PART 2 continued CHAPTER 11 continued
(1) Section 114 applies with the modifications in subsection (2) in a case in which—
(a) an amount falls to be treated as a balancing charge under that section,
(b) the person on whom the balancing charge is to be imposed acquired the plant or machinery in question as a result of a transaction between connected persons (or a series of transactions each of which was between connected persons),
(c) none of the relevant provisions of ICTA under which the qualifying activity might have been treated as continuing has applied in respect of the transaction (or transactions), and
(d) a first-year allowance, a writing-down allowance or a balancing allowance in respect of expenditure on the provision of that plant or machinery has been made to any of those persons.
(2) For the purpose of calculating the balancing charge—
(a) A is the amount of any allowances within subsection (1)(d),
(b) any consideration paid or received on a disposal of the plant or machinery between the connected persons is to be disregarded, and
(c) if a balancing allowance or a balancing charge has been made in respect of any of the transactions, A is to be adjusted in a just and reasonable manner.
(3) “The relevant provisions of ICTA” means section 113(2), 114(1) or 343(2) (effect of change in persons carrying on a trade etc. or of company reconstruction).
(1) This section applies if—
(a) plant or machinery is leased to two or more persons jointly,
(b) at least one of them is a person who—
(i) is not resident in the United Kingdom, and
(ii) does not use the plant or machinery exclusively for earning profits chargeable to tax, and
(c) the leasing is not protected leasing.
(2) Subsection (3) applies if, at any time when the plant or machinery is leased as described in subsection (1), the lessees use the plant or machinery for the purposes of a qualifying activity or activities but not for leasing.
(3) The expenditure on the provision of the plant or machinery is to be treated as not subject to sections 107, 109 and 110 if, and to the extent to which, it appears that the profits of the qualifying activity or activities will be chargeable to tax throughout—
(a) the designated period, or
(b) if shorter, the period of the lease.
(4) Subsection (5) applies if, under subsection (3), part of the expenditure is treated as not subject to section 107, 109 or 110.
(5) Whether or not the plant or machinery continues to be leased as described in subsection (1), Chapters 5 (allowances and charges) and 10 (long-life assets) and this Chapter have effect as if—
(a) the part of the expenditure that is not subject to section 107, 109 or 110 were expenditure on the provision of a separate item of plant or machinery, and
(b) the rest were expenditure which has been incurred on the provision of another item of plant or machinery (and which is subject to those sections).
(6) All such apportionments are to be made as are necessary as a result of subsection (5).
(1) If—
(a) expenditure is incurred on the provision of plant or machinery which is leased as described in section 116(1),
(b) the whole or a part of the expenditure has qualified for a normal writing-down allowance under section 116(3),
(c) at any time in the designated period while the plant or machinery is so leased, no lessee uses the plant or machinery for the purposes of a qualifying activity or activities the profits of which are chargeable to tax, and
(d) section 114 (recovery of prohibited allowances) does not apply at that time and has not applied at any earlier time,
sections 111 and 112 (recovery of excess allowances) apply as if the plant or machinery or (as the case may be) the separate item of plant or machinery referred to in section 116(5)(a) had at that time begun to be used for overseas leasing which is not protected leasing.
(2) If—
(a) the whole or a part of any expenditure has qualified for—
(i) a normal writing-down allowance otherwise than as a result of section 116(3), or
(ii) a first-year allowance,
(b) subsequently, but during the designated period, the plant or machinery is leased as described in section 116(1),
(c) at any time in the designated period while the plant or machinery is so leased, no lessee uses the plant or machinery for the purposes of a qualifying activity or activities the profits of which are chargeable to tax, and
(d) section 114 (recovery of prohibited allowances) does not apply at that time and has not applied at any earlier time,
sections 111 and 112 (recovery of excess allowances) apply as if the plant or machinery (and not any separate item of plant or machinery referred to in section 116(5)(a)) had at that time begun to be used for overseas leasing which is not protected leasing.
