Office of Public Sector Information
PART 2 continued CHAPTER 13 continued
(1) This section applies if—
(a) there is, for the purposes of Schedule 17 to FA 1980, a transfer by a participator in an oil field of the whole or part of his interest in the field, and
(b) as part of the transfer, the old participator disposes of, and the new participator acquires—
(i) plant or machinery used, or expected to be used, in connection with the field, or
(ii) a share in such plant or machinery.
(2) The amount, if any, by which the new participator’s expenditure exceeds the old participator’s disposal value is to be left out of account in determining the new participator’s available qualifying expenditure.
(3) In subsection (2)—
(a) “the new participator’s expenditure” means the expenditure incurred by the new participator on the acquisition of the plant or machinery, and
(b) “the old participator’s disposal value” means the disposal value to be brought into account by the old participator as a result of the disposal of the plant or machinery to the new participator.
(4) In this section—
(a) “oil field” and “participator” have the same meaning as in Part I of OTA 1975,
(b) “the old participator” means the participator whose interest in the oil field is wholly or partly transferred, and
(c) “the new participator” means the person to whom the interest in the oil field is transferred.
(5) Nothing in this section affects the operation of Chapter 17 (anti-avoidance).
(1) Sections 168 to 170 apply if—
(a) a person (“the contractor”) is entitled to an interest in a contract made with, or with the authorised representative of, the government of a country or territory in which oil is or may be produced, and
(b) the contract provides (among other things) for any plant or machinery of a description specified in the contract which—
(i) is provided by the contractor, and
(ii) has an oil-related use under the contract,
to be transferred (immediately or later) to the government or representative.
(2) For the purposes of this section and sections 168 to 170, plant or machinery has an oil-related use if it is used—
(a) to explore for, win access to or extract oil,
(b) for the initial storage or treatment of oil, or
(c) for other purposes ancillary to the extraction of oil.
(3) In this section and sections 168 to 170 “oil” has the meaning given by section 556(3).
(1) This section applies if—
(a) the contractor incurs capital expenditure on the provision of plant or machinery of a description specified in the contract,
(b) the plant or machinery is to have an oil-related use under the contract, for the purposes of a trade of oil extraction carried on by the contractor,
(c) the amount of the expenditure is commensurate with the value of the contractor’s interest under the contract, and
(d) the plant or machinery is transferred to the government or representative in accordance with the contract.
(2) Despite the transfer, the plant or machinery is to be treated for the purposes of this Part as owned by the contractor (and not by any other person) until—
(a) it ceases to be owned by the government or representative, or
(b) it ceases to be used, or held for use, by any person under the contract.
This is subject to section 170(2).
(1) This section applies if—
(a) a person (“the participator”) acquires an interest in the contract from—
(i) the contractor, or
(ii) another person who has acquired it (directly or indirectly) from the contractor,
(b) the participator incurs capital expenditure on the provision of plant or machinery,
(c) the plant or machinery is to have an oil-related use under the contract, for the purposes of a trade of oil extraction carried on by the participator,
(d) the amount of the expenditure is commensurate with the value of the participator’s interest under the contract, and
(e) the plant or machinery is transferred to the government or representative in accordance with the contract.
(2) Despite the transfer, the plant or machinery is to be treated for the purposes of this Part as owned by the participator (and not by any other person) until—
(a) it ceases to be owned by the government or representative, or
(b) it ceases to be used, or held for use, by any person under the contract.
This is subject to section 170(2).
(1) This section applies if—
(a) a person (“the relevant participator”) acquires an interest in the contract from—
(i) the contractor, or
(ii) another person who has acquired it (directly or indirectly) from the contractor, and
(b) some of the expenditure incurred by the relevant participator to acquire the interest in the contract is attributable to plant or machinery which—
(i) is treated by section 168 as owned by the contractor, or
(ii) is treated by section 169 or subsection (2) as owned by another person (“the other participator”).
(2) The plant or machinery is to be treated for the purposes of this Part as owned by the relevant participator (and not by any other person) until—
(a) it ceases to be owned by the government or representative, or
(b) it ceases to be used, or held for use, by any person under the contract.
