words in s. 53(1)(b) inserted (with effect in accordance with Sch. 16 para. 3(6) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 3(2)

F12 S. 53(1)(ba)(bb) inserted (with effect in accordance with Sch. 16 para. 3(7) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 3(3)

F13 Words in s. 53(1)(d) substituted (with effect in accordance with Sch. 16 para. 3(7) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 3(4)

F14 S. 53(1A)-(1C) inserted (with effect in accordance with Sch. 16 para. 3(6) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 3(5)

F15 Words in s. 53(2) substituted (with effect in accordance with s. 135(3) of the amending Act) by Finance Act 1996 (c. 8), Sch. 21 para. 31(2)(a)

F16 Words in s. 53(2) substituted (with effect in accordance with s. 135(3) of the amending Act) by Finance Act 1996 (c. 8), Sch. 21 para. 31(2)(b)

F17 S. 53(2A) inserted (with effect in accordance with s. 135(3) of the amending Act) by Finance Act 1996 (c. 8), Sch. 21 para. 31(3)

Modifications etc. (not altering text)

C3 S. 53(2) modified (for the year of assessment 1988-1989) by S.I. 1991/851, regs. 1, 9, Sch.2.

C4 S. 53(2) modified (for the year of assessment 1989-1990) by S.I. 1992/511, regs. 1, 9, Sch.2.

C5 S. 53(2) applied (with modifications) (for the year of assessment 1990–91) by S.I. 1993/415, reg. 9, Sch.2

C6 S. 53(2) modified (for the year of assessment 1991-92) by The Lloyds Underwriters (Tax) (1991-92) Regulations 1994 (S.I. 1994/728), regs. 1(1), 9, Sch. 2

C7 S. 53(2) modified (for the years of assessment 1992-93 and 1993-94) by The Lloyds Underwriters (Tax) (1992–93 to 1996–97) Regulations 1995 (S.I. 1995/352), regs. 1(1), 14(1), Sch.

C8 S. 53(2) modified (for the year of assessment 1994-95) by The Lloyds Underwriters (Tax) (1992–93 to 1996–97) Regulations 1995 (S.I. 1995/352), regs. 1(1), 15(1), Sch.

54 Expenditure included in consideration for acquisition of existing interest in land. U.K.

(1) In any case where—

(a) after any machinery or plant has become a fixture, a person (“the purchaser") acquires an interest in the relevant land, being an interest which was in existence prior to his acquisition of it, and

(b) the consideration which the purchaser gives for that interest is or includes a capital sum which, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture, F18 ...

F18 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

then, subject to [F19 the following provisions of this Chapter], on and after the purchaser’s acquisition of his interest in the relevant land, the fixture shall be treated for the purposes of this Part as belonging to him in consequence of his incurring expenditure as mentioned in paragraph (b) above.

(2) If, in a case where subsection (1)(a) above applies—

(a) the machinery or plant was, prior to the purchaser’s acquisition of the interest in the relevant land, let under an equipment lease, and

(b) in connection with the acquisition of the interest in the relevant land, the purchaser pays a capital sum to discharge the obligations of the equipment lessee under the equipment lease,

subsection (1) above shall apply as if that capital sum were such a capital sum as is referred to in paragraph (b) of that subsection.

Textual Amendments

F18 S. 54(1)(c) and preceding word repealed (with effect in accordance with Sch. 16 para. 4(4) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 4(2)(a), Sch. 18 Pt. 6(12) (with Sch. 16 para. 4(5))

F19 Words in s. 54(1) substituted (with effect in accordance with Sch. 16 para. 4(4) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 4(2)(b)

Modifications etc. (not altering text)

C9 S. 54 modified (19.9.1994) by Coal Industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 20(3)(c); S.I. 1994/2189, art. 2, Sch.

55 Expenditure incurred by incoming lessee: transfer of allowances. U.K.

(1) In any case where—

(a) after any machinery or plant has become a fixture, a person (“the lessor") who has an interest in the relevant land grants a lease, and

(b) apart from section 57, the lessor would be entitled, for the chargeable period related to the grant of the lease, to an allowance in respect of expenditure incurred on the provision of the fixture, and

(c) the consideration which the lessee gives for the lease is or includes a capital sum which, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture, and

(d) the lessor and the lessee make an election under this section,

then, subject to section 57, on and after the grant of the lease, the fixture shall be treated for the purposes of this Part as belonging to the lessee in consequence of his incurring expenditure as mentioned in paragraph (c) above.