(3) Subsections (4) and (5) apply if—
(a) expenditure is incurred on the provision of plant or machinery which is leased as described in section 116(1),
(b) the whole or a part of the expenditure has qualified for a normal writing-down allowance under section 116(3),
(c) at the end of the designated period, the plant or machinery is leased as described in section 116(1) but subsection (1) has not had effect, and
(d) it appears that the extent to which the plant or machinery has been used for the purposes of a qualifying activity or activities the profits of which are chargeable to tax is less than the extent of such use taken into account in determining the amount of the expenditure which qualified for a normal writing-down allowance.
(4) Sections 111 and 112 (recovery of excess allowances) apply as if—
(a) a part of the expenditure corresponding to the reduction in the extent of use referred to in subsection (3)(d) were expenditure on the provision of a separate item of plant or machinery, and
(b) the separate item of plant or machinery had been used, on the last day of the designated period, for overseas leasing which is not protected leasing.
(5) Any disposal value subsequently brought into account under this Part in respect of the plant or machinery must be apportioned by reference to the extent of its use (determined at the end of the designated period) for the purposes of a qualifying activity or activities the profits of which are chargeable to tax.
(6) If an apportionment is made under subsection (5), section 116(6) does not apply.
(1) If—
(a) expenditure is incurred on the provision of plant or machinery, and
(b) before the expenditure has qualified for a normal writing-down allowance, the plant or machinery is used for overseas leasing which is protected leasing,
a claim for a writing-down allowance which takes account of that expenditure must be accompanied by a certificate.
(2) The certificate must specify—
(a) the description of protected leasing,
(b) the person to whom the plant or machinery has been leased, and
(c) if the certificate is given by reference to a chargeable period, all the items of plant or machinery (if more than one) relevant to that period.
(3) Subsection (1) applies, for the purposes of claims to first-year allowances, as if the references to a normal writing-down allowance and to a writing-down allowance included a first-year allowance.
(4) But nothing in subsection (3) prevents subsection (1) from continuing to apply if the use for protected leasing occurs after the expenditure has qualified for one allowance and before it qualifies for another.
(1) If—
(a) any expenditure on plant or machinery has qualified for a first-year allowance or a normal writing-down allowance, and
(b) the plant or machinery is subsequently used at any time in the designated period for overseas leasing which is not protected leasing,
the person who then owns the plant or machinery must give notice of the fact to the Inland Revenue.
(2) The notice must specify—
(a) the person who is not resident in the United Kingdom to whom the plant or machinery has been leased, and
(b) if the notice is given by reference to a chargeable period, all the items of plant or machinery (if more than one) relevant to that period.
(3) The notice must be given—
(a) no later than 3 months after the end of the chargeable period in which the plant or machinery is first used for overseas leasing which is not protected leasing, or
(b) if at the end of the 3 months the person required to give the notice does not know and cannot reasonably be expected to know that the plant or machinery is being so used, within 30 days of coming to know of it.
(1) If expenditure is incurred on the provision of plant or machinery which is leased as described in section 116(1) (joint lessees: mitigation of regime), the lessor must give notice to the Inland Revenue.
(2) A notice under subsection (1) must specify—
(a) the names and addresses of the persons to whom the asset is jointly leased,
(b) the part of the expenditure properly attributable to each of them, and
(c) which of them (so far as the lessor knows) is resident in the United Kingdom.
(3) If circumstances occur such that section 117(1) or (2) (recovery of allowances) applies, the person who is then the lessor must give notice of the fact to the Inland Revenue.
(4) A notice under subsection (3) must specify—
(a) any of the joint lessees who is not resident in the United Kingdom to whom the plant or machinery has been leased, and
(b) if it is given by reference to a chargeable period, all the items of plant or machinery (if more than one) relevant to that period.
(5) A notice under this section must be given—
(a) no later than 3 months after the end of the chargeable period in which the plant or machinery is first leased as described in section 116(1) or (as the case may be) in which the circumstances referred to in subsection (3) occur, or
(b) if at the end of the 3 months the person required to give the notice does not know and cannot reasonably be expected to know that the plant or machinery is being so used, within 30 days of coming to know of it.
