Office of Public Sector Information
(1) No allowances are to be given or charges imposed in respect of management assets of any life assurance business carried on by a company except under Part 2 (plant and machinery allowances).
(2) An asset is a management asset of any life assurance business carried on by a company if it is provided for use, or used, for the management of that business of that company.
(3) The management of any life assurance business consists of pursuing those purposes expenditure on which would, on the assumption below, be treated as expenses of management under section 75 of ICTA as applied by 76 of ICTA.
(4) The assumption is that section 76(1)(d) (exclusion from expenses of management of expenses referable to pension business, ISA business, life reinsurance business and overseas life assurance business) is disregarded.
(5) In this Act “life assurance business” has the meaning given by section 431(2) of ICTA.
(1) This section applies if a company which is carrying on any life assurance business holds an asset for purposes other than the management of that business.
(2) “Investment asset” means an asset that is within subsection (1).
(3) If the company is carrying on more than one category of life assurance business, any allowance under this Act in respect of an investment asset must be apportioned between the categories in the same way that income from the asset would, under section 432A of ICTA, be treated as referable to different categories of business in the case of an insurance company.
(4) If the company is charged to tax in respect of its life assurance business under Case I of Schedule D, no allowance in respect of an investment asset is to be taken into account in calculating the company’s profits from that business.
(5) If the company is charged to tax under—
(a) section 436 of ICTA (pension business and ISA business),
(b) section 439B of ICTA (life reinsurance business), or
(c) section 441 of ICTA (overseas life assurance business),
no allowance in respect of an investment asset is to be taken into account in calculating the company’s profits from the category of life assurance business in question.
This Chapter has effect for the interpretation of, and for otherwise supplementing—
(a) Chapter 18 of Part 2 (plant and machinery allowances: additional VAT liabilities and rebates),
(b) Chapter 10 of Part 3 (industrial buildings allowances: additional VAT liabilities and rebates), and
(c) Chapter 4 of Part 6 (research and development allowances: additional VAT liabilities and rebates).
(1) “Additional VAT liability” means an amount which a person becomes liable to pay by way of adjustment under the VAT capital items legislation in respect of input tax.
(2) “Additional VAT rebate” means an amount which a person becomes entitled to deduct by way of adjustment under the VAT capital items legislation in respect of input tax.
(1) The time when a person incurs an additional VAT liability or an additional VAT rebate is made to a person is the last day of the period—
(a) which is one of the periods making up the VAT period of adjustment applicable to the asset in question under the VAT capital items legislation, and
(b) in which the increase or decrease in use giving rise to the liability or rebate occurs.
(2) “VAT period of adjustment” means a period specified under the VAT capital items legislation by reference to which adjustments are made in respect of input tax.
(1) The chargeable period in which, and the time when, an additional VAT liability or additional VAT rebate accrues is set out in the Table.
| Circumstances | Chargeable period | Time of accrual |
|---|---|---|
| The liability or rebate is accounted for in a VAT return. | The chargeable period which includes the last day of the period to which the VAT return relates. | The last day of the period to which the VAT return relates. |
| The Commissioners of Customs and Excise assess the liability or rebate as due before a VAT return is made. | The chargeable period which includes the day on which the assessment is made. | The day on which the assessment is made. |
| The relevant activity is permanently discontinued before the liability or rebate is accounted for in a VAT return or assessed by the Commissioners. | The chargeable period in which the relevant activity is permanently discontinued. | The last day of the chargeable period in which the relevant activity is permanently discontinued. |
(2) In the Table—
(a) “VAT return” means a return made to the Commissioners of Customs and Excise for the purposes of value added tax, and
(b) “the relevant activity” means the trade or, in relation to Part 2, the qualifying activity to which the additional VAT liability or additional VAT rebate relates.
(1) This section applies if—
(a) any provision of this Act requires an allowance or charge to which a person is entitled or liable in respect of any qualifying expenditure to be determined by reference to—
(i) a proportion only of that expenditure, or
(ii) a proportion only of what that allowance or charge would have been apart from that provision, and
(b) the person incurs an additional VAT liability or an additional VAT rebate is made to the person in respect of that expenditure.
(2) The additional VAT liability or rebate is subject to the same apportionment as the original expenditure, allowance or charge.
(1) In this Chapter, “the VAT capital items legislation” means any Act or instrument (whenever passed or made) providing for the proportion of input tax on an asset of a specified description which may be deducted by a person from his output tax to be adjusted from time to time as a result of—
(a) an increase, or
(b) a decrease,
in the extent to which the asset is used by him for making taxable supplies (or taxable supplies of a specified class or description) during a specified period.
