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Capital Allowances Act 2001

2001 CHAPTER 2

CONTENTS

Go to Preamble

  1. Part 1

    Introduction

    1. Chapter 1

      Capital allowances: general

      1. 1. Capital allowances

      2. 2. General means of giving effect to capital allowances

      3. 3. Claims for capital allowances

      4. 4. Capital expenditure

      5. 5. When capital expenditure is incurred

      6. 6. Meaning of “chargeable period”

    2. Chapter 2

      Exclusion of double relief

      1. 7. No double allowances

      2. 8. No double relief through pooling under Part 2 (plant and machinery allowances)

      3. 9. Interaction between fixtures claims and other claims

      4. 10. Interpretation

  2. Part 2

    Plant and machinery allowances

    1. Chapter 1

      Introduction

      1. 11. General conditions as to availability of plant and machinery allowances

      2. 12. Expenditure incurred before qualifying activity carried on

      3. 13. Use for qualifying activity of plant or machinery provided for other purposes

      4. 14. Use for qualifying activity of plant or machinery which is a gift

    2. Chapter 2

      Qualifying activities

      1. 15. Qualifying activities

      2. 16. Ordinary Schedule A businesses

      3. 17. Furnished holiday lettings businesses

      4. 18. Management of investment companies

      5. 19. Special leasing of plant or machinery

      6. 20. Employments and offices

    3. Chapter 3

      Qualifying expenditure

      1. Buildings, structures and land

        1. 21. Buildings

        2. 22. Structures, assets and works

        3. 23. Expenditure unaffected by sections 21 and 22

        4. 24. Interests in land

        5. 25. Building alterations connected with installation of plant or machinery

      2. Demolition costs

        1. 26. Demolition costs

      3. Expenditure on thermal insulation, safety measures, etc.

        1. 27. Application of Part to thermal insulation, safety measures, etc.

        2. 28. Thermal insulation of industrial buildings

        3. 29. Fire safety

        4. 30. Safety at designated sports grounds

        5. 31. Safety at regulated stands at sports grounds

        6. 32. Safety at other sports grounds

        7. 33. Personal security

      4. Exclusion of certain types of expenditure

        1. 34. Expenditure by MPs and others on accommodation

        2. 35. Expenditure on plant or machinery for use in dwelling-house not qualifying expenditure in certain cases

        3. 36. Restriction on qualifying expenditure in case of employment or office

        4. 37. Exclusion where sums payable in respect of depreciation

        5. 38. Production animals etc.

    4. Chapter 4

      First-year qualifying expenditure

      1. General

        1. 39. First-year allowances available for certain types of qualifying expenditure only

      2. Types of expenditure which may qualify for first-year allowances

        1. 40. Expenditure incurred for Northern Ireland purposes by small or medium-sized enterprises

        2. 41. Miscellaneous exclusions from section 40 (expenditure for Northern Ireland purposes etc.)

        3. 42. Exclusion of plant or machinery partly for use outside Northern Ireland

        4. 43. Effect of plant or machinery subsequently being primarily for use outside Northern Ireland

        5. 44. Expenditure incurred by small or medium-sized enterprises

        6. 45. ICT expenditure incurred by small enterprises

        7. 46. General exclusions applying to sections 40, 44 and 45

      3. Expenditure of small or medium-sized enterprises

        1. 47. Expenditure of small or medium-sized enterprises: companies

        2. 48. Expenditure of small or medium-sized enterprises: businesses

        3. 49. Whether company is a member of a large or medium-sized group

      4. Supplementary

        1. 50. Time when expenditure is incurred

        2. 51. Disclosure of information between UK tax authorities

    5. Chapter 5

      Allowances and charges

      1. First-year allowances

        1. 52. First-year allowances

      2. Pooling

        1. 53. Pooling of qualifying expenditure

        2. 54. The different kinds of pools

      3. Writing-down and balancing allowances and balancing charges

        1. 55. Determination of entitlement or liability

        2. 56. Amount of allowances and charges

      4. Available qualifying expenditure

        1. 57. Available qualifying expenditure

        2. 58. Initial allocation of qualifying expenditure to pools

        3. 59. Unrelieved qualifying expenditure

      5. Disposal events and disposal values: general

        1. 60. Meaning of “disposal receipt” and “disposal event”