This is subject to a later application of this subsection.
(3) The person who, until subsection (2) applies, is treated as owning the plant or machinery is to be treated for the purposes of this Part as if he had disposed of it for a consideration equal to the relevant participator’s expenditure attributable to it.
(4) The relevant participator is to be treated for the purposes of this Part as if—
(a) he had incurred capital expenditure of an amount given by subsection (5), and
(b) he owned the plant or machinery (in accordance with subsection (2)) as a result of having incurred that expenditure.
(5) The amount of that expenditure is—
(a) the amount of the relevant participator’s expenditure attributable to the plant or machinery, or
(b) if less, the disposal value to be brought into account by the contractor or the other participator as a result of subsection (3).
(6) The expenditure attributable to plant or machinery for the purposes of this section is to be determined having regard to what is just and reasonable in the circumstances.
(1) This section applies if a person treated as owning plant or machinery under section 168(2), 169(2) or 170(2) ceases to be treated as owning it solely as a result of one of those provisions.
(2) If the person receives capital compensation, the disposal value to be brought into account is the amount of the compensation.
(3) If the person does not receive capital compensation, the disposal value to be brought into account is nil.
(1) This Chapter applies to determine entitlement to allowances under this Part in respect of expenditure on plant or machinery that is, or becomes, a fixture.
(2) For the purposes of this Part, ownership of plant or machinery that is, or becomes, a fixture is determined under this Chapter.
(3) The provisions of this Chapter that treat a person as being the owner of a fixture (see sections 176 to 184 and 193 to 195) are subject to the provisions of this Chapter which treat a person as ceasing to be the owner of a fixture (see sections 188 to 192).
(4) References in this Chapter to a person being treated—
(a) as the owner of plant or machinery, or
(b) as ceasing to be the owner of plant or machinery,
are to be read as references to the person being so treated for the purposes of this Part.
(5) This Chapter does not affect any entitlement a person has to an allowance as a result of section 538 (contribution allowances for plant and machinery).
(1) In this Chapter “fixture”—
(a) means plant or machinery that is so installed or otherwise fixed in or to a building or other description of land as to become, in law, part of that building or other land, and
(b) includes any boiler or water-filled radiator installed in a building as part of a space or water heating system.
(2) In this Chapter “relevant land”, in relation to a fixture means—
(a) the building or other description of land of which the fixture becomes part, or
(b) in the case of a boiler or water-filled radiator which is a fixture as a result of subsection (1)(b), the building in which it is installed as part of a space or water heating system.
(1) In this Chapter “equipment lease” means—
(a) an agreement entered into in the circumstances given in subsection (2), or
(b) a lease entered into under or as a result of such an agreement.
(2) The circumstances are that—
(a) a person incurs capital expenditure on the provision of plant or machinery for leasing,
(b) an agreement is entered into for the lease, directly or indirectly from that person, of the plant or machinery to another person,
(c) the plant or machinery becomes a fixture, and
(d) the agreement is not an agreement for the plant or machinery to be leased as part of the relevant land.
(3) In this Chapter—
“equipment lessor” means the person from whom (directly or indirectly) the equipment lease provides for the plant or machinery to be leased, and
“equipment lessee” means the person to whom the equipment lease provides for the plant or machinery to be leased.
(4) Except in the context of leasing plant or machinery, any reference in this Chapter to a lease is to—
(a) any leasehold estate in or, in Scotland, lease of, the land (whether in the nature of a head-lease, sub-lease or under-lease), or
(b) any agreement to acquire such an estate or, in Scotland, lease;
and, in relation to such an agreement, “grant” is to be read accordingly.
(1) In this Chapter “interest in land” means—
(a) the fee simple estate in the land or an agreement to acquire such an estate,
(b) in relation to Scotland, the interest of the owner or an agreement to acquire such an interest,
(c) a lease,
(d) an easement or servitude or an agreement to acquire an easement or servitude, and
(e) a licence to occupy land.