(2) In this Chapter “the VAT capital items legislation” also includes any other Act or instrument (whenever passed or made) which provides for Article 20(2) to (4) of the Sixth VAT Directive to be given effect.
(3) “The Sixth VAT Directive” means the Sixth Directive (77/388/EEC) of the Council of the European Communities on Value Added Tax, dated 17th May 1977.
(4) In this Chapter “input tax”, “output tax” and “taxable supply” have the same meaning as in VATA 1994.
(1) In this Chapter “oil licence” means a UK oil licence or a foreign oil concession.
(2) In this Chapter “UK oil licence” means a licence under—
(a) Part I of the Petroleum Act 1998 (c. 17) (“the 1998 Act”), or
(b) the Petroleum (Production) Act (Northern Ireland) 1964 (c. 28 (N.I.)) (“the 1964 Act”),
authorising the winning of oil.
(3) In this Chapter “foreign oil concession” means any right which—
(a) is a right to search for or win oil that exists in its natural condition in a place to which neither the 1998 Act nor the 1964 Act applies, and
(b) is conferred or exercisable (whether or not under a licence) in relation to a particular area.
(4) In this Chapter “interest in an oil licence” includes, if there is an agreement which—
(a) relates to oil from the whole or a part of the licensed area, and
(b) was made before the extraction of the oil to which it relates,
any entitlement under the agreement to, or to a share of, that oil or the proceeds of its sale.
(1) This section applies if—
(a) there is a material disposal of an oil licence which, at the time of the disposal, relates to an undeveloped area, and
(b) any of the consideration for the disposal consists of—
(i) another oil licence, or an interest in another oil licence, which at that time relates to an undeveloped area, or
(ii) an obligation to undertake exploration work or appraisal work in an area which is or forms part of the licensed area in relation to the licence disposed of.
(2) The value of the consideration within subsection (1)(b) is to be treated as nil for the purposes of—
(a) Part 5 (mineral extraction allowances),
(b) Part 6 (research and development allowances), and
(c) section 555 (disposal of oil licence with exploitation value).
(3) A “material disposal” of an oil licence means any disposal (including a part disposal and a disposal of an interest in an oil licence) other than a disposal in relation to which section 568 or 569 (sales treated as being for alternative amount) has effect.
(4) If—
(a) the material disposal is part of a larger transaction under which one party makes to another material disposals of two or more licences, and
(b) at the time of disposal, each of those licences relates to an undeveloped area,
the licensed area for the purposes of subsection (1)(b) is the totality of the licensed areas in relation to those licences.
(5) In relation to a material disposal of a licence under which the buyer acquires an interest in the licence only so far as it relates to part of the licensed area, any reference in this section and section 554 to the licensed area is to be read as a reference only to that part of the licensed area to which the buyer’s acquisition relates.
(6) In subsection (1)(b)—
“exploration work”, in relation to an area, means work carried out for the purpose of searching for oil anywhere in that area, and
“appraisal work”, in relation to an area, means work carried out for the purpose of ascertaining—
the extent or characteristics of any oil-bearing area the whole or part of which lies in that area, or
what the reserves of oil of any such oil-bearing area are.
(1) A UK oil licence relates to an undeveloped area if—
(a) no consent for development has been granted to the licensee for any part of the licensed area by the relevant authority, and
(b) no programme of development has been served on the licensee or approved for any part of the licensed area by the relevant authority.
(2) A foreign oil concession relates to an undeveloped area if—
(a) no development has actually taken place in any part of the licensed area, and
(b) no condition for the carrying out of development anywhere in that area has been satisfied—
(i) by the grant of any consent by the authorities of a country or territory exercising jurisdiction in relation to the area, or
(ii) by the approval or service on the licensee, by any such authorities, of any programme of development.
(3) Subsections (4) and (5) of section 36 of FA 1983 (meaning of development) apply for the purposes of subsections (1) and (2).
(4) In subsection (1) “licensee” means—
(a) the person entitled to the benefit of the licence or, if two or more persons are entitled to the benefit, each of those persons, and
(b) a person who has rights under an agreement which is—
(i) approved by the Board of Inland Revenue, and
(ii) certified by the relevant authority to confer on that person rights which are the same as, or similar to, those conferred by a licence.
(5) In subsection (2) “licensee” means the person with the concession or any person having an interest in it.