(1) Leasing of plant or machinery is short-term leasing if—
(a) the number of consecutive days for which it is leased to the same person will normally be less than 30, and
(b) the total number of days for which it is leased to that person in any period of 12 months will normally be less than 90.
(2) Leasing of plant or machinery is also short-term leasing if—
(a) the number of consecutive days for which the plant or machinery is leased to the same person will not normally exceed 365, and
(b) the total length of the periods for which it is leased in any consecutive period of 4 years within the designated period to lessees in circumstances not falling within section 125(4) (other qualifying purposes: non-leasing use) will not exceed 2 years.
(3) If any plant or machinery is leased as a number of items which—
(a) form part of a group of items of the same or a similar description, and
(b) are not separately identifiable,
all items in the group may be treated as used for short-term leasing if substantially the whole of the items in the group are so used.
(4) For the purposes of subsections (1) and (2) persons who are connected with each other are to be treated as the same person.
(1) Plant or machinery is used for a qualifying purpose at any time when any of the persons listed in subsection (2) uses it for short-term leasing (as defined by section 121).
(2) The persons are—
(a) the person (“X”) who incurred expenditure on the provision of the plant or machinery;
(b) a person who is connected with X;
(c) a person who acquired the plant or machinery from X as a result of—
(i) a disposal on the occasion of which, or
(ii) two or more disposals on the occasion of each of which,
the qualifying activity carried on by the person making the disposal was treated as continuing under one of the relevant provisions of ICTA;
(d) a person to whom the plant or machinery is leased and who is resident in the United Kingdom;
(e) a person to whom the plant or machinery is leased, who is carrying on a qualifying activity in the United Kingdom and who uses the plant or machinery for the short-term leasing in the course of that activity.
(3) “The relevant provisions of ICTA” means section 113(2) or 114(1) (effect of change in persons carrying on a trade etc.).
(1) A ship is used for a qualifying purpose at any time when it is let on charter in the course of a trade which consists of or includes operating ships by a person who is—
(a) resident in the United Kingdom or carries on the trade there, and
(b) responsible for navigating and managing the ship throughout the period of the charter and for defraying—
(i) all expenses in connection with the ship throughout that period, or
(ii) substantially all such expenses other than those directly incidental to a particular voyage or to the employment of the ship during that period.
(2) Subsection (1) applies, with the necessary modifications, in relation to aircraft as it applies in relation to ships.
(3) For the purposes of subsection (1)(b) a person is responsible for something if he—
(a) is responsible as principal, or
(b) appoints another person to be responsible in his place.
(4) Subsections (1) and (2) do not apply if the main object, or one of the main objects—
(a) of the letting of the ship or aircraft on charter,
(b) of a series of transactions of which the letting of the ship or aircraft on charter was one, or
(c) of any of the transactions in such a series,
was to obtain a writing-down allowance determined without regard to section 109 (writing-down allowances at 10%) in respect of expenditure incurred by any person on the provision of the ship or aircraft.
(1) A transport container is used for a qualifying purpose at any time when it is leased in the course of a trade which is carried on by a person who—
(a) is resident in the United Kingdom, or
(b) carries on the trade there,
and either of the conditions given below is met.
(2) The first condition is that—
(a) the person’s trade consists of or includes the operation of ships or aircraft, and
(b) the container is at other times used by that person in connection with the operation of the ships or aircraft.
(3) The second condition is that the container is leased under a succession of leases to different persons who are not, or most of whom are not, connected with each other.
(1) Plant or machinery is used for a qualifying purpose at any time when subsection (2) or (4) applies.
(2) This subsection applies if any of the persons listed in subsection (3) uses the plant or machinery for the purpose of a qualifying activity without leasing it.
(3) The persons are—
(a) the person (“X”) who incurred expenditure on the provision of the plant or machinery;
(b) a person who is connected with X;
(c) a person who acquired the plant or machinery from X as a result of—
(i) a disposal on the occasion of which, or
(ii) two or more disposals on the occasion of each of which,
the qualifying activity carried on by the person making the disposal was treated as continuing under one of the relevant provisions of ICTA.