        2. 61. Disposal events and disposal values

        3. 62. General limit on amount of disposal value

        4. 63. Cases in which disposal value is nil

        5. 64. Case in which no disposal value need be brought into account

      6. The final chargeable period

        1. 65. The final chargeable period

      7. List of provisions outside this Chapter about disposal values

        1. 66. List of provisions outside this Chapter about disposal values

    6. Chapter 6

      Hire-purchase etc. and plant or machinery provided by lessee

      1. Hire-purchase and similar contracts

        1. 67. Plant or machinery treated as owned by person entitled to benefit of contract, etc.

        2. 68. Disposal value on cessation of notional ownership

        3. 69. Hire-purchase etc. and fixtures

      2. Plant or machinery provided by lessee

        1. 70. Plant or machinery provided by lessee

    7. Chapter 7

      Computer software

      1. 71. Software and rights to software

      2. 72. Disposal values

      3. 73. Limit on disposal values

    8. Chapter 8

      Cars, etc.

      1. Cars above the cost threshold

        1. 74. Single asset pool

        2. 75. General limit on amount of writing-down allowance

        3. 76. Limit where part of expenditure met by another person

        4. 77. Car used partly for purposes other than those of qualifying activity

        5. 78. Effect of partial depreciation subsidy

        6. 79. Cases where Chapter 17 (anti-avoidance) applies

      2. Vehicles provided for purposes of employment or office

        1. 80. Vehicles provided for purposes of employment or office

      3. Interpretation

        1. 81. Extended meaning of “car”

        2. 82. Qualifying hire cars

    9. Chapter 9

      Short-life assets

      1. 83. Meaning of “short-life asset”

      2. 84. Cases in which short-life asset treatment is ruled out

      3. 85. Election for short-life asset treatment: procedure

      4. 86. Short-life asset pool

      5. 87. Short-life assets provided for leasing

      6. 88. Sales at under-value

      7. 89. Disposal to connected person

    10. Chapter 10

      Long-life assets

      1. Long-life asset expenditure

        1. 90. Long-life asset expenditure

        2. 91. Meaning of “long-life asset”

        3. 92. Application of Chapter to part of expenditure

      2. Expenditure excluded from being long-life asset expenditure

        1. 93. Fixtures etc.

        2. 94. Ships

        3. 95. Railway assets

        4. 96. Cars

        5. 97. Expenditure within the relevant monetary limit: general

        6. 98. Expenditure to which the monetary limits apply

        7. 99. The monetary limit

        8. 100. Exceeding the monetary limit

      3. Rules applying to long-life asset expenditure

        1. 101. Long-life asset pool

        2. 102. Writing-down allowances at 6%

      4. Anti-avoidance provisions

        1. 103. Later claims

        2. 104. Disposal value of long-life assets

    11. Chapter 11

      Overseas leasing

      1. Basic terms

        1. 105. “Leasing”, “overseas leasing” etc.

        2. 106. The designated period

      2. Certain expenditure to be pooled

        1. 107. The overseas leasing pool

        2. 108. Effect of disposal to connected person on overseas leasing pool

      3. Allowances reduced or, in certain cases, prohibited

        1. 109. Writing-down allowances at 10%

        2. 110. Cases where allowances are prohibited

      4. Recovery of excess allowances

        1. 111. Excess allowances: standard recovery mechanism

        2. 112. Excess allowances: connected persons

        3. 113. Excess allowances: special provision for ships

      5. Recovery of allowances given in cases where prohibition applies

        1. 114. Prohibited allowances: standard recovery mechanism

        2. 115. Prohibited allowances: connected persons

      6. Application of Chapter in relation to joint lessees

        1. 116. Mitigation of regime

        2. 117. Recovery of allowances in case of joint lessees

      7. Duties to supply information

        1. 118. Certificate relating to protected leasing

        2. 119. Notice of change of use of plant or machinery

        3. 120. Notice and joint lessees

      8. Qualifying purposes

        1. 121. Meaning of “short-term leasing”

        2. 122. Short-term leasing by buyer, lessee, etc.

