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SCHEDULES

SCHEDULE 26U.K.Special rate expenditure and the special rate pool

Part 2 U.K.Commencement etc

Sale between connected personsU.K.

15(1)This paragraph applies where, on or after the relevant date—U.K.

(a)there is a sale of a pre-commencement integral feature,

(b)the buyer and seller are connected persons (within the meaning of section 575 of CAA 2001), and

(c)the buyer's expenditure on the integral feature would (apart from this paragraph) be special rate expenditure.

(2)An integral feature is a pre-commencement integral feature if the seller—

(a)incurred expenditure on it before the relevant date, or

(b)incurred expenditure on it on or after that date which was not qualifying expenditure because of a previous application of this paragraph.

(3)The buyer's expenditure on the integral feature is not qualifying expenditure unless—

(a)the original expenditure was qualifying expenditure, or

(b)the buyer's expenditure would have been qualifying expenditure, had it been incurred at the time the original expenditure was incurred.

(4)The “original expenditure”—

(a)where the integral feature is a pre-commencement integral feature because of sub-paragraph (2)(a), is the expenditure mentioned in that sub-paragraph, and

(b)otherwise, is the expenditure incurred on the integral feature before the relevant date by virtue of which this paragraph first applied.

(5)The “relevant date” has the same meaning as in paragraph 14.