(4) This subsection applies if—
(a) a lessee uses the plant or machinery for the purposes of a qualifying activity without leasing it, and
(b) if he had incurred expenditure on the provision of the plant or machinery at that time, the expenditure would have fallen to be included, in whole or in part, in his available qualifying expenditure for a chargeable period.
(5) “The relevant provisions of ICTA” means section 113(2) or 114(1) (effect of change in persons carrying on a trade etc.).
(1) In this Chapter “normal writing-down allowance” means a writing-down allowance of an amount determined without regard to sections 102 and 109 (reduced rates).
(2) In this Chapter any reference, in relation to any person, to expenditure having qualified for a normal writing-down allowance is to—
(a) the expenditure, or part of it, having fallen to be included in that person’s available qualifying expenditure for any chargeable period, and
(b) that available qualifying expenditure being expenditure which is not subject to section 102 or 109.
(3) Any reference in this Chapter to a person’s expenditure having qualified for a first-year allowance is to such an allowance having fallen to be made in respect of the whole or any part of the expenditure.
(1) Qualifying expenditure incurred on the provision of a ship for the purposes of a qualifying activity, if allocated to a pool, must be allocated to a single asset pool (a “single ship pool”).
(2) Subsection (1) is subject to the exceptions given in section 128 and any election under section 129 to use the appropriate non-ship pool.
(3) In this Chapter “the appropriate non-ship pool”, in relation to a ship, means the pool to which the expenditure incurred on the provision of the ship would be allocated, or would have been allocated, apart from this Chapter.
(1) The expenditure is not to be allocated to a single ship pool if the ship is provided for leasing unless—
(a) the ship is not used for overseas leasing at any time in the designated period, or if it is, is used only for protected leasing, and
(b) it appears that the ship will be used for a qualifying purpose in the designated period and will not be used for any other purpose at any time in that period.
(2) The expenditure is not to be allocated to a single ship pool if the qualifying activity for the purposes of which the ship is provided is special leasing of plant or machinery.
(3) In subsection (1) “leasing”, “overseas leasing”, “protected leasing”, “qualifying purpose” and “designated period” have the same meaning as in Chapter 11 (overseas leasing).
(1) A person who has incurred qualifying expenditure on the provision of a ship may, by an election made for a chargeable period, allocate to the appropriate non-ship pool—
(a) all or a part of any qualifying expenditure that would otherwise be allocated to a single ship pool, or
(b) all or a part of the available qualifying expenditure in a single ship pool.
(2) An election under this section must be made by notice given to the Inland Revenue—
(a) for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;
(b) for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.
(3) “The relevant chargeable period” means the chargeable period for which the election is made.
(1) A person who is entitled to a first-year allowance for a chargeable period in respect of qualifying expenditure on the provision of a ship may, by notice, postpone all or part of the allowance.
(2) A person who is entitled to a writing-down allowance for a chargeable period in respect of qualifying expenditure allocated to a single ship pool may, by notice, postpone all or part of the allowance.
(3) A notice under this section must specify the amount postponed.
(4) A notice under this section must be given to the Inland Revenue—
(a) for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;
(b) for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.
(5) “The relevant chargeable period” means the chargeable period for which the person is entitled to the allowance.
(6) If a person entitled to a first-year allowance in respect of qualifying expenditure on the provision of a ship claims the allowance in respect of part of the expenditure, subsection (1) applies to the allowance claimed.
(7) If a person entitled to a writing-down allowance in respect of qualifying expenditure allocated to a single ship pool requires the allowance to be reduced to a specified amount, subsection (2) applies to the allowance as so reduced.
(1) If a person gives notice in respect of a chargeable period under section 130—
(a) the allowance is withheld or withdrawn to the extent that it is postponed, but
(b) sections 57 to 59 (calculation of available qualifying expenditure) apply as if the allowance had been made to the person without any postponement.
(2) On making a claim, the person is entitled to have all or part of a postponed first-year allowance made to him as a first-year allowance for one or more subsequent chargeable periods in which he is carrying on the qualifying activity.
(3) On making a claim, the person is entitled to have all or part of a postponed writing-down allowance made to him as a writing-down allowance for one or more subsequent chargeable periods in which he is carrying on the qualifying activity.