(1) This section applies if—
(a) a person (“the seller”) disposes of an interest in an oil licence to another (“the buyer”), and
(b) part of the value of the interest is attributable to allowable exploration expenditure incurred by the seller.
(2) For the purposes of Part 6 (research and development allowances) the disposal is to be treated as a disposal by which the seller ceases to own an asset representing the allowable exploration expenditure to which that part of the value of the interest is attributable.
(3) Part 6 applies as if the disposal value to be brought into account were equal to so much of the buyer’s expenditure on acquiring the interest as it is just and reasonable to attribute to that part of the value of the interest.
(4) In this section “allowable exploration expenditure” means expenditure which—
(a) is incurred on mineral exploration and access within the meaning of Part 5 (mineral extraction allowances), and
(b) is qualifying expenditure for the purposes of Part 6.
(1) In this Chapter “licensed area” means (subject to section 553(4) and (5))—
(a) in relation to a UK oil licence, the area to which the licence applies, and
(b) in relation to a foreign oil concession, the area in relation to which the right to search for or win oil is conferred or exercisable under the concession.
(2) In this Chapter “the relevant authority”, in relation to a UK oil licence means—
(a) in the case of a licence under Part I of the 1998 Act, the Secretary of State, and
(b) in the case of a licence under the 1964 Act, the Department of Enterprise, Trade and Investment in Northern Ireland.
(3) In this Chapter “oil”—
(a) in relation to a UK oil licence, means any substance won or capable of being won under the authority of a licence granted under Part I of the 1998 Act or the 1964 Act, other than methane gas won in the course of operations for making and keeping mines safe, and
(b) in relation to a foreign oil concession, means any petroleum (as defined by section 1 of the 1998 Act).
Sections 558 (effect of partnership changes) and 559 (effect of successions) apply for the purposes of this Act other than—
(a) Part 2 (plant and machinery allowances),
(b) Part 6 (research and development allowances), and
(c) Part 10 (assured tenancy allowances).
(1) This section applies if—
(a) a relevant activity has been set up and is at any time carried on in partnership,
(b) there has been a change in the persons engaged in carrying on the relevant activity, and
(c) the change is not treated as a permanent discontinuance of the relevant activity under section 113(1) or 337(1) of ICTA (change in persons carrying on a trade etc. and effect of company ceasing to trade etc.).
(2) In this section—
“the present partners” means the person or persons for the time being carrying on the relevant activity, and
“predecessors”, in relation to the present partners, means their predecessors in carrying on the relevant activity.
(3) Any allowance or charge is to be made to or on the present partners.
(4) The amount of any allowance or charge arising under subsection (3) is to be calculated as if—
(a) the present partners had at all times been carrying on the relevant activity, and
(b) everything done to or by their predecessors in carrying on the relevant activity had been done to or by the present partners.
(5) In this section “relevant activity” means a trade, property business, profession or vocation.
(1) This section applies if—
(a) a person (“the successor”) succeeds to a relevant activity which until that time was carried on by another person (“the predecessor”), and
(b) the relevant activity is treated as discontinued under section 113(1) or 337(1) of ICTA (change in persons carrying on a trade etc. and effect of company ceasing to trade etc.).
(2) The property in question is to be treated as if—
(a) it had been sold to the successor when the succession takes place, and
(b) the net proceeds of the sale were the market value of the property.
(3) The property in question is any property which—
(a) immediately before the succession, was in use for the purposes of the discontinued relevant activity, and
(b) immediately after the succession, and without being sold, is in use for the purposes of the new relevant activity.
(4) No entitlement to an initial allowance arises under this section.
(5) In this section “relevant activity” means a trade, property business, profession or vocation.
(1) This section applies if—
(a) assets are transferred as part of, or in connection with, the transfer of the whole or part of the business of an insurance company to another company,
(b) the transfer is—
(i) in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the Insurance Companies Act 1982 (c. 50) (transfers of long term business), or
(ii) a qualifying overseas transfer within the meaning of paragraph 4A of Schedule 19AC to ICTA (overseas life insurance companies).
(2) But this section does not apply in relation to any asset transferred to a non-resident company unless the asset will fall to be treated, immediately after the transfer, as an asset which is held for the purposes of the whole or a part of so much of any business carried on by the non-resident company as is carried on through a branch or agency in the United Kingdom.
(3) This section also does not apply if section 561 applies (transfer of a UK trade to a company in another member State).
(4) If this section applies—
(a) any allowances and charges that would have been made to or on the transferor are to be made instead to or on the transferee, and
(b) the amount of any such allowance or charge is to be calculated as if everything done to or by the transferor had been done to or by the transferee,
but no sale or transfer of assets made to the transferee by the transferor is to be treated as giving rise to any such allowance or charge.