(2) In any case where the lessor is not within the charge to tax, it shall be assumed that he is within that charge for the purpose of determining whether the condition in subsection (1)(b) above is fulfilled.

(3) An election under this section shall be made by notice to the inspector given within two years after the date on which the lease takes effect.

(4) No election may be made under this section if—

(a) the lessor and the lessee are connected with each other within the terms of section 839 of the principal Act; F20 ...

F20 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F20 S. 55(4)(b) and preceding word repealed (with effect in accordance with Sch. 18 Pt. 6(12) Notes 1, 3 of the amending Act) by Finance Act 1997 (c. 16), Sch. 18 Pt. 6(12)

Modifications etc. (not altering text)

C10 S. 55(3) modified (for the year of assessment 1988-1989) by S.I. 1991/851, regs. 1, 9, Sch.2.

C11 S. 55(3) modified (for the year of assessment 1989-1990) by S.I. 1992/511, regs. 1, 9, Sch.2.

C12 S. 55(3) applied (with modifications) (for the year of assessment 1990–91) by The Lloyd’s Underwriters (Tax) (1990–91) Regulations 1993 (S.I. 1993/415), reg. 9, Sch.2

C13 S. 55(3) modified (for the year of assessment 1991-92) by The Lloyds Underwriters (Tax) (1991-92) Regulations 1994 (S.I. 1994/728), regs. 1(1), 9, Sch. 2

C14 S. 55(3) modified (for the years of assessment 1992-93 and 1993-94) by The Lloyds Underwriters (Tax) (1992–93 to 1996–97) Regulations 1995 (S.I. 1995/352), regs. 1(1), 14(1), Sch.

C15 S. 55(3) modified (for the year of assessment 1994-95) by The Lloyds Underwriters (Tax) (1992–93 to 1996–97) Regulations 1995 (S.I. 1995/352), regs. 1(1), 15(1), Sch.

C16 S. 55(4)(a) excluded (16.7.1992) by Finance (No. 2) Act 1992 (c. 48), s. 77, Sch. 17 paras. 5(5)(c), 7

56 Expenditure incurred by incoming lessee: lessor not entitled to allowances. U.K.

In any case where—

(a) after any machinery or plant has become a fixture, a person (“the lessor") who has an interest in the relevant land grants a lease, but section 55(1)(b) does not apply in his case, and

(b) the consideration which the lessee gives for the lease is or includes a capital sum which, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture, and

F21 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) the fixture has not before [F22 the time of the grant of the lease] been used for the purposes of a trade by the lessor or any person connected with him within the terms of section 839 of the principal Act,

then, subject to [F23 the following provisions of this Chapter], on and after the grant of the lease, the fixture shall be treated for the purposes of this Part as belonging to the lessee in consequence of his incurring expenditure as mentioned in paragraph (b) above.

Textual Amendments

F21 S. 56(c) repealed (with effect in accordance with Sch. 16 para. 4(4) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 4(3)(a), Sch. 18 Pt. 6(12) (with Sch. 16 para. 4(6))

F22 Words in s. 56(d) substituted (with effect in accordance with Sch. 16 para. 4(4) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 4(3)(b)

F23 Words in s. 56 substituted (with effect in accordance with Sch. 16 para. 4(4) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 4(3)(c)

[F24 56A Restriction on duplicate allowances under sections 54 and 56. U.K.

(1) Where the relevant conditions are satisfied in relation to any case in which the provisions of section 54(1) or section 56 would (but for this section) be treated as applying, those provisions shall not apply in that case, and shall be treated as never having applied in that case.

(2) The relevant conditions are as follows—

(a) that an interest in any land in which the whole or any part of the relevant land is comprised is held by any person immediately after the relevant time;

(b) that that interest is not the one which—

(i) in a case falling within section 54(1)(a), is acquired by the purchaser; or

(ii) in a case falling within section 56(a), is acquired by the lessee in consequence of the grant of the lease;

(c) that the person with that interest is a person falling to be treated for the purposes of this Part as a person to whom the fixture belonged immediately before the relevant time in consequence of the incurring by him of expenditure on the provision of the fixture;

(d) that that person does not fall to be so treated by virtue of section 154;

(e) that that person is entitled to an allowance in respect of that expenditure and makes or has made a claim for that allowance; and

(f) that the relevant time is on or after 24th July 1996.

