Income Tax Act 2007

[F1 Capital allowances: claw-back of major lump sum U.K.

Textual Amendments

F1 Pt. 11A Ch. 2 inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 3 para. 3 (with Sch. 9 paras. 1-9, 22)

614BR Effect of capital allowances: introduction U.K.

(1) This section and sections 614BS to 614BW apply if an occasion occurs on which a major lump sum falls to be paid in relation to the lease of the asset.

(2) In those sections the occasion is called “the relevant occasion”.

614BS Cases where expenditure taken into account under Part 2, 5 or 8 of CAA 2001 U.K.

(1) This section applies if capital expenditure incurred by the current lessor (“L”) in respect of the leased asset is or has been taken into account for the purposes of any allowance or charge under—

(a) Part 2 of CAA 2001 (plant and machinery allowances),

(b) Part 5 of that Act (mineral extraction allowances), or

(c) Part 8 of that Act (patent allowances).

(2) The Part of that Act in question (“the relevant Part”) has effect as if the relevant occasion were an event (“the relevant event”) as a result of which a disposal value is to be brought into account of an amount equal to the amount or value of the major lump sum (but subject to any applicable limiting provision).

(3) In this section “limiting provision” means a provision to the effect that the disposal value of the asset in question is not to exceed an amount (“the limit”) described by reference to capital expenditure incurred in respect of the asset.

(4) Subsection (5) applies if—

(a) as a result of subsection (2), a disposal value (“the relevant disposal value”) falls or has fallen to be brought into account by a person in respect of the leased asset for the purposes of the relevant Part, and

(b) a limiting provision has effect in the case of that Part.

(5) The limiting provision has effect (so far as it would not otherwise do so), in relation to the relevant disposal value and any simultaneous or later disposal value, as if—

(a) it did not limit any particular disposal value, but

(b) it limited the total amount of all the disposal values brought into account for the purposes of the relevant Part by L in respect of the leased asset.

(6) In subsection (5) “simultaneous or later disposal value” means any disposal value which falls to be brought into account by L in respect of the leased asset as a result of any event occurring at the same time as, or later than, the relevant event.

614BT Cases where expenditure taken into account under other provisions of CAA 2001 U.K.

(1) This section applies if any allowance is or has been given in respect of capital expenditure incurred by the current lessor (“L”) in respect of the leased asset under any provision of CAA 2001 other than—

(a) Part 2 of CAA 2001 (plant and machinery allowances),

(b) Part 5 of that Act (mineral extraction allowances), or

(c) Part 8 of that Act (patent allowances).

(2) The amount specified in subsection (3) is treated, in relation to L, as if it were a balancing charge to be made on L for the chargeable period in which the relevant occasion falls.

(3) That amount is an amount equal to—

(a) the total of the allowances given as mentioned in subsection (1) (so far as not previously recovered or withdrawn), or

(b) if it is less, the amount or value of the major lump sum.

(4) In this section “chargeable period” has the meaning given by section 6 of CAA 2001.

614BU Capital allowances deductions: waste disposal and cemeteries U.K.

(1) This section applies if any deduction is or has been allowed to the current lessor (“L”) in respect of capital expenditure incurred in connection with the leased asset as a result of—

(a) section 165 or 168 of ITTOIA 2005 (preparation and restoration expenditure in relation to waste disposal site), or

(b) section 170 of that Act (cemeteries and crematoria: deduction for capital expenditure).

(2) L is treated as if trading receipts arose to L from the trade in question on the relevant occasion.

(3) The amount of those receipts is equal to the lesser of—

(a) the amount or value of the major lump sum, and

(b) the deductions previously allowed.

614BV Capital allowances deductions: films and sound recordings U.K.

(1) This section applies if—

(a) any relevant deduction has been allowed to the current lessor (“L”) in respect of expenditure incurred in connection with the leased asset, and

(b) the amount or value of the major lump sum exceeds so much of that sum as was treated as receipts of a revenue nature under section 134(2) of ITTOIA 2005 (disposal proceeds of original master version of film or sound recording treated as receipt of a revenue nature).

(2) In subsection (1) “relevant deduction” means any deduction as a result of—

(a) section 135 of ITTOIA 2005 (allocation of expenditure on master versions of films or sound recordings to periods), or

(b) section 138, 138A, 139 or 140 of that Act (relief for production or acquisition expenditure in respect of films).

(3) L is treated as if receipts of a revenue nature arose to L from the trade or business in question on the relevant occasion.

(4) The amount of those receipts is equal to the excess mentioned in subsection (1)(b).

614BW Contributors to capital expenditure U.K.

(1) This section applies if—

(a) section 614BS or 614BT applies in relation to a leased asset,

(b) allowances are or have been made to a person (“the contributor”) as a result of sections 537 to 542 of CAA 2001 (allowances in respect of contributions to capital expenditure), and

(c) those allowances are or were in respect of the contributor's contribution of a capital sum to expenditure on the provision of the leased asset.

(2) Section 614BS or, as the case may be, section 614BT has effect in relation to the contributor and those allowances as it has effect in relation to the current lessor and allowances in respect of capital expenditure incurred by the current lessor in respect of the leased asset.]