(2) If an interest in land is—
(a) conveyed or assigned by way of security, and
(b) subject to a right of redemption,
the person with the right of redemption is treated for the purposes of this Chapter as having that interest, and not the creditor.
(1) If—
(a) a person incurs capital expenditure on the provision of plant or machinery for the purposes of a qualifying activity carried on by him,
(b) the plant or machinery becomes a fixture, and
(c) that person has an interest in the relevant land at the time the plant or machinery becomes a fixture,
that person is to be treated, on and after that time, as the owner of the fixture as a result of incurring the expenditure.
(2) If there are two or more persons with different interests in the relevant land who would be treated as the owner of the same fixture as a result of subsection (1), one interest only is taken into account under that subsection.
(3) The interest to be taken into account is given by the following rules—
Rule 1
If one of the interests is an easement or servitude or any agreement to acquire an easement or servitude, that interest is the interest to be taken into account.
Rule 2
If Rule 1 does not apply, but one of the interests is a licence to occupy land, that interest is the interest to be taken into account.
Rule 3
In any other case—
(a) except in Scotland, the interest to be taken into account is the interest which is not in reversion (at law or in equity and whether directly or indirectly) on any other interest in the relevant land which is held by any of the persons referred to in subsection (2), and
(b) in Scotland, the interest to be taken into account is the interest of whichever of the persons referred to in subsection (2) has, or last had, the right of use of the relevant land.
(4) Subsection (1) is subject to section 177(4).
(1) If—
(a) the conditions in—
(i) section 178 (equipment lessee has qualifying activity etc.),
(ii) section 179 (equipment lessor has right to sever fixture that is not part of building), or
(iii) section 180 (equipment lease is part of affordable warmth programme),
are met in relation to an equipment lease,
(b) the equipment lessor and the equipment lessee are not connected persons, and
(c) they elect that this section should apply,
the equipment lessor is to be treated, on and after the relevant time, as the owner of the fixture as a result of incurring the capital expenditure on the provision of the plant or machinery that is the subject of the equipment lease.
(2) The relevant time for the purposes of subsection (1) is (unless subsection (3) applies) the time when the equipment lessor incurs the expenditure.
(3) If—
(a) the conditions in section 178 are met in relation to an equipment lease (but the conditions in sections 179 and 180 are not), and
(b) the equipment lessor incurs the capital expenditure before the equipment lessee begins to carry on the qualifying activity,
the relevant time is the time when the equipment lessee begins to carry on the qualifying activity.
(4) If an election is made under this section, the equipment lessee is not to be treated under section 176 as the owner of the fixture.
(5) An election under this section must be made by notice 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.
(6) “The relevant chargeable period” means the chargeable period in which the capital expenditure was incurred.
The conditions referred to in section 177(1)(a)(i) are that—
(a) the equipment lease is for the lease of the plant or machinery for the purposes of a qualifying activity which is, or is to be, carried on by the equipment lessee,
(b) if the equipment lessee had incurred the capital expenditure incurred by the equipment lessor on the provision of the plant or machinery that is the subject of the equipment lease, he would, as a result of section 176, have been entitled to an allowance in respect of it, and
(c) the equipment lease is not for the lease of the plant or machinery for use in a dwelling-house.
(1) The conditions referred to in section 177(1)(a)(ii) are that—
(a) the plant or machinery becomes a fixture by being fixed to land that is neither a building nor part of a building,
(b) the equipment lessee has an interest in the land when taking possession of the plant or machinery under the equipment lease,
(c) under the terms of the equipment lease, the equipment lessor is entitled to sever the plant or machinery, at the end of the period for which it is leased, from the land to which it is fixed at that time,
(d) under the terms of the equipment lease, the equipment lessor will own the plant or machinery on its severance in accordance with the equipment lease,
(e) the nature of the plant or machinery and the way in which it is fixed to land are such that its use on one set of premises does not, to any material extent, prevent it from being used, once severed, for the same purposes on a different set of premises,
(f) the equipment lease is one which under normal accountancy practice falls (or would fall) to be treated in the accounts of the equipment lessor as an operating lease, and
(g) the equipment lease is not for the lease of the plant or machinery for use in a dwelling-house.