(3) In this section “the relevant time” means, as the case may be—

(a) the time when the purchaser acquires his interest in the relevant land; or

(b) the time of the grant of the lease.

Textual Amendments

F24 Ss. 56A-56D inserted (with effect in accordance with Sch. 16 para. 4(4) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 4(1)

56B Fixtures on which a former owner had an allowance. U.K.

(1) Where—

(a) any machinery or plant falls to be treated for the purposes of this Part as a fixture belonging to any person (“the new claimant”) in consequence of his incurring capital expenditure on the provision of that machinery or plant, and

(b) the requirements of subsection (2) below are satisfied in the case of that machinery or plant,

so much (if any) of that expenditure as exceeds the maximum allowable amount shall be disregarded for the purposes of this Part or, as the case may be, shall be taken to be expenditure that should never have been taken into account for those purposes.

(2) The requirements of this subsection are satisfied in the case of any machinery or plant where—

(a) it falls or has fallen, otherwise than by virtue of section 154, to be treated as having belonged at a relevant earlier time to any person (“the prior claimant”) in consequence of his incurring expenditure (“the other expenditure”) which is not the expenditure mentioned in subsection (1)(a) above;

(b) the prior claimant, as a consequence of having made a claim for an allowance in respect of the other expenditure, is or has been required to bring a disposal value of the machinery or plant into account; and

(c) the event by reason of which that disposal value has been or is to be brought into account is an event occurring on or after 24th July 1996.

(3) For the purposes of this section the new claimant and the prior claimant may be the same person.

(4) Subject to subsection (5) below, the maximum allowable amount for the purposes of this section is the sum of—

(a) the disposal value of the machinery or plant which the prior claimant has been or is required to bring into account; and

(b) so much (if any) of the expenditure mentioned in subsection (1)(a) above as is deemed by virtue of section 66 (installation costs) to be expenditure on the provision of the machinery or plant.

(5) Subsection (4) above shall have effect where the requirements of subsection (2) above are satisfied by reference to more than one such event as is mentioned in subsection (2)(c) above as if they were satisfied by reference only to the most recent of those events.

(6) In this section “a relevant earlier time” means a time which—

(a) is before the time which is taken for the purposes of this Part to be the earliest time when the machinery or plant belonged to the new claimant in consequence of his incurring the expenditure mentioned in subsection (1)(a) above; and

(b) does not fall to be disregarded under subsection (7) below.

(7) For the purposes of subsection (6) above a time must be disregarded if—

(a) in consequence of any sale of the machinery or plant, it has ceased, at any time after that time and before the time mentioned in paragraph (a) of that subsection, to belong to any person;

(b) that person and the purchaser were not connected with each other, within the terms of section 839 of the principal Act, at the time of sale; and

(c) the sale was not a sale of the machinery or plant as a fixture.

Textual Amendments

F24 Ss. 56A-56D inserted (with effect in accordance with Sch. 16 para. 4(4) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 4(1)

56C Fixtures on which an allowance has been given under Part I. U.K.

(1) Where—

(a) a person has at any time made a claim for an allowance to which he is entitled under Part I in respect of expenditure incurred on the construction of a building or structure,

(b) that expenditure was or included expenditure on the provision of machinery or plant,

(c) that person has made a transfer of the relevant interest in the building or structure (“the relevant transfer”),

(d) the person to whom the relevant transfer is made, or any person to whom for the purposes of this Part the machinery or plant is subsequently treated as belonging, makes a claim for an allowance under this Part, and

(e) that claim is for an allowance in respect of capital expenditure incurred, at a time on or after 24th July 1996 when it is a fixture in the building or structure, on the provision of the machinery or plant,

the amount taken for the purposes of the claim mentioned in paragraph (d) above to have been incurred on the provision of the fixture shall not exceed the relevant amount.

(2) In subsection (1) above “the relevant amount” means the amount equal, on the relevant assumption, to the portion of the consideration for the relevant transfer which would have been attributable to the fixture.

