Finance Act 1985 (c. 54)

SCHEDULES

Section 55.

SCHEDULE 14 Allowances and Charges in Respect of Machinery and Plant

PART I Amendments with Respect to Expenditure Incurred on or after 1st April 1985

1 In section 46 of the [1971 c. 68.] Finance Act 1971 (machinery and plant on lease) after subsection (1) there shall be inserted the following subsection—

“(1A) Where subsection (1) above applies, the question whether the provision of the machinery or plant is to be treated as being wholly and exclusively or only partly for the purposes of the trade referred to in paragraph (a) of that subsection shall be determined according to whether the machinery or plant was in fact provided wholly and exclusively for the purpose of letting otherwise than in the course of a trade or only partly for that purpose.”

2 In paragraph 5 of Schedule 8 to that Act (use partly for trade purposes and partly for other purposes) in sub-paragraph (1) (first-year allowances)—

(a) for the words from " that, during" to " used for other purposes " there shall be substituted " that the provision of the machinery or plant is partly for purposes other than those of a trade carried on by him";

(b) for the words " machinery or plant were to be used only " there shall be substituted " provision of the machinery or plant were wholly and exclusively"; and

(c) the words " during that period " shall be omitted.

PART II Amendments with Respect to Chargeable Periods etc. ending on or after 1st April 1985

The Finance Act 1971

3 (1) At the end of subsection (2A) of section 44 of the Finance Act 1971 (which was inserted by section 59 of the [1984 c. 43.] Finance Act 1984) there shall be added the words " and all such assessments and adjustments of assessments shall be made as may be necessary to give effect to this subsection".

(2) In subsection (4) of that section (definition of "qualifying expenditure ") in paragraph (a), for the words from " which is in use " to " those purposes ", where those words secondly occur, there shall be substituted " being expenditure incurred in the chargeable period in question or its basis period or at any previous time, and "

(3) In subsection (5) of that section (which among other matters requires, as a condition for bringing disposal value into account, that the machinery or plant has been in use for the purposes of the trade) for the words from " on the provision of which " to the end of paragraph (c) mere shall be substituted—

“(a) on the provision of which for the purposes of the trade he has incurred capital expenditure; and

(b) which belongs to him at some time in the chargeable period or its basis period ; and

(c) in respect of which, in the chargeable period or its basis period, one of the following events occurs, namely—

(i) the machinery or plant ceases to belong to him ;

(ii) he loses possession of the machinery or plant in circumstances where it is reasonable to assume that the loss is permanent;

(iii) the machinery or plant ceases to exist as such (as a result of destruction, dismantling or otherwise);

(iv) the machinery or plant begins to be used wholly or partly for purposes which are other than those of the trade;

(v) the trade is permanently discontinued (or is treated by virtue of any provision of the Tax Acts as permanently discontinued);

and that is the first such event to occur”.

4 In subsection (1) of section 46 of that Act (machinery and plant on lease) for paragraph (6) there shall be substituted the following paragraph—

“(b) at the time when the lessor permanently ceases to let the machinery or plant otherwise than in the course of a trade, the machinery or plant shall be treated for the purposes of this Chapter as being used wholly for purposes other than those of the trade referred to in paragraph (a) above”.

5 (1) In Schedule 8 to that Act (supplementary provisions) in paragraph 4 (disposal before bringing into use) in sub-paragraph (1) for the words from " the following provisions " onwards there shall be substituted " where—

(a) a first-year allowance is made in respect of capital expenditure on the provision of machinery or plant, and

(b) in the chargeable period related to the incurring of that expenditure, the disposal value of that machinery or plant falls to be brought into account in accordance with subsection (5) of section 44 of this Act,

that expenditure shall not, by virtue of sub-paragraph (ii) of paragraph (a) of subsection (4) of that section, be excluded from the capital expenditure referred to in that paragraph ".

(2) In sub-paragraph (2) of that paragraph for the words " referred to in " there shall be substituted " by reason of which disposal value falls to be brought into account as mentioned in "and for the words from " (a) paragraph (a) " to " referred to were " there shall be substituted " section 44 of this Act, as modified by that subparagraph, shall have effect as if any reference in subsection (4)(a) of that section to capital expenditure incurred were a reference to".

