Modifications etc. (not altering text)
C1Pt. II (ss. 22–83) modified by Finance Act 1990 (c. 29), s. 87(3)(4)
C2Pt. 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.
C3Pt. 2 modified (8.11.1995) by Atomic Energy Authority Act 1995 (c. 37), Sch. 3 para. 20
C4Pt. 2 modified (8.11.1995) by Atomic Energy Authority Act 1995 (c. 37), Sch. 3 para. 16
C5Pt. 2 modified (24.7.1996) by Broadcasting Act 1996 (c. 55), s. 149(1)(f), Sch. 7 para. 14(1) (with Sch. 7 para. 14(2))
C6Pt. 2 restricted (24.7.1996) by Broadcasting Act 1996 (c. 55), s. 149(1)(f), Sch. 7 para. 16
C7Pt. 2 modified (24.7.1996) by Broadcasting Act 1996 (c. 55), s. 149(1)(f), Sch. 7 para. 15(2)
C8Pt. 2 modified (24.7.1996) by Broadcasting Act 1996 (c. 55), s. 149(1)(f), Sch. 7 para. 15(3)
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)
(1)Where—
(a)any machinery or plant is used for the purposes of any non-trading activities carried on by any person, and
(b)it is directly or indirectly as a consequence of the machinery or plant having been leased under a finance lease that it is available for that use,
subsections (1), (2) and (3) of section 75 and subsection (1) of section 76 (except the words after “without”) shall have effect as if the use for the purposes of those activities were a use for the purposes of a trade carried on by that person.
(2)Where—
(a)subsection (1), (2) or (3) of section 75 applies by virtue of paragraph (b) of that subsection, or is treated (under one or both of section 76(1) and subsection (1) above) as so applying,
(b)it is directly or indirectly as a consequence of the machinery or plant having been leased under a finance lease that it is available after—
(i)the date of the sale,
(ii)the date of the making of the contract, or
(iii)the date of the assignment,
for the use which is mentioned in that paragraph, or which is treated as if it were a use so mentioned, and
(c)apart from this subsection the disposal value to be brought into account under sections 24, 25 and 26 by reason of the sale, contract or assignment would be more than the amount (“the section 76(2) amount”) which (if no disposal value fell to be brought into account) would be applicable instead in accordance with section 76(2) and subsection (5) below,
sections 24, 25 and 26 (and, accordingly, subsections (1) to (3) of section 75) shall have effect as if the disposal value to be so brought into account were equal to the section 76(2) amount.
(3)Where—
(a)a disposal value has fallen, in a case within sub-paragraphs (a) and (b) of subsection (2) above, to be brought into account under sections 24, 25 and 26 by reason of the sale, contract or assignment,
(b)the machinery or plant in question falls to be treated as belonging, at a time after the event by reason of which that disposal value fell to be brought into account, to any person in consequence of his incurring any capital expenditure,
(c)the allowances under this Part in respect of that capital expenditure are not restricted by subsection (1), (2) or (3) of section 75, and
(d)the amount of that expenditure (“the actual amount”) exceeds the maximum allowable amount,
this Part shall have effect in relation to that expenditure as if it were expenditure of an amount equal to the maximum allowable amount.
(4)In subsection (3) above “the maximum allowable amount” means the sum of the following amounts—
(a)the disposal value falling to be brought into account as mentioned in subsection (3)(a) above, and
(b)so much of the actual amount of the expenditure as is equal to the amount included in that expenditure by virtue of section 66 (installation costs).
(5)In a case which—
(a)falls within paragraphs (a) and (b) of subsection (2) above, but
(b)is a case in which no disposal value falls to be brought into account as mentioned in the applicable subsection of section 75,
subsections (2) to (4) of section 76 shall have effect as if the amounts referred to in each of paragraphs (b) and (c) of section 76(2) were equal to the notional written-down value of the capital expenditure incurred by the person mentioned in that paragraph on the provision of the machinery or plant.
(6)Subsection (7) below applies where, in a case falling within paragraphs (a) and (b) of subsection (2) above—
(a)the finance lease, or
(b)any transaction or series of transactions of which it forms a part,
makes provision (otherwise than by means of guarantees from persons connected with the lessee) the effect of which (if the lessor and the persons connected with him are treated as the same person) is to remove the whole, or the greater part, of any non-compliance risk which (apart from that provision) would fall directly or indirectly on the lessor.
(7)Where this subsection applies—
(a)subsections (1), (2) and (3) of section 75 shall have effect as if (as well as excluding the making of a first-year allowance), they also required—
(i)the whole amount of the expenditure, and
(ii)any additional VAT liability incurred in respect of it,
to be left out of account in determining the amount for any period of a person’s qualifying expenditure under section 25; and
(b)subsections (2), (3) and (5) above shall not apply.
(8)Where subsection (7) above applies in a case where the buyer, person entering into the contract or assignee is different from the lessor—
(a)any capital expenditure incurred on the provision of the machinery or plant by the lessor, and
(b)any additional VAT liability incurred in respect of it,
shall also be disregarded both for the purposes of determining the amount for any period of the lessor’s qualifying expenditure under section 25 and for the purposes of any claim by the lessor to a first-year allowance.
(9)In this section “the notional written-down value”, in relation to any expenditure incurred by a person on the provision of any machinery or plant, means the amount which, if—
(a)the sale, contract or assignment were an event by reason of which a disposal value of that machinery or plant fell to be brought into account in that person’s case, and
(b)the further assumptions set out in subsection (10) below were made in relation to that expenditure,
would give rise to neither a balancing allowance nor a balancing charge for the chargeable period for which that disposal value would be brought into account in that person’s case.
(10)Those assumptions are—
(a)that the person in question incurred the expenditure on the provision of the machinery or plant wholly and exclusively for the purposes of a trade carried on by him (until its deemed discontinuance) separately from any other trade or other activities carried on or assumed to be carried on by him;
(b)that that person was within the charge to tax in respect of that separate trade;
(c)that the expenditure was the only capital expenditure ever taken into account in respect of that trade in determining qualifying expenditure for the purposes of section 24;
(d)that the expenditure is to be treated in relation to that person as expenditure to which Chapter IVA of this Part applies if, but only if, it is expenditure falling in fact to be so treated apart from the preceding assumptions; and
(e)that there had been made to that person the full amount of every allowance to which, on the assumptions specified in paragraphs (a) to (c) above, that person was entitled in respect of that expenditure.
(11)This section and sections 75 and 76 shall have effect in relation to machinery or plant where—
(a)it is directly or indirectly as a consequence of the machinery or plant having been leased under a finance lease that it is available for any use to which it is put, and
(b)the machinery or plant has at any time been acquired by one public authority from another otherwise than by purchase,
as if the public authority from whom it was acquired were connected with the public authority that acquired it and with every person connected with the acquiring authority.
(12)In this section—
“deemed discontinuance”, in relation to the trade assumed under subsection (10) above in a case in which section 75(1), (2) or (3) applies or is treated as applying, means a permanent discontinuance of that trade at the time of the sale, of the performance of the contract or, as the case may be, of the assignment;
“non-compliance risk”, in relation to a finance lease, means a risk that a loss will be sustained by any person if payments under the lease are not made in accordance with its terms;
“non-trading activities” means any activities that do not constitute a trade; and
“public authority” includes the Crown or any government or local authority;
and (subject to subsection (11) above) references in this section to persons connected with each other shall be construed in accordance with section 839 of the principal Act.]
Textual Amendments
F1S. 76A inserted (with effect in accordance with s. 46(3) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 46(2) (with s. 46(3)(a)-(c))