Finance (No. 4) Bill

Session 2010 - 12
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Other Bills before Parliament

Finance (No. 4) Bill

Finance (No. 4) Bill
Schedule 10 — Plant and machinery allowances: fixtures
283

5     (1)
In section 563 (procedure for determining certain questions affecting two or
more persons), in subsection (1)(a) for “two” substitute “one”.
      (2)
Accordingly, in the heading for that section for “two” substitute “one”.
Fixtures on which business premises renovation allowance has been made
6
After section 186 insert—
5
“186A
Fixtures on which a business premises renovation allowance has been
made
(1)
This section applies if—
(a)
a person (“the past owner”) has at any time claimed an
allowance to which that person was entitled under Part 3A
10
(business premises renovation allowances) in respect of
qualifying expenditure under that Part incurred in respect of
a qualifying building (“Part 3A expenditure”),
(b)
there has been a balancing event within section 360N(1) as a
result of which an asset representing the whole or part of the
15
Part 3A expenditure (“the Part 3A asset”) ceased to be owned
by the past owner,
(c)
the Part 3A asset was or included plant or machinery, and
(d)
the current owner makes a claim under this Part in respect of
expenditure (“new expenditure”) incurred—
20
(i)
on the provision of the plant or machinery, and
(ii)
at a time when it is a fixture.
(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.
25
(3)
If the proceeds from the balancing event mentioned in subsection
(1)(b) exceed R, the maximum allowance amount is—

where—

F is so much of the proceeds from the balancing event as are
attributable to the fixture,
30

T is the total amount of the proceeds from the balancing
event, and

R is the qualifying expenditure incurred by the past owner on
the Part 3A asset less the net Part 3A allowances in respect of
that asset.
35
(4)
Where subsection (3) does not apply, the maximum allowable
amount is so much of the proceeds from the balancing event as are
attributable to the fixture.
(5)
For the purposes of subsection (3) the “net Part 3A allowances” in
respect of the Part 3A asset means—
40
(a)
the total of any allowances made under Part 3A in respect of
the past owner’s qualifying expenditure, less
(b)
the total of any balancing charges made under that Part in
respect of that expenditure.

Finance (No. 4) Bill
Schedule 10 — Plant and machinery allowances: fixtures
284

(6)
For the purposes of this section, the current owner of the plant or
machinery is—
(a)
the person who acquired the Part 3A asset from the past
owner, or
(b)
any person who is subsequently treated as the owner of the
5
plant or machinery.”
7
In section 9 (interaction between fixtures claims and other claims), in
subsection (2)—
(a)
in paragraph (a), after “Part 3” insert “, 3A”, and
(b)
in paragraph (b), after “section 186(2)” insert “, 186A(2)”.
10
8
In section 57 (available qualifying expenditure), in subsection (3), after
“section 186(2)” insert “, 186A(2)”.
9
In section 198 (election to apportion sale price on sale of qualifying interest),
for subsection (5)(a) substitute—
“(a)
sections 186, 186A and 187 (fixtures on which industrial
15
buildings allowance, business premises renovation
allowance or research and development allowance has been
made),”.
10
In section 199 (election to apportion capital sum given by lessee on grant of
lease), for subsection (5)(a) substitute—
20
“(a)
sections 186, 186A and 187 (fixtures on which industrial
buildings allowance, business premises renovation
allowance or research and development allowance has been
made),”.
Commencement and transitionals
25
11
The amendments made by paragraphs 2 to 5 have effect—
(a)
for income tax purposes, in relation to new expenditure incurred on
or after 6 April 2012, and
(b)
for corporation tax purposes, in relation to new expenditure incurred
on or after 1 April 2012.
30
12
The amendments made by paragraph 6 to 10 have effect—
(a)
for income tax purposes, in relation to balancing events which occur
on or after 6 April 2012, and
(b)
for corporation tax purposes, in relation to balancing events which
occur on or after 1 April 2012.
35
13    (1)
Where (ignoring this sub-paragraph) plant or machinery would be treated
for the purposes of subsection (1)(b) of section 187A of CAA 2001 as having
been owned by a person for a period which began and ended before the
commencement date, that period of ownership is, for those purposes, to be
regarded as not occurring at a relevant earlier time.
40
      (2)
Section 187A(3)(a) of CAA 2001 (imposition of the pooling requirement)
does not apply if the period for which the plant or machinery is treated as
having been owned by the past owner as a result of incurring the historic
expenditure ends no later than the end of the period of 2 years beginning
with the commencement date.
45
      (3)
“The commencement date” means—