6 In paragraph 5 of that Schedule (use partly for trade etc. purposes and partly for other purposes) for sub-paragraphs (2) to (5) there shall be substituted the following sub-paragraphs—

“(2) Where a person carrying on a trade incurs capital expenditure on the provision of machinery or plant partly for the purposes of that trade (in sub-paragraphs (4) to (6) below referred to as "the actual trade") and partly for other purposes, it shall be assumed for the purposes of section 44 of this Act that he incurred the expenditure on the provision of the machinery or plant wholly and exclusively for the purposes of a trade (in sub-paragraphs (4) to (6) below referred to as "the notional trade ") carried on by him separately from the actual trade and any other trade carried on by him.

(3) If, for any chargeable period, a person who has incurred expenditure on the provision of machinery or plant for the purposes of a trade (in sub-paragraphs (4) to (6) below referred to as "the actual trade ") is required to bring the disposal value of the machinery or plant into account by reason of it beginning in that chargeable period or its basis period to be used partly, but not wholly, for purposes other than those of the actual trade, it shall be assumed for the purposes of section 44 of this Act that, immediately after the beginning of that chargeable period or its basis period, he incurs capital expenditure equal to that disposal value on the provision of the machinery or plant wholly and exclusively for the purposes of a trade (in sub-paragraphs (4) to (6) below referred to as "the notional trade ") carried on by him separately from the actual trade and any other trade carried on by him.

(4) Without prejudice to sub-paragraphs (i) to (iii) of paragraph (c) of subsection (5) of section 44 of this Act, it shall be assumed for the purposes of that section that the notional trade is permanently discontinued on the machinery or plant beginning to be used wholly for purposes other than those of the actual trade.

(5) The allowance or charge under section 44 of this Act which, on the above assumptions, and having regard to subparagraph (6) below, would fall to be made for any chargeable period in the case of the notional trade—

(a) shall be reduced to such extent as may be just and reasonable having regard to all the relevant circumstances of the case and, in particular, to the extent to which the machinery or plant was used in that chargeable period or its basis period otherwise than for the purposes of the actual trade ; and

(b) shall, as so reduced, be made for that chargeable period in the case of the actual trade.

(6) If an allowance under section 44 of this Act falling to be made by virtue of this paragraph for any chargeable period in the case of the actual trade is not claimed or is disclaimed under subsection (2A) of that section, or is reduced in amount in accordance with a requirement under the proviso of subsection (2) of that section or under subsection (2A) 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 notional 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 disclaimed or, as the case may require, as proportionately reduced.”

7 (1) In paragraph 6 of that Schedule (effect of subsidies towards wear and tear) in sub-paragraph (4),—

(a) for the words from the beginning to " in respect thereof " there shall be substituted " If an allowance has been made under section 44 of this Act for a chargeable period prior to that in which or, as the case may be, in the basis period of which the first sum is so paid in respect of the machinery or plant"; and

(b) for the words " permanently ceased to be used for the purposes " there shall be substituted " begun to be used wholly for purposes other than those".

(2) In sub-paragraph (5) of that paragraph—

(a) in paragraph (a) for the words "the machinery or plant is brought into use" there shall be substituted " capital expenditure was incurred on providing the machinery or plant wholly and exclusively";

(b) in paragraph (b) for the words from " it ceases " to " with " there shall be substituted " the notional trade is treated by virtue of paragraph (c) below as permanently discontinued " and for the word " being " there shall be substituted " are";

(c) in paragraph (c) after the word "that" there shall be inserted " without prejudice to sub-paragraphs (i) to (iii) of paragraph (c) of subsection (5) of that section " and for the words from " ceasing " onwards there shall be substituted " beginning to be used wholly or partly for purposes other that those of the actual trade"; and

(d) paragraph (d) shall be omitted.

(3) In sub-paragraph (6) of that paragraph—

(a) after the word " claimed ", in the first place where it occurs, there shall be inserted " or is disclaimed under subsection (2A) of that section";

(b) after the words " proviso to subsection (2) of that section " there shall be inserted " or under subsection (2A) of that section"; and

(c) for the words from " claimed ", in the last place where it occurs, onwards there shall be substituted " claimed or as disclaimed or, as the case may require, as proportionately reduced".

8 (1) In paragraph 7 of that Schedule (effect of use for purposes of trade where no allowances previously available), in: paragraph (a) of sub-paragraph (1) for the words from " but" to " circumstances " there shall be substituted " for purposes which were".