(5) In this section—
(a) “insurance company” has the same meaning as in Chapter I of Part XII of ICTA, and
(b) “non-resident company” means a company resident outside the United Kingdom.
(1) This section applies if—
(a) a qualifying company resident in one member State (“company A”) transfers the whole or a part of a trade carried on by it in the United Kingdom to a qualifying company resident in another member State (“company B”),
(b) section 140A of TCGA 1992 (transfer of assets treated as no-gain no-loss disposal etc.) applies in relation to the transfer, and
(c) immediately after the transfer company B—
(i) is resident in the United Kingdom, or
(ii) carries on in the United Kingdom through a branch or agency a trade which consists of, or includes, the trade or the part of the trade transferred.
(2) If this section applies—
(a) the transfer itself does not give rise to any allowances or charges under this Act, and
(b) in relation to assets included in the transfer, anything done to or by company A before the transfer is to be treated after the transfer as having been done to or by company B.
(3) If, for the purposes of subsection (2)(b), expenditure falls to be apportioned between assets included in the transfer and other assets, the apportionment is to be made in a just and reasonable manner.
(4) In this section “qualifying company” means a body incorporated under the law of a member State.
(5) If this section applies, section 343(2) of ICTA does not apply (effect of company reconstruction without change of ownership).
(1) Any reference in this Act to the sale of property includes the sale of that property together with any other property.
(2) For the purposes of subsection (1), all property sold as a result of one bargain is to be treated as sold together even though—
(a) separate prices are, or purport to be, agreed for separate items of that property, or
(b) there are, or purport to be, separate sales of separate items of that property.
(3) If an item of property is sold together with other property, then, for the purposes of this Act—
(a) the net proceeds of the sale of that item are to be treated as being so much of the net proceeds of sale of all the property as, on a just and reasonable apportionment, is attributable to that item, and
(b) the expenditure incurred on the provision or purchase of that item is to be treated as being so much of the consideration given for all the property as, on a just and reasonable apportionment, is attributable to that item.
(4) This section applies, with the necessary modifications, to other proceeds (consisting of insurance money or other compensation) as it applies in relation to the net proceeds of a sale.
(5) This section applies in relation to Part 5 as if expenditure on the provision or purchase of an item of property included expenditure on the acquisition of—
(a) a mineral asset (as defined by section 397), or
(b) land outside the United Kingdom.
(1) This section applies in relation to the determination of a question if—
(a) at the time when the question falls to be determined, it appears that the determination is material to the liability to tax (for whatever period) of two or more persons, and
(b) section 564 provides for this section to apply.
(2) The Commissioners who are to determine the question, for the purposes of the tax of all the persons concerned, are given in subsections (3) to (5).
(3) If—
(a) the same body of General Commissioners has jurisdiction with respect to all the persons concerned, and
(b) those persons do not agree that the determination is to be made by the Special Commissioners,
the determination is to be made by that body of General Commissioners.
(4) If—
(a) different bodies of General Commissioners have jurisdiction with respect to the persons concerned, and
(b) those persons do not agree that the determination is to be made by the Special Commissioners,
the determination is to be made by such of those bodies of General Commissioners as the Board of Inland Revenue may direct.
(5) In any other case, the determination is to be made by the Special Commissioners.
(6) The Commissioners must determine the question in the same way as an appeal, but all the persons concerned are entitled—
(a) to appear before and be heard by the Commissioners, or
(b) to make representations to them in writing.
(1) Section 563 applies in relation to the determination for the purposes of any of Parts 3 to 11 or this Part of any question about the way in which a sum is to be apportioned.
(2) Section 563 applies in relation to any determination of the market value of property for the purposes of—
(a) any provision of Part 2 (plant and machinery allowances),
(b) section 423 (mineral extraction allowances: amount of disposal value to be brought into account),
(c) section 559 (effect of successions),
(d) section 568 or 569 (sales treated as being for alternative amount), or
(e) section 573 (transfers treated as sales).
(3) Section 563 applies in relation to any determination of the amount of any sums paid or proceeds for the purposes of section 357 (industrial buildings allowances: arrangements having an artificial effect on pricing).
(4) If section 561 (transfer of a UK trade to a company in another member State) applies, section 563 applies—
(a) for the purposes of the tax of both company A and company B referred to in that section, and
(b) in relation to the determination of any question of apportionment of expenditure under section 561(3).
Capital Allowances Act 2001