Part IIU.K. Machinery and Plant

Modifications etc. (not altering text)

C9Pt. 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)

[F1Chapter IVAU.K. Long-life assets

Textual Amendments

F1Pt. 2 Ch. 4A inserted (with application in accordance with Sch. 14 para. 10 of the amending Act) by Finance Act 1997 (c. 16), Sch. 14 para. 2

Rules applying to expenditure on long-life assetsU.K.

38E Separate pools for expenditure on long-life assets.U.K.

(1)Where expenditure to which this Chapter applies has been incurred on the provision of machinery or plant wholly and exclusively for the purposes of a trade (“the actual trade”), the following provisions of this section shall have effect with respect to the allowances and charges to be made under section 24 in the case of the actual trade.

(2)It shall be assumed for the purposes of sections 24, 25 and 26—

(a)that the person carrying on the actual trade incurred the expenditure on the provision of the machinery or plant wholly and exclusively for the purposes of a trade carried on by him separately from the actual trade and from any other trade which he in fact carries on or is assumed for any purpose to carry on;

(b)that the purposes for which the machinery or plant is used (whether wholly or partly) are purposes of the separate trade if they are purposes of the actual trade, but not otherwise; and

(c)that the separate trade is permanently discontinued if the actual trade is or is treated as permanently discontinued, but not otherwise.

(3)Any allowance or charge under section 24 which, on those assumptions and having regard to subsection (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.

(4)If an allowance under section 24 falling by virtue of this section to be made for any chargeable period (“the earlier period”) in the case of the actual trade—

(a)is not claimed, or

(b)is reduced in amount in accordance with a requirement under subsection (3) 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 the separate trade for the earlier period shall be treated as not claimed or, as the case may require, as proportionately reduced.

(5)Where there is more than one item of machinery or plant to which subsection (2) above applies in the case of any person, this section shall have effect as if the separate trade for which, in that person’s case, each of those items is treated as used were the same separate trade.

(6)The reference in subsection (1) above to expenditure incurred on the provision of machinery or plant wholly and exclusively for the purposes of a trade does not include a reference to any amount falling by virtue of section 31, 61, 79 or 80 to be treated as incurred on the provision of machinery or plant wholly and exclusively for the purposes of the separate trade mentioned in that section.

38F Modifications applying to pools for long-life assets.U.K.

(1)Where sections 24, 25 and 26 apply, in any of the cases mentioned in subsection (2) below, to any expenditure to which this Chapter applies, they shall so apply as if the reference in section 24(2) to 25 per cent. were a reference to 6 per cent.

(2)Those cases are—

(a)any case where sections 24, 25 and 26 apply in accordance with section 31, 38E, 79 or 80; and

(b)any case where the machinery or plant in question is machinery or plant to which section 61 applies.

(3)Where—

(a)any person entitled to do so has made a Part II claim in respect of expenditure incurred on the provision of any plant or machinery,

(b)that expenditure was expenditure falling to be treated for the purposes of that claim as expenditure to which this Chapter applies,

(c)at any time after the making of that claim, that person or another person makes a Part II claim in respect of any capital expenditure incurred at any time (including a time before the incurring of the expenditure to which the earlier claim relates) on the provision of the same machinery or plant,

(d)the expenditure to which the later claim relates would not (but for this subsection) be treated for the purposes of the later claim as expenditure to which this Chapter applies, and

(e)the expenditure to which the later claim relates does not fall within paragraph (d) above by virtue of being expenditure which is prevented by section 38B from being expenditure to which this Chapter applies,

this Part shall have effect in relation to the later claim as if the expenditure to which it relates were expenditure to which this Chapter applies.

(4)References in this section to the making of a Part II claim in respect of any expenditure are references to any of the following—

(a)the making of a return in which that expenditure is taken into account in determining a person’s qualifying expenditure for the purposes of section 24;

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

(c)the making, in any other manner, of a claim for the expenditure to be so taken into account.

(5)In subsection (4) above “return” means any return required to be made under the Taxes Management Act 1970 for income tax or corporation tax purposes.

(6)In the case of expenditure falling within subsection (1) of section 42, this section has effect subject to subsections (3) to (7) of that section.

38G Disposal value of long-life assets.U.K.

(1)If, in a case where sections 24, 25 and 26 have had effect in accordance with section 38F(1) in relation to any expenditure incurred by a person (“the charged person”)—

(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)The assumptions mentioned in subsection (2) above are—

(a)subject to paragraph (b) below, 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;

(b)that that expenditure were not, in the charged person’s case, prevented by section 38C or 38D from being expenditure to which this Chapter applies; and

(c)that the full amount of every allowance to which the charged 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.]