        3. 123. Ships and aircraft

        4. 124. Transport containers

        5. 125. Other qualifying purposes

      9. Minor definitions

        1. 126. Minor definitions

    12. Chapter 12

      Ships

      1. Pooling and postponement of allowances

        1. 127. Single ship pool

        2. 128. Expenditure which is not to be allocated to single ship pool

        3. 129. Election to use the appropriate non-ship pool

        4. 130. Notice postponing first-year or writing-down allowance

        5. 131. Effect of postponement

        6. 132. Disposal events and single ship pool

        7. 133. Ship not used

      2. Deferment of balancing charges

        1. 134. Deferment of balancing charges: introduction

        2. 135. Claim for deferment

        3. 136. Further conditions for deferment

        4. 137. Effect of deferment

        5. 138. Limit on amount deferred

        6. 139. Amount taken into account in respect of old ship

      3. Attribution of deferred amounts

        1. 140. Notice attributing deferred amounts to new expenditure

        2. 141. Deferred amounts attributed to earlier expenditure first

        3. 142. Variation of attribution

        4. 143. Effect of attribution

        5. 144. Amounts which cease to be attributable

        6. 145. Requirement to notify where no entitlement to defer amounts

      4. Expenditure on new shipping

        1. 146. Basic meaning of expenditure on new shipping

        2. 147. Exclusions: ship previously owned

        3. 148. Exclusions: object to secure deferment

        4. 149. Exclusions: later events

        5. 150. Exclusions where expenditure not incurred by shipowner

      5. Qualifying ships

        1. 151. Basic meaning of qualifying ship

        2. 152. Ships under 100 tons

        3. 153. Ships which are not qualifying ships

        4. 154. Further registration requirement

      6. Deferment of balancing charges: supplementary provisions

        1. 155. Change in the persons carrying on the qualifying activity

        2. 156. Connected persons

      7. Further provisions

        1. 157. Adjustment of assessments etc.

        2. 158. Members of same group

    13. Chapter 13

      Provisions affecting mining and oil industries

      1. Expenditure connected with mineral extraction trades

        1. 159. Meaning of “mineral extraction trade” etc.

        2. 160. Expenditure treated as incurred for purposes of mineral extraction trade

        3. 161. Pre-trading expenditure on mineral exploration and access

      2. Provisions relating to ring fence trades

        1. 162. Ring fence trade a separate qualifying activity

        2. 163. Meaning of “abandonment expenditure”

        3. 164. Abandonment expenditure incurred before cessation of ring fence trade

        4. 165. Abandonment expenditure within 3 years of ceasing ring fence trade

      3. Transfers of interests in oil fields: anti-avoidance

        1. 166. Transfers of interests in oil fields: anti-avoidance

      4. Oil production sharing contracts

        1. 167. Oil production sharing contracts

        2. 168. Expenditure on plant or machinery incurred by contractor

        3. 169. Expenditure on plant or machinery incurred by participator

        4. 170. Participator’s expenditure attributable to plant or machinery

        5. 171. Disposal values on cessation of ownership

    14. Chapter 14

      Fixtures

      1. Introduction

        1. 172. Scope of Chapter etc.

        2. 173. Meaning of “fixture” and “relevant land”

        3. 174. Meaning of “equipment lease” and “lease”

        4. 175. Meaning of “interest in land”, etc.

      2. Persons who are treated as owners of fixtures

        1. 176. Person with interest in relevant land having fixture for purposes of qualifying activity

        2. 177. Equipment lessors

        3. 178. Equipment lessee has qualifying activity etc.

        4. 179. Equipment lessor has right to sever fixture that is not part of building

        5. 180. Equipment lease is part of affordable warmth programme

        6. 181. Purchaser of land giving consideration for fixture

        7. 182. Purchaser of land discharging obligations of equipment lessee

        8. 183. Incoming lessee where lessor entitled to allowances

        9. 184. Incoming lessee where lessor not entitled to allowances

      3. Restrictions on amount of qualifying expenditure

        1. 185. Fixture on which a plant and machinery allowance has been claimed

        2. 186. Fixture on which an industrial buildings allowance has been made

        3. 187. Fixture on which a research and development allowance has been made

      4. Cessation of ownership of fixtures

        1. 188. Cessation of ownership when person ceases to have qualifying interest

        2. 189. Identifying the qualifying interest in special cases

        3. 190. Cessation of ownership of lessor where section 183 applies

        4. 191. Cessation of ownership on severance of fixture

        5. 192. Cessation of ownership of equipment lessor

      5. Acquisition of ownership of fixture when another ceases to own it

        1. 193. Acquisition of ownership by lessor or licensor on termination of lease or licence