(3) The relevant assumption for the purposes of subsection (2) above is that the relevant transfer was a sale of the relevant interest in the building or structure for the amount which immediately after that transfer represented the residue of the expenditure incurred on the construction of the building or structure.

(4) Expressions used both in this section and in Part I have the same meanings in this section as in that Part.

Textual Amendments

F24 Ss. 56A-56D inserted (with effect in accordance with Sch. 16 para. 4(4) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 4(1)

56D Fixtures on which an allowance has been given under Part VII. U.K.

(1) Where—

(a) a person has at any time made a claim for an allowance to which he is entitled under Part VII in respect of any allowable scientific research expenditure of a capital nature (“the Part VII expenditure”),

(b) the Part VII expenditure was or included expenditure on the provision of machinery or plant,

(c) an asset representing the whole or any part of the Part VII expenditure (“the Part VII asset”) has ceased, on any occasion, to belong to that person,

(d) the person who acquired the Part VII asset on that occasion, or any person to whom for the purposes of this Part the machinery or plant is subsequently treated as belonging, makes a claim for an allowance under this Part, and

(e) that claim is for an allowance in respect of capital expenditure incurred, at a time on or after 24th July 1996 when it is a fixture, on the provision of the machinery or plant,

the amount taken for the purposes of the claim mentioned in paragraph (d) above to have been incurred on the provision of the fixture shall not exceed the relevant amount.

(2) In subsection (1) above “the relevant amount” means the amount equal, on the relevant assumption, to the portion of the consideration for the disposal of the Part VII asset which would have been attributable to the fixture.

(3) The relevant assumption for the purposes of subsection (2) above is that the occasion mentioned in subsection (1)(c) above was a disposal of the Part VII asset for the amount equal to whichever is the smaller of—

(a) the disposal value of the asset on that occasion; and

(b) so much of the Part VII expenditure as related to the provision of the Part VII asset.

(4) Expressions used both in subsection (1) above and in Part VII have the same meanings in that subsection as in that Part.]

Textual Amendments

F24 Ss. 56A-56D inserted (with effect in accordance with Sch. 16 para. 4(4) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 4(1)

57 Fixtures treated as ceasing to belong to particular persons. U.K.

(1) The provisions of this section and section 58 are without prejudice to any other circumstances in which the disposal value of a fixture falls to be brought into account in accordance with section 24.

(2) Subject to subsection (4) below, if at any time the person to whom a fixture is treated for the purposes of this Part as belonging by virtue of any of sections 52, 54, 55 and 56 ceases (whether by reason of the transfer, surrender or expiry of the interest or otherwise) to have the qualifying interest, the fixture shall be treated for those purposes as ceasing to belong to him at that time.

(3) In this section and section 59 “the qualifying interest” means—

(a) where section 52 or 54 applies, the interest in the relevant land referred to in that section; and

(b) where section 55 or 56 applies, the lease referred to in that section;

but if the qualifying interest is an agreement to acquire an interest in land and that interest in land is subsequently transferred or granted to the person referred to in subsection (2) above, the interest so transferred or granted shall be treated as the same interest as the qualifying interest.

(4) For the purposes of subsection (2) above—

(a) if the qualifying interest ceases to exist by reason of its merger in another interest acquired by the person referred to in that subsection, that other interest shall be treated as the same interest as the qualifying interest;

(b) if the qualifying interest is a lease and, on its termination, a new lease of the relevant land (with or without other land) is granted to the lessee, the new lease shall be treated as the same interest as the qualifying interest;

(c) if the qualifying interest is a licence and, on its termination, a new licence to occupy the relevant land (with or without other land) is granted to the licensee, the new licence shall be treated as the same interest as the qualifying interest;

(d) if the qualifying interest is a lease and, with the consent of the lessor, the lessee remains in possession of the relevant land after the termination of the lease but without a new lease being granted to him, the qualifying interest shall be treated as continuing to subsist so long as the lessee remains in possession of the relevant land.

(5) At the time at which, by virtue of section 55, the fixture concerned begins to be treated for the purposes of this Part as belonging to the lessee, it shall be treated for those purposes as ceasing to belong to the lessor (as defined in that section).

(6) Where, by virtue of subsection (2) above, on the termination of a lease or licence, a fixture is treated for the purposes of this Part as ceasing to belong to the outgoing lessee or licensee, it shall, on that termination, be treated for those purposes as beginning to belong to the person who, immediately before the termination, was the lessor under the lease or, as the case may be, the licensor under the licence.