(2) For the purposes of applying subsection (1)(f), the equipment lessor is to be treated as being a company incorporated in a part of the United Kingdom.
(1) The conditions referred to in section 177(1)(a)(iii) are that—
(a) the plant or machinery which is the subject of the equipment lease consists of a boiler, heat exchanger, radiator or heating control that is installed in a building as part of a space or water heating system,
(b) the expenditure of the equipment lessor is incurred before 1st January 2008, and
(c) the equipment lease is approved for the purposes of this section as entered into as part of the affordable warmth programme.
(2) The approval mentioned in subsection (1)(c) may be given, with the consent of the Treasury—
(a) by the Secretary of State;
(b) in the case of buildings in Scotland, by the Scottish Ministers;
(c) in the case of buildings in Wales, by the National Assembly for Wales;
(d) in the case of buildings in Northern Ireland, by the Department for Social Development in Northern Ireland.
(3) If an approval is withdrawn, it is to be treated for the purposes of subsection (1)(c) as never having had effect.
(1) If—
(a) after any plant or machinery has become a fixture, a person (“the purchaser”) acquires an interest in the relevant land,
(b) that interest was in existence before the purchaser’s acquisition of it, and
(c) the consideration which the purchaser gives for the interest is or includes a capital sum that, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture,
the purchaser is to be treated, on and after the time of the acquisition, as the owner of the fixture as a result of incurring that expenditure.
(2) Subsection (1) does not apply, and is to be treated as never having applied, if—
(a) immediately after the time of the acquisition, any person holds another interest in any land in which the whole or any part of the relevant land is comprised, and
(b) the person holding that other interest has a prior right in relation to the fixture.
(3) For the purposes of subsection (2)(b), the person holding the other interest has a prior right in relation to the fixture if he—
(a) is treated as the owner of the fixture immediately before the time referred to in subsection (2)(a) as a result of incurring expenditure on the provision of the fixture,
(b) is not so treated as a result of section 538 (contribution allowances for plant and machinery),
(c) is entitled to an allowance in respect of that expenditure, and
(d) makes or has made a claim in respect of that expenditure.
(4) Subsection (1) is subject to section 182.
(1) If—
(a) after any plant or machinery has become a fixture, a person (“the purchaser”) acquires an interest in the relevant land,
(b) that interest was in existence before the purchaser’s acquisition of it,
(c) before that acquisition, the plant or machinery was let under an equipment lease, and
(d) in connection with that acquisition, the purchaser pays a capital sum to discharge the obligations of the equipment lessee under the equipment lease,
the purchaser is to be treated, on and after the time of the acquisition, as the owner of the fixture as a result of incurring expenditure, consisting of that capital sum, on the provision of the fixture.
(2) Subsection (1) does not apply, and is to be treated as never having applied, if—
(a) immediately after the time of the acquisition, any person holds another interest in any land in which the whole or any part of the relevant land is comprised, and
(b) the person holding that other interest has a prior right in relation to the fixture.
(3) Section 181(3) (test for whether the person holding the other interest has a prior right) applies for the purposes of subsection (2)(b).
(1) If—
(a) after any plant or machinery has become a fixture, a person (“the lessor”) who has an interest in the relevant land grants a lease,
(b) the lessor is entitled to an allowance in respect of the fixture for the chargeable period in which the lease is granted or would be if he were within the charge to tax,
(c) the consideration which the lessee gives for the lease is or includes a capital sum that, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture,
(d) the lessor and the lessee are not connected persons, and
(e) the lessor and the lessee make an election under this section,
the lessee is to be treated, on and after the time when the lease is granted, as the owner of the fixture as a result of incurring that expenditure.
(2) An election under this section must be made by notice to the Inland Revenue within 2 years after the date on which the lease takes effect.