        2. 194. Acquisition of ownership by assignee of equipment lessor

        3. 195. Acquisition of ownership by equipment lessee

      6. Disposal values

        1. 196. Disposal values in relation to fixtures: general

        2. 197. Disposal values in avoidance cases

      7. Election to fix apportionment

        1. 198. Election to apportion sale price on sale of qualifying interest

        2. 199. Election to apportion capital sum given by lessee on grant of lease

        3. 200. Elections under sections 198 and 199: supplementary

        4. 201. Elections under sections 198 and 199: procedure

      8. Further provisions

        1. 202. Interpretation

        2. 203. Amendment of returns etc.

        3. 204. Appeals etc.

    15. Chapter 15

      Asset provided or used only partly for qualifying activity

      1. 205. Reduction of first-year allowances

      2. 206. Single asset pool etc.

      3. 207. Reduction of allowances and charges on expenditure in single asset pool

      4. 208. Effect of significant reduction in use for purposes of qualifying activity

    16. Chapter 16

      Partial depreciation subsidies

      1. 209. Meaning of “partial depreciation subsidy”

      2. 210. Reduction of first-year allowances

      3. 211. Single asset pool etc.

      4. 212. Reduction of allowances and charges on expenditure in single asset pool

    17. Chapter 17

      Anti-avoidance

      1. Relevant transactions

        1. 213. Relevant transactions: sale, hire-purchase (etc.) and assignment

      2. Restrictions on allowances

        1. 214. Connected persons

        2. 215. Transactions to obtain allowances

        3. 216. Sale and leaseback, etc.

        4. 217. No first-year allowance for B’s expenditure

        5. 218. Restriction on B’s qualifying expenditure

      3. Finance leases

        1. 219. Meaning of “finance lease”

        2. 220. Allocation of expenditure to a chargeable period

      4. Sale and finance leasebacks

        1. 221. Meaning of “sale and finance leaseback”

        2. 222. Disposal value restricted

        3. 223. No first-year allowance for B’s expenditure

        4. 224. Restriction on B’s qualifying expenditure

        5. 225. B’s qualifying expenditure if lessor not bearing non-compliance risk

        6. 226. Qualifying expenditure limited in subsequent transactions

      5. Sale and leaseback or sale and finance leaseback: election for special treatment

        1. 227. Circumstances in which election may be made

        2. 228. Effect of election: relaxation of restriction on B’s qualifying expenditure, etc.

      6. Miscellaneous and supplementary

        1. 229. Hire-purchase etc.

        2. 230. Exception for manufacturers and suppliers

        3. 231. Adjustments of assessments etc.

        4. 232. Meaning of connected person

        5. 233. Additional VAT liabilities and rebates

    18. Chapter 18

      Additional VAT liabilities and rebates

      1. Introduction

        1. 234. Introduction

      2. Additional VAT liability

        1. 235. Additional VAT liability treated as qualifying expenditure

        2. 236. Additional VAT liability generates first-year allowance

        3. 237. Exceptions to section 236

      3. Additional VAT rebate

        1. 238. Additional VAT rebate generates disposal value

        2. 239. Limit on disposal value where additional VAT rebate

      4. Short-life assets: balancing allowance

        1. 240. Additional VAT liability

      5. Anti-avoidance

        1. 241. No first-year allowance in respect of additional VAT liability

        2. 242. Restriction on B’s qualifying expenditure: general

        3. 243. Restriction on B’s qualifying expenditure: sale and finance leaseback

        4. 244. B’s qualifying expenditure if lessor not bearing non-compliance risk

        5. 245. Effect of election under section 227 on additional VAT liability

        6. 246. Miscellaneous

    19. Chapter 19

      Giving effect to allowances and charges

      1. Trades

        1. 247. Trades

      2. Property businesses

        1. 248. Ordinary Schedule A businesses

        2. 249. Furnished holiday lettings businesses

        3. 250. Overseas property businesses

      3. Activities analogous to trades

        1. 251. Professions and vocations

        2. 252. Mines, transport undertakings etc.