(7) If at any time a fixture is permanently severed from the relevant land (so that it ceases to be a fixture) and, immediately before that time, it was treated for the purposes of this Part as belonging to any person by virtue of any provision of sections 51 to 56, subsections (1) to (6) above or section 58(2) or (4), then, unless on its severance the fixture does in fact belong to that person, it shall be treated for those purposes as ceasing to belong to him at that time.

58 Equipment lessors: special provisions. U.K.

(1) If, by virtue of an election under section 53, a fixture is treated for the purposes of this Part as belonging to the equipment lessor and either—

(a) the equipment lessor at any time assigns his rights under an equipment lease, or

(b) the financial obligations of the equipment lessee under an equipment lease are at any time discharged, on the payment of a capital sum or otherwise,

then, at that time (or, as the case may be, the earliest of those times) the fixture shall be treated for the purposes of this Part as ceasing to belong to the equipment lessor by reason of a sale by him of the fixture.

(2) If subsection (1)(a) above applies, then, on and after the time of the assignment referred to in that paragraph, the fixture to which the agreement in question relates shall be treated for the purposes of this Part as belonging to the assignee and the consideration given by him for the assignment shall be treated for those purposes—

(a) as the price received for the sale of the fixture by the assignor; and

(b) as expenditure incurred by the assignee on acquiring the fixture.

(3) On and after an assignment falling within paragraph (a) of subsection (1) above, that subsection shall have effect as if the machinery or plant (as a fixture) were treated for the purposes of this Part as belonging to the assignee by virtue of an election under section 53 and, accordingly, as if the assignee were the equipment lessor, as defined in that section.

(4) Where a capital sum is paid as mentioned in subsection (1)(b) above, that capital sum shall be treated for the purposes of this Part—

(a) as the price received for the sale of the fixture by the equipment lessor; and

(b) if that capital sum is paid by the equipment lessee, as expenditure incurred by him on the provision of the fixture;

and where paragraph (b) above applies, on and after the time of that payment, the fixture shall be treated for the purposes of this Part as belonging to the equipment lessee.

(5) Where the financial obligations of the equipment lessee under an equipment lease have become vested in any other person (by assignment, operation of law or otherwise) any reference in subsection (1)(b) or (4) above to the equipment lessee shall be construed as a reference to the person in whom those obligations are for the time being vested when the capital sum is paid.

59 Disposal value of fixtures in certain cases. U.K.

(1) In any case where—

(a) by virtue of section 57, a fixture is at any time treated for the purposes of this Part as ceasing to belong to any person (“the former owner"), and

(b) the qualifying interest continues in existence after that time (whether in the hands of the former owner or any other person) or would so continue but for its becoming merged in another interest, and

(c) the occasion of the fixture ceasing to belong to the former owner is not its permanent severance from the relevant land (whether on disposal, demolition, destruction or otherwise),

the fixture shall be treated for the purposes of this Part as sold at that time by the former owner for a price determined [F25 (subject to sections 59A and 59B)] in accordance with subsections (2) to (6) below.

(2) Subject to subsection (6) below, if the occasion of the fixture ceasing to belong to the former owner is the sale of the qualifying interest, the price referred to in subsection (1) above is that portion of the sale price of the qualifying interest which falls (or, if the purchaser were entitled to an allowance, would fall) to be treated for the purposes of this Part as expenditure incurred by the purchaser on the provision of the fixture.

(3) If the fixture ceases to belong to the former owner by virtue of section 57(5), the price referred to in subsection (1) above is so much of the capital sum referred to in section 55(1)(c) as falls to be treated for the purposes of this Part as expenditure by the lessee on the provision of the fixture.

(4) If neither subsection (2) nor subsection (3) above applies, the price referred to in subsection (1) above is that portion of the price which, on a sale of the qualifying interest in the open market, would fall to be treated for the purposes of this Part as expenditure by the purchaser on the provision of the fixture.

(5) The sale referred to in subsection (4) above shall be assumed to take place immediately before the event which causes the fixture to be treated for the purposes of this Part as ceasing to belong to the former owner; but that event shall be disregarded in determining the open market price on that sale.