(2) After that sub-paragraph there shall be inserted the following sub-paragraph—

“(1A) Where sub-paragraph (1) above applies, the question whether the provision of the machinery or plant is to be taken to be wholly and exclusively or only partly for the purposes of the trade shall be determined according to whether the use referred to in paragraph (a) or, as the case may be, paragraph (b) of that sub-paragraph is wholly and exclusively or only partly for those purposes.”

9 (1) In paragraph 10 of that Schedule (expensive motor cars), in sub-paragraph (2)—

(a) in paragraph (a) the words from "immediately" to "the expenditure " shall be omitted and for the words " brings the motor car into use " there shall be substituted " incurred the expenditure on the provision of the motor car wholly and exclusively";

(b) paragraph (b), except the final word " and", shall be omitted; and

(c) in paragraph (c), after the word " that" there shall be inserted " without prejudice to sub-paragraphs (i) to (iii) of paragraph (c) of subsection (5) of that section " and for the words from " ceases " onwards there shall be substituted " begins to be used wholly or partly for purposes other than those of the actual trade".

(2) In sub-paragraph (4) of that paragraph, for the words from the beginning to " applies " there shall be substituted " Where the disposal value of the motor car falls to be taken into account by reason of an event falling within section 44(5)(c)(i) of this Act and that event is such a sale or the performance of such a contract as is referred to in paragraph 3 of this Schedule".

10 In paragraph 15(3) of that Schedule (application of provisions of section 48 of the [1968 c. 3.] Capital Allowances Act 1968 relating to successions to trades) after the words "by substituting" there shall be inserted—

“(a) in subsection (1), for the words 'in use', in each place where they occur, the words 'either in use or provided and available for use'; and

(b) in subsection (2), for the word 'used' the words 'either used or provided and available for use'; and

(c)”.

The Finance Act 1974

11 In section 17(1) of the [1974 c. 30.] Finance Act 1974 (expenditure on fire safety) the words " and had been in use for the purposes of the trade " shall be omitted.

The Finance Act 1975

12 In section 14(1) of the [1975 c. 7.] Finance Act 1975 (expenditure on thermal insulation) the words " and had been in use for the purposes of the trade " shall be omitted.

The Finance (No. 2) Act 1975

13 In section 49(1) of the [1975 c. 45.] Finance (No. 2) Act 1975 (expenditure on safety at sports grounds) the words " and had been in use for the purposes of the trade " shall be omitted.

The Finance Act 1980

14 (1) In section 65 of the [1980 c. 48.] Finance Act 1980 (writing-down allowances etc in case of leased assets), in subsection (2),—

(a) in paragraph (a) the words from " immediately " to " brought into use " shall be omitted and for the words " brings the machinery or plant into use " there shall be substituted " incurred the expenditure on the provision of the machinery or plant wholly and exclusively";

(b) paragraph (b), except the final word " and", shall be omitted; and

(c) in paragraph (c), after the word "that" there shall be inserted " without prejudice to sub-paragraphs (i) to (iii) of paragraph (c) of subsection (5) of that section " and for the words from " ceases " onwards there shall be substituted " begins to be used wholly or partly for purposes other than those of the actual trade".

(2) In subsection (3) of that section,—

(a) after the word " claimed ", in the first place where it occurs, there shall be inserted " or is disclaimed under subsection (2A) of that section"; and

(b) after the words " proviso to subsection (2) of that section " there shall be inserted " or under subsection (2A) of that section"; and

(c) for the words from "claimed", in the last place where it occurs, onwards there shall be substituted " claimed or as disclaimed or, as the case may require, as proportionately reduced".

(3) In subsection (4) of that section, for the words from "cease" onwards there shall be substituted " begin to be used wholly or partly for purposes other than those of the actual trade".

15 In section 71(1) of that Act (expenditure on quarantine premises) the words "and had been in use for the purposes of the trade " shall be omitted.

The Finance Act 1984

16 In Schedule 16 to the [1984 c. 43.] Finance Act 1984 (assumptions for certain calculations relating to foreign companies) in paragraph 10 (capital allowances) for the words from " section 44 " to " balancing adjustments), not" there shall be substituted " Chapter I of Part JJl of the [1971 c. 68.] Finance Act 1971 to have been provided for purposes wholly other than those of the trade and not