Part 2 Plant and machinery allowances
Chapter 11 Overseas leasing
Recovery of excess allowances
111 Excess allowances: standard recovery mechanism
(1)
If—
(a)
expenditure incurred by a person in providing plant or machinery has qualified for a first-year allowance or a normal writing-down allowance, and
(b)
at any time in the designated period, the plant or machinery is used for overseas leasing which is not protected leasing,
the following provisions of this section have effect in relation to the person who is the owner of the plant or machinery when it is first so used.
(2)
For the chargeable period in which the plant or machinery is first used as described in subsection (1)(b), the owner is—
(a)
liable to a balancing charge of an amount given by subsection (4), and
(b)
required to bring into account a disposal value of an amount given by that subsection.
(3)
For the chargeable period following that in which the plant or machinery is first used as described in subsection (1)(b), an amount given by subsection (4) is to be allocated to whatever pool is appropriate for plant or machinery which is of that description and is provided for leasing and used for overseas leasing.
(4)
The amounts are—
The balancing charge
The amount, if any, by which F + N exceeds T, where—
F is the amount of any first-year allowance made in respect of the qualifying expenditure referred to in subsection (1)(a) (“E”),
N is the total of any normal writing-down allowances made in respect of E for the relevant chargeable periods, and
T is the total of the allowances that could have been made for the relevant chargeable periods if no first-year allowance or normal writing-down allowances had been or could have been made.
The disposal value
The amount, if any, by which E exceeds (F + N), where E, F and N have the meaning given in relation to the amount of the balancing charge.
The amount to be allocated to the pool
The aggregate of the balancing charge and the disposal value.
(5)
For the purpose of calculating N, the normal writing-down allowances that were made in respect of expenditure on an item of plant or machinery are to be determined as if that item were the only item of plant or machinery in relation to which Chapter 5 had effect.
(6)
“The relevant chargeable periods” means the chargeable period in which the qualifying expenditure was incurred and any subsequent chargeable period up to and including the one in which the plant or machinery was first used as described in subsection (1)(b).
112 Excess allowances: connected persons
(1)
Section 111 applies with the modifications in subsections (2) to (4) in a case in which—
(a)
the owner acquired the plant or machinery as a result of a transaction between connected persons (or a series of transactions each of which was between connected persons),
F1(b)
the transaction was not effected (or, if more than one, none of the transactions was effected) on the occasion of a change in the persons carrying on the qualifying activity—
(i)
which falls within F2Chapter 1 of Part 22 of CTA 2010 (transfers of trade without change of ownership), or
(ii)
in relation to which Condition A or Condition B is met, and
(c)
any of the connected persons is a person to whom—
(i)
a first-year allowance or a normal writing-down allowance has been made in respect of expenditure on the provision of the plant or machinery, or
(ii)
a balancing allowance has been made in respect of such expenditure without a first-year allowance or normal writing-down allowance having been claimed.
F3(1A)
Condition A is that—
(a)
at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and
(b)
at least one person who carried on the qualifying activity before the change continued to carry it on after the change.
(1B)
Condition B is that—
(a)
the qualifying activity was carried on in partnership both immediately before and immediately after the change,
(b)
a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and
(c)
at least one company which carried the activity on before the change continued to carry it on after the change.
(2)
For the purposes of section 111(2) and (3)—
E is the amount of the expenditure in respect of which an allowance within subsection (1)(c) has been made,
F is the amount of any first-year allowance within subsection (1)(c), and
N is the amount of any normal writing-down allowance or balancing allowance within subsection (1)(c).
(3)
For the purposes of section 111(2) and (3), any consideration paid or received on a disposal of the plant or machinery between the connected persons is to be disregarded.
(4)
If a balancing allowance or a balancing charge has been made in respect of any of the transactions, the amount representing F + N is to be adjusted in a just and reasonable manner.
F4(5)
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113 Excess allowances: special provision for ships
(1)
If the plant or machinery referred to in section 111 is a ship—
(a)
no allowance is to be made in respect of the ship under section 131(3) (postponed allowances) for the first chargeable period of overseas use or any subsequent chargeable period,
(b)
nothing in section 132(2) (disposal events and single ship pool) restricts the operation of section 111, and
(c)
the amount of any first-year or writing-down allowance in respect of the ship which has been postponed under section 130 and not made is to be allocated to a long-life asset pool or an overseas leasing pool for the chargeable period following the first chargeable period of overseas use.
(2)
“The first chargeable period of overseas use” means the chargeable period in which the plant or machinery is first used for overseas leasing which is not protected leasing.