(6) If the sale referred to in subsection (2) above is at a price lower than that which the qualifying interest would have fetched if sold in the open market, that subsection shall not apply unless the purchaser’s expenditure on the acquisition of the fixture can be taken into account as mentioned in section 26(1)(b)(i).

(7) If the occasion of the fixture ceasing to belong to the former owner is the expiry of the qualifying interest, then, except in so far as the former owner receives any capital sum, by way of compensation or otherwise, by reference to the fixture, the disposal value of the fixture which falls to be brought into account under section 24 shall be nil.

(8) In any case where—

(a) the disposal value of a fixture falls to be brought into account in accordance with section 24 on the permanent discontinuance of the trade in circumstances where that value falls to be determined under paragraph (e) of subsection (1) of section 26; and

(b) before the occurrence of the later event referred to in that paragraph, the fixture is not permanently severed from the relevant land,

that paragraph shall apply as if the reference therein to paragraphs (a) and (b) of that subsection were omitted; but if the event which follows the discontinuance of the trade is the sale of the qualifying interest, the disposal value of the fixture to be brought into account under those sections shall be that portion of the sale price referred to in subsection (2) above.

(9) If the disposal value of the fixture falls to be brought into account in accordance with section 24 on its beginning to be used wholly or partly for purposes which are other than those of the trade, section 26(1)(f) shall apply as if the reference to the price which the machinery or plant would have fetched if sold on the open market were a reference to that portion of the price referred to in subsection (4) above.

F26 (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11) In relation to expenditure incurred before 27th July 1989, subsection (10) above shall have effect with the substitution for the words following “to the former owner" of the words “another person incurs expenditure on the provision of the fixture, there shall be disregarded so much (if any) of that expenditure as exceeds the disposal value which the former owner is required to bring into account in accordance with section 24".

Textual Amendments

F25 Words in s. 59(1) inserted (with effect in accordance with Sch. 16 para. 5(3) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 5(1)

F26 S. 59(10) repealed (with effect in accordance with Sch. 18 Pt. 6(12) Notes 1, 4 of the amending Act) by Finance Act 1997 (c. 16), Sch. 18 Pt. 6(12)

Modifications etc. (not altering text)

C17 S. 59 excluded (19.9.1994) by Coal Industry Act 1994 (c. 21), s. 68(4), Sch. 4 para. 20(3)(a); S.I. 1994/2189, art. 2, Sch.

C18 S. 59(10) excluded (19.3.1997) by Finance Act 1997 (c. 16), Sch. 16 para. 2(8)

[F27 59A Disposal values in avoidance cases. U.K.

(1) If, in a case where machinery or plant has been treated by virtue of this Chapter as belonging to any person (“the charged person”) in consequence of his incurring any expenditure—

(a) an event occurs by reason of which a disposal value of that machinery or plant is to be brought into account by the charged person in accordance with section 24,

(b) the amount of the disposal value to be so brought into account would (but for this section) be less than the notional written-down value of the machinery or plant, and

(c) the event is comprised in, or occurs in pursuance of, any scheme or arrangement which has avoidance as its main object, or as one of its main objects,

this Part shall have effect in relation to the charged person as if the amount of the disposal value to be brought into account were equal to the notional written-down value of the machinery or plant.

(2) In this section “the notional written-down value”, in relation to any machinery or plant, means the amount which, if—

(a) it were the disposal value falling to be brought into account as mentioned in subsection (1) above, and

(b) the assumptions set out in subsection (3) below were made,

would give rise to neither a balancing allowance nor a balancing charge for the chargeable period for which that disposal value is to be brought into account.

(3) Those assumptions are—

(a) that expenditure on the provision of the machinery or plant were the only expenditure ever taken into account in determining the charged person’s qualifying expenditure for the purposes of section 24; and

(b) that the full amount of every allowance to which that person was entitled in respect of that expenditure had been made to him.

(4) The reference in subsection (1) above to avoidance is a reference to—

(a) the obtaining under this Part for the charged person of an allowance or deduction or of a greater allowance or deduction, or

(b) the avoidance or reduction of a charge under this Part on the charged person.]

Textual Amendments

F27 S. 59A inserted (with effect in accordance with Sch. 16 para. 5(3) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 5(2)

[F28 59B Election to use alternative apportionment. U.K.

