Finance Act 1997

Section 85.

SCHEDULE 15 U.K. Capital allowances: Schedule A cases etc

Repeal of existing rules U.K.

1 U.K. Section 32 of the Taxes Act 1988 (capital allowances in Schedule A cases) shall cease to have effect, both for the purposes of income tax and for the purposes of corporation tax.

Removal of restriction on set-off of losses U.K.

2 (1) In section 379A(2) of the Taxes Act 1988 (cases in which Schedule A losses may be set against other income of the same year or the following year)—

(a) in paragraph (a) (losses attributable to relevant capital allowances), the word “relevant” shall be omitted; and

(b) the words after paragraph (b) (which define the relevant capital allowances) shall cease to have effect.

(2) In section 503 of that Act (letting of furnished holiday accommodation treated as trade), after subsection (1) there shall be inserted the following subsection—

“(1A) In its application by virtue of subsection (1) above, section 384 shall have effect with the omission of subsections (6) to (8) and of the words after paragraph (b) in subsection (10) (restrictions on right to set off losses attributable to capital allowances).”

New general provision U.K.

3 In Chapter I of Part II of the M1 Capital Allowances Act 1990 (general provisions about capital allowances in respect of machinery and plant), the following section shall be inserted after section 28—

“28A Schedule A cases.

“28A (1) Subject to subsection (3) below and section 29, where any person carries on a Schedule A business—

(a) that person’s Schedule A business shall be treated as a trade for the purposes of this Part and of the other provisions of the Tax Acts so far as relating to allowances or charges under this Part; and

(b) that trade shall be treated for those purposes as one trade carried on separately from any other trade carried on by that person.

(2) For the purposes of the Corporation Tax Acts the reference in subsection (1) above to a Schedule A business is a reference, in relation to a company, to all the activities carried on by that company which—

(a) would be treated as comprised in a Schedule A business if they were carried on by an individual, rather than by a company; and

(b) are not activities the profits and gains from which are treated for the purposes of the Corporation Tax Acts as chargeable to tax under Case VI of Schedule D.

(3) Expenditure incurred in providing machinery or plant for use in a dwelling-house shall not, by virtue of this section, be treated as incurred in providing that machinery or plant for the purposes of a trade.

(4) Where machinery or plant is provided partly for use in a dwelling-house and partly for other purposes, such apportionment of the expenditure incurred in providing that machinery or plant shall be made for the purposes of subsection (3) above as is just and reasonable.”

Marginal Citations

M1 1990 c. 1.

4 In section 29 of that Act of 1990 (furnished holiday accommodation), for subsection (1), both as it applies for the purposes of income tax and as it applies for the purposes of corporation tax, there shall be substituted the following subsections—

“(1) Subject to subsection (1A) below, this Part and the other provisions of the Tax Acts so far as relating to allowances or charges under this Part shall have effect as if so much of the Schedule A business of any person as consists in the commercial letting of furnished holiday accommodation in the United Kingdom were a single trade carried on separately from both—

(a) the trade in which, in accordance with section 28A, the rest (if any) of that business is comprised; and

(b) any other trade carried on by that person.

(1A) Subsection (1) above does not apply for the purposes of the Corporation Tax Acts; but for those purposes this Part and the other provisions of those Acts so far as relating to allowances and charges under this Part shall have effect as if—

(a) the commercial letting of furnished holiday accommodation in the United Kingdom in respect of which profits or gains are chargeable under Case VI of Schedule D were a trade; and

(b) all such lettings made by the same person were a single trade carried on separately from any other trade which is, or under section 28A is treated as, carried on by that person.”

Manner of making allowances and charges U.K.

5 (1) In subsection (3) of section 67 of that Act of 1990 (manner of giving allowance on thermal insulation), the words from “shall be made” to “corporation tax,” shall be omitted.

(2) After that subsection there shall be inserted the following subsection—

“(3A) Subsections (2) and (3) above have effect for the purposes of corporation tax only.”

(3) After subsection (4) of that section there shall be inserted the following subsection—

“(4A) Where the letting of any industrial building or structure by any person is deemed by virtue of section 28A to be in the course of a trade, subsection (1) above shall have effect as if that person occupied that building or structure for the purposes of that trade throughout the period for which it is let by him.”

6 (1) In section 73 of that Act of 1990 (manner of making allowances and charges under Part II), in subsection (1), for “subsection (2)” there shall be substituted “ subsections (1A) and (2) ”.

(2) After subsection (1) of that section there shall be inserted the following subsection—

“(1A) Any allowance or charge made to or on any company by virtue of section 28A shall be made for the purposes of corporation tax by way of discharge or repayment of tax and, for that purpose—

(a) any such allowance shall be available primarily against income chargeable to tax under Schedule A; and

(b) the amount on which any such charge is to be made shall be treated as income so chargeable.”

Meaning of capital expenditure U.K.

7 In section 159 of that Act of 1990, after subsection (1) (capital expenditure and capital sums not to include trading expenses and receipts) there shall be inserted the following subsection—

“(1A) References in subsection (1) above to a trade include references to a Schedule A business or to any such activities as are mentioned in section 28A(2).”

Consequential amendment of section 434E of the Taxes Act 1988 U.K.

8 In section 434E(2) of the Taxes Act 1988 (letting of investment assets of life assurance companies to be treated as letting otherwise than in the course of a trade), at the end there shall be inserted “ except where it is a letting of machinery or plant that is deemed to be a letting in the course of a trade by virtue of section 28A of that Act (Schedule A businesses etc.). ”

Commencement U.K.

9 (1) Subject to sub-paragraph (2) below, this Schedule has effect—

(a) for the purposes of income tax, in relation to the year 1997-98 and subsequent years of assessment; and

(b) for the purposes of corporation tax, in relation to accounting periods ending on or after 1st April 1997.

(2) Paragraph 7 above has effect for any year of assessment or accounting period ending on or after 26th November 1996, but only in relation to expenditure incurred on or after that date and sums paid or received on or after that date.