Capital Allowances Act 1990 (repealed)

53 Expenditure incurred by equipment lessor. U.K.

(1) [F1 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 [F2 which is or is to be] carried on by the equipment lessee F3 ... , and

[F4 (ba) that agreement is not an agreement for the lease of the machinery or plant for use in a dwelling-house, and

[F5 (bb) the equipment lessee is within the charge to tax in the United Kingdom on the profits of the trade for the purposes of which he has entered into that agreement, 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, [F6 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.

[F7 (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 [F8 “by the equipment lessee”]; 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 [F9 an officer of the Board] given before the expiry of the period [F10 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.

[F11 (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

F1 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)

F2 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)

F3 Words in s. 53(1)(b) repealed (with effect in accordance with s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(2)(3), Sch. 5 para. 54(2), Sch. 27 Pt. 3(4) (with Sch. 5 Pt. 4)

F4 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)

F5 S. 53(1)(bb) substituted (with effect in accordance with s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(2)(3), Sch. 5 para. 54(3) (with Sch. 5 Pt. 4)

F6 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)

F7 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)

F8 Words in s. 53(1B)(a) substituted (with effect in accordance with s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(2)(3), Sch. 5 para. 54(4) (with Sch. 5 Pt. 4)

F9 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)

F10 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)

F11 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)

C1 S. 53(2) modified (for the year of assessment 1988-1989) by S.I. 1991/851, regs. 1, 9, Sch.2.

C2 S. 53(2) modified (for the year of assessment 1989-1990) by S.I. 1992/511, regs. 1, 9, Sch.2.

C3 S. 53(2) applied (with modifications) (for the year of assessment 1990–91) by S.I. 1993/415, reg. 9, Sch.2

C4 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

C5 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.

C6 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.