(1) This section applies where, in a case in which a disposal value of a fixture is required to be brought into account by the former owner, the price referred to in subsection (1) of section 59 falls to be determined in accordance with subsection (2) or (3) of that section.

(2) Subject to sections 56C, 56D and 59A and to the following provisions of this section, the purchaser and the former owner may jointly, by an election under this section, fix the amount which, for all the purposes of this Part, is to be taken—

(a) in a case to which subsection (2) of section 59 applies, to be the portion of the sale price referred to in that subsection; or

(b) in a case to which subsection (3) of that section applies, to be the portion of the capital sum referred to in section 55(1)(c) that falls to be treated as expenditure by the purchaser on the provision of the fixture.

(3) The amount fixed by an election under this section shall not exceed either of the following amounts, that is to say—

(a) the amount of the capital expenditure which was taken for the purposes of this Part to have been incurred by the former owner on the provision of the fixture or of the machinery or plant which became the fixture; and

(b) the actual amount of the sale price or capital sum referred to in section 59(2) or, as the case may be, section 55(1)(c).

(4) Where the portion of any amount which is to be taken as attributable to the provision of a fixture is fixed by an election under this section—

(a) the remainder (if any) of that amount shall be taken for the purposes of this Act to be expenditure attributable to the acquisition of the property which is not the fixture but is acquired for that amount;

(b) if there is no remainder, the expenditure so attributable shall be taken for those purposes to be nil.

(5) An apportionment by virtue of an election under this section shall have effect in place of any apportionment that would otherwise be made under section 150.

(6) In this section—

• “the former owner” shall be construed in accordance with subsection (1) of section 59; and

• “the purchaser” means the purchaser or lessee referred to in subsection (2) or, as the case may be, subsection (3) of that section.

Textual Amendments

F28 Ss. 59B, 59C inserted (with effect in accordance with Sch. 16 para. 6(2) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 6(1)

59C Elections under section 59B: supplemental. U.K.

(1) A section 59B election must be made by notice given to an officer of the Board.

(2) A notice containing a section 59B election (in addition to specifying the amount fixed by the election) must contain the following information—

(a) the name of each of the persons making the election;

(b) information sufficient to identify the machinery or plant;

(c) information sufficient to identify the relevant land;

(d) particulars of the interest acquired by the purchaser or, as the case may be, of the lease granted to him; and

(e) the tax district references of each of the persons making the election.

(3) The amount specified as the amount fixed by a section 59B election must be quantified at the time when the election is made; but if, as a result of circumstances arising after the making of the election, the maximum amount which could be fixed by the election is reduced to an amount which is less than the amount specified in the election, that election shall be deemed for the purposes of this Act to have specified the amount to which the maximum is reduced.

(4) A section 59B election shall not be made more than two years after the time when the purchaser acquires the interest in question or, as the case may be, is granted the lease in question.

(5) Where a person who has joined in making a section 59B election subsequently makes a return for his relevant period, a copy of the notice containing the election must accompany the return.

(6) A section 59B election shall be irrevocable once made.

(7) Nothing in section 42 of, or Schedule 1A to, the Taxes Management Act 1970 (claims in returns and claims not included in returns) shall apply to a section 59B election.

(8) Where any question relating to a section 59B election falls to be determined by any body of Commissioners for the purposes of any proceedings before them—

(a) each of the persons who has joined in making the election shall be entitled to appear and be heard by the Commissioners, or to make representations to them in writing;

(b) the Commissioners shall determine that question separately from any other questions in those proceedings; and

(c) their determination on that question shall have effect as if made in an appeal to which each of those persons was a party.

(9) In this section—

• “relevant period”, in relation to any person who has joined in making a section 59B election, means the period for which a return is made by that person which is the first such period in which the election has an effect in his case for the purposes of income tax or corporation tax; and

• “a section 59B election” means an election under section 59B;

and subsection (6) of section 59B applies for the purposes of this section as it applies for the purposes of that section.

(10) In the case of an election for the purposes of a trade, profession or business carried on by persons in partnership, the references in this section to a return shall be construed, in relation to those persons, as references to a return under section 12AA of the Taxes Management Act 1970 (partnership returns).]

Textual Amendments

F28 Ss. 59B, 59C inserted (with effect in accordance with Sch. 16 para. 6(2) of the amending Act) by Finance Act 1997 (c. 16), Sch. 16 para. 6(1)