Part 4Loss relief
Chapter 2Trade losses
Restrictions on sideways relief for certain capital allowances
C175Trade leasing allowances given to individuals
1
Sideways relief is not available to an individual for so much of a loss as derives from a trade leasing allowance unless the individual meets the time commitment test.
2
A trade leasing allowance is an allowance made under Part 2 of CAA 2001 in respect of—
a
expenditure incurred on the provision of plant or machinery for leasing in the course of a trade, or
b
expenditure incurred on the provision for the purposes of a trade of an asset which is not to be leased but which is fee-producing.
3
An asset is fee-producing if payments in the nature of—
a
royalties, or
b
licence fees,
are to arise from rights granted by the individual in connection with the asset.
4
To meet the time commitment test conditions A and B must be met.
5
Condition A is that the individual must carry on the trade for a continuous period of at least 6 months beginning or ending in the basis period for the tax year in which the loss was made (“the loss-making basis period”).
6
Condition B is that substantially the whole of the individual's time must be given to carrying on the trade—
a
for a continuous period of at least 6 months beginning or ending in the loss-making basis period (if the individual starts or permanently ceases to carry on the trade in the tax year (or does both)), or
b
throughout the loss-making basis period (in any other case).
C176First-year allowances F1and annual investment allowances: introduction
Sideways relief is not available to an individual for so much of a loss as derives from F3an annual investment allowance or a first-year allowance under Part 2 of CAA 2001 if either section 77 or 78 applies.
C177First-year allowances: partnerships with companies
1
This section applies if—
a
the first-year allowance is in respect of expenditure incurred at any time on the provision of plant or machinery for leasing in the course of a qualifying activity, and
b
either the qualifying activity was at that time carried on by the individual in partnership with a company or arrangements have been made with a view to the activity being so carried on.
2
It does not matter—
a
if the firm includes other partners, or
b
when the arrangements were made.
3
For the purposes of this section—
a
letting a ship on charter is treated as leasing the ship, and
b
references to making arrangements include effecting schemes.
C178First-year allowances F2and annual investment allowances: arrangements to reduce tax liabilities
1
This section applies if—
a
the F4annual investment allowance or first-year allowance is made in connection with a relevant qualifying activity or a relevant asset (see subsections (2) and (3)), and
b
arrangements within subsection (4) have been made.
2
A qualifying activity is a relevant one if—
a
at the time when the expenditure was incurred, the activity was carried on by the individual as a partner in a firm, or
b
at a later time, it has been carried on by the individual as a partner in a firm or transferred to a person connected with the individual.
3
An asset is a relevant one if, after the time when the expenditure was incurred, the asset was transferred by the individual—
a
to a person connected with the individual, or
b
to a person at a price lower than its market value.
4
Arrangements are within this subsection if as a result of them—
a
the sole benefit, or
b
the main benefit,
that might be expected to arise to the individual from the transaction under which the expenditure was incurred is the obtaining of a reduction in tax liability by means of sideways relief.
5
It does not matter when the arrangements were made.
6
References to making arrangements include effecting schemes.
C179Capital allowances restrictions: supplementary
1
If relief is given in a case to which section 75 or 76 applies, the relief is withdrawn by the making of an assessment to income tax under this section.
2
Expressions which are used—
a
in any of sections 75 to 78, and
b
in Part 2 of CAA 2001,
have the same meaning in those sections as in that Part.