(1) If—
(a) after any plant or machinery has become a fixture, a person (“the lessor”) who has an interest in the relevant land grants a lease,
(b) the lessor is not within section 183(1)(b),
(c) before the lease is granted, the fixture has not been used for the purposes of a qualifying activity carried on by the lessor or any person connected with the lessor, and
(d) the consideration which the lessee gives for the lease is or includes a capital sum that, in whole or in part, falls to be treated for the purposes of this Part as expenditure on the provision of the fixture,
the lessee is to be treated, on and after the time when the lease is granted, as the owner of the fixture as a result of incurring that expenditure.
(2) Subsection (1) does not apply, and is to be treated as never having applied, if—
(a) immediately after the time when the lease is granted, any person holds another interest in any land in which the whole or any part of the relevant land is comprised, and
(b) the person holding that other interest has a prior right in relation to the fixture.
(3) Section 181(3) (test for whether the person holding the other interest has a prior right) applies for the purposes of subsection (2)(b).
(1) This section applies if—
(a) a person (“the current owner”) is treated as the owner of a fixture as a result of incurring capital expenditure (“new expenditure”) on its provision,
(b) the plant or machinery is treated as having been owned at a relevant earlier time by any person (“the past owner”) as a result of incurring other expenditure,
(c) the plant or machinery is within paragraph (b) otherwise than as a result of section 538 (contribution allowances for plant and machinery), and
(d) the past owner is or has been required to bring the disposal value of the plant or machinery into account (as a result of having made a claim in respect of that other expenditure).
(2) If the new expenditure exceeds the maximum allowable amount, the excess—
(a) is to be left out of account in determining the current owner’s qualifying expenditure, or
(b) if the new expenditure has already been taken into account for this purpose, is to be treated as expenditure that should never have been taken into account.
(3) The maximum allowable amount is—
D + I
where—
D is the disposal value of the plant or machinery which the past owner has been or is required to bring into account, and
I is any of the new expenditure that is treated under section 25 (building alterations in connection with installation) as expenditure on the provision of the plant or machinery.
(4) If more than one disposal event has occurred requiring the past owner to bring the disposal value of the plant or machinery into account, the maximum allowable amount is calculated by reference only to the most recent of those events.
(5) For the purposes of this section, the current owner and the past owner may be the same person.
(6) In subsection (1)(b) “relevant earlier time” means (subject to subsection (7)) any time before the earliest time when the current owner is treated as owning the plant or machinery as a result of incurring the new expenditure.
(7) If, before the earliest time when the current owner is treated as owning the plant or machinery as a result of incurring the new expenditure—
(a) any person has ceased to own the plant or machinery as a result of a sale,
(b) the sale was not a sale of the plant or machinery as a fixture, and
(c) the buyer and seller were not connected persons at the time of the sale,
the relevant earlier time does not include any time before the seller ceased to own the plant or machinery.
(1) This section applies if—
(a) a person (“the past owner”) has at any time claimed an allowance to which he is entitled under Part 3 (industrial buildings allowances) in respect of expenditure which was or included expenditure on the provision of plant or machinery,
(b) the past owner has transferred the interest which is the relevant interest for the purposes of Part 3, and
(c) the current owner of the plant or machinery makes a claim in respect of expenditure (“new expenditure”) incurred—
(i) on the provision of the plant or machinery, and
(ii) at a time when it is a fixture in the building.
(2) If the new expenditure exceeds the maximum allowable amount, the excess is to be left out of account in determining the current owner’s qualifying expenditure.
(3) The maximum allowable amount is—
where—
F is the part of the consideration for the transfer by the past owner that is attributable to the fixture,
T is the total consideration for that transfer, and
R is the residue of qualifying expenditure attributable to the relevant interest immediately after that transfer, calculated on the assumption that the transfer was a sale of the relevant interest.
(4) For the purposes of this section the current owner of the plant or machinery is—
(a) the person to whom the past owner transferred the relevant interest, or
(b) any person who is subsequently treated as the owner of the plant or machinery.
(5) In this section “building” and “residue of qualifying expenditure” have the same meaning as in Part 3.
Capital Allowances Act 2001