      4. Investment companies

        1. 253. Investment companies

      5. Life assurance business

        1. 254. Introductory

        2. 255. Apportionment of allowances and charges

        3. 256. Different giving effect rules for different categories of business

        4. 257. Supplementary

      6. Special leasing of plant or machinery

        1. 258. Special leasing: income tax

        2. 259. Special leasing: corporation tax (general)

        3. 260. Special leasing: corporation tax (excess allowance)

        4. 261. Special leasing: life assurance business

      7. Employments and offices

        1. 262. Employments and offices

    20. Chapter 20

      Supplementary provisions

      1. Partnerships and successions

        1. 263. Qualifying activities carried on in partnership

        2. 264. Partnership using property of a partner

        3. 265. Successions: general

        4. 266. Election where predecessor and successor are connected persons

        5. 267. Effect of election

        6. 268. Successions by beneficiaries

      2. Miscellaneous

        1. 269. Use of plant or machinery for business entertainment

        2. 270. Shares in plant or machinery

  3. Part 3

    Industrial buildings allowances

    1. Chapter 1

      Introduction

      1. 271. Industrial buildings allowances

      2. 272. Expenditure on the construction of a building

      3. 273. Preparation of sites for plant or machinery

    2. Chapter 2

      Industrial buildings

      1. Buildings in use for the purposes of a qualifying trade

        1. 274. Trades and undertakings which are “qualifying trades”

        2. 275. Building used for welfare of workers

        3. 276. Parts of trades and undertakings

        4. 277. Exclusion of dwelling-houses, retail shops, showrooms, hotels and offices etc.

        5. 278. Building used by more than one licensee

      2. Qualifying hotels and sports pavilions

        1. 279. Qualifying hotels

        2. 280. Qualifying sports pavilions

      3. Commercial buildings (enterprise zones)

        1. 281. Commercial buildings (enterprise zones)

      4. Supplementary provisions

        1. 282. Buildings outside the United Kingdom

        2. 283. Non-industrial part of building disregarded

        3. 284. Roads on industrial estates etc.

        4. 285. Cessation of use and temporary disuse of building

    3. Chapter 3

      The relevant interest in the building

      1. 286. General rule as to what is the relevant interest

      2. 287. Interest acquired on completion of construction

      3. 288. Effect of creation of subordinate interest

      4. 289. Merger of leasehold interest

      5. 290. Election to treat grant of lease exceeding 50 years as sale

      6. 291. Supplementary provisions with respect to elections

    4. Chapter 4

      Qualifying expenditure

      1. Introduction

        1. 292. Meaning of “qualifying expenditure”

        2. 293. Meaning of references to carrying on a trade as a developer

      2. Qualifying expenditure

        1. 294. Capital expenditure on construction of a building

        2. 295. Purchase of unused building where developer not involved

        3. 296. Purchase of building which has been sold unused by developer

        4. 297. Purchase of used building from developer

      3. Qualifying enterprise zone expenditure

        1. 298. The time limit for qualifying enterprise zone expenditure

        2. 299. Application of section 294

        3. 300. Application of sections 295 and 296

        4. 301. Purchase of building within 2 years of first use

      4. Part of expenditure within time limit for qualifying enterprise zone expenditure

        1. 302. Qualifying enterprise zone expenditure where section 295 or 296 applies

        2. 303. Purchase of building within 2 years of first use

        3. 304. Application of section 303 where developer involved

    5. Chapter 5

      Initial allowances

      1. 305. Initial allowances for qualifying enterprise zone expenditure

      2. 306. Amount of initial allowance and period for which allowance made

      3. 307. Building not industrial building when first used etc.

      4. 308. Grants affecting entitlement to initial allowances

    6. Chapter 6

      Writing-down allowances

      1. 309. Entitlement to writing-down allowance

      2. 310. Basic rule for calculating amount of allowance

      3. 311. Calculation of allowance after sale of relevant interest

      4. 312. Allowance limited to residue of qualifying expenditure

      5. 313. Meaning of “the residue of qualifying expenditure”