(4) The total amount of any first-year allowances made under subsection (2) or writing-down allowances made under subsection (3) must not exceed the amount of the postponed allowance in question.
(5) A writing-down allowance made under subsection (3) is ignored for the purposes of section 59 (unrelieved qualifying expenditure).
(6) The fact that a postponed writing-down allowance is claimed for a chargeable period does not affect entitlement to, or the amount of, any other writing-down allowance to which the person is otherwise entitled for that chargeable period.
(7) A postponed allowance is not, merely because of the postponement, included in the reference in section 403ZB(2) of ICTA (group relief) to an allowance or amount carried forward from an earlier period.
(1) A person is required to bring a disposal value into account in a single ship pool if the ship—
(a) is provided for leasing, and
(b) begins to be used otherwise than for a qualifying purpose within the first 4 years of the designated period.
(2) If any disposal event (including one under subsection (1)) occurs in relation to a single ship pool—
(a) the available qualifying expenditure in the single ship pool is allocated, for the chargeable period in which the event occurs, to the appropriate non-ship pool,
(b) the disposal value must be brought into account as a disposal value for that chargeable period in the appropriate non-ship pool, and
(c) the single ship pool ends without a final chargeable period and without any liability to a balancing charge arising.
(3) Subsections (1) and (2) apply even if, as a result of an election under section 129, some of the qualifying expenditure on the provision of the ship has been allocated to the appropriate non-ship pool.
(4) In subsection (1) “leasing”, “qualifying purpose” and “designated period” have the same meaning as in Chapter 11 (overseas leasing).
(1) This section applies if—
(a) a person has incurred qualifying expenditure on the provision of a ship for the purposes of a qualifying activity, and
(b) the ship ceases to be owned by the person without having been brought into use for the purposes of the qualifying activity.
(2) Any writing-down allowances that have previously been made in respect of qualifying expenditure in the single ship pool (or which have been postponed) must be withdrawn.
(3) The amount of any writing-down allowances withdrawn under subsection (2) is allocated, for the chargeable period in which the person ceases to own the ship, to the appropriate non-ship pool.
(4) Any adjustments required by this section are in addition to any adjustments required under section 132 (disposal events and single ship pool).
(1) Sections 135 to 156 enable a balancing charge that arises when there is a disposal event in respect of a ship to be deferred and attributed to qualifying expenditure on another ship.
(2) In this Chapter “the deferment rules” means sections 135 to 156.
(1) A person (“the shipowner”) who is liable to a balancing charge for a chargeable period may claim deferment of all or part of the charge if—
(a) in the chargeable period there is a disposal event (“the relevant disposal event”) in respect of a ship (“the old ship”),
(b) the old ship—
(i) was provided for the purposes of a qualifying activity carried on by the shipowner, and
(ii) was owned by the shipowner at some time in the chargeable period, and
(c) the conditions in section 136 are met.
(2) The amount which may be deferred is subject to the limit in section 138.
(3) For income tax purposes, a claim for deferment must be made on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends.
(4) “The relevant chargeable period” means the chargeable period for which the shipowner is liable to the balancing charge.
(5) For corporation tax purposes, Part IX of Schedule 18 to FA 1998 applies in relation to the making of a claim for deferment as it applies in relation to the making of a claim for an allowance.
The conditions referred to in section 135(1)(c) are that—
(a) the relevant disposal event is of a kind mentioned in section 61(1)(a) to (d) (cessation of ownership, loss, abandonment, destruction etc. of ship),
(b) the old ship was a qualifying ship immediately before the relevant disposal event,
(c) the shipowner has not incurred a loss in respect of the qualifying activity for the chargeable period for which he is liable to the balancing charge, and
(d) no amount in respect of the old ship has been allocated to—
(i) the overseas leasing pool,
(ii) a single asset pool under section 206 (plant or machinery provided or used partly for purposes other than those of the qualifying activity),
(iii) a single asset pool under section 211 (payment of partial depreciation subsidy), or
(iv) a pool for a qualifying activity consisting of special leasing.