Finance (No. 4) Bill
Schedule 11 — Expenditure on plant and machinery for use in designated assisted areas
285

(a)
for income tax purposes, 6 April 2012, and
(b)
for corporation tax purposes, 1 April 2012.
Schedule 11
Section 44

Expenditure on plant and machinery for use in designated assisted areas
1
CAA 2001 is amended as follows.
5
2
In section 39 (first-year allowances available for certain types of qualifying
expenditure only), at the appropriate place in the list insert—

“section 45K
expenditure on plant and

machinery for use in designated

assisted areas.”

10
3
After section 45J insert—
“45K
Expenditure on plant and machinery for use in designated assisted
areas
(1)
Expenditure is first-year qualifying expenditure if—
(a)
it is incurred by a company on the provision of plant or
15
machinery for use primarily in an area which at the time the
expenditure is incurred is a designated assisted area,
(b)
it is incurred in the period of 5 years beginning with 1 April
2012,
(c)
Conditions A to E are met.
20
(2)
“Designated assisted area” means an area which—
(a)
is designated by an order made by the Treasury, and
(b)
falls wholly within an assisted area.
(3)
An area may be designated by an order under subsection (2)(a) only
if at the time the order is made—
25
(a)
the area falls wholly within an enterprise zone, and
(b)
a memorandum of understanding, in respect of the area,
relating to the availability of allowances in respect of
expenditure to which this section applies has been entered
into by the Treasury and the responsible authority for the
30
area.
(4)
An order made under subsection (2)(a) may provide that an area
designated by the order is to be treated as having been so designated
at times falling before the order is made.
(5)
But where an area has previously been designated by an order under
35
subsection (2)(a), section 14 of the Interpretation Act 1978 does not
apply, by virtue of subsection (4), so as to imply a power to make an
order (“the new order”) treating that area (or any part of it) as if it
were not so designated at times falling before the new order is made.

Finance (No. 4) Bill
Schedule 11 — Expenditure on plant and machinery for use in designated assisted areas
286

(6)
Condition A is that the company is within the charge to corporation
tax.
(7)
Condition B is that the expenditure is incurred for the purposes of a
qualifying activity within section 15(1)(a) or (f).
(8)
Condition C is that the expenditure is incurred for the purposes of—
5
(a)
a business of a kind not previously carried on by the
company,
(b)
expanding a business carried on by the company, or
(c)
starting up an activity which relates to a fundamental change
in a product or production process of, or service provided by,
10
a business carried on by the company.
(9)
Condition D is that the plant or machinery is unused and not second-
hand.
(10)
Condition E is that the expenditure is not replacement expenditure.
(11)
“Replacement expenditure” means expenditure incurred on the
15
provision of plant or machinery (“new plant or machinery”)
intended to perform the same or a similar function, for the purposes
of the qualifying activity of the company, as other plant or machinery
(“replaced plant or machinery”)—
(a)
on which the company has previously incurred qualifying
20
expenditure, and
(b)
which has been superseded by the new plant or machinery.
(12)
But if and to the extent that—
(a)
the expenditure is incurred on the provision of new plant or
machinery that is capable of and intended to perform a
25
significant additional function, when compared to the
replaced plant or machinery, and
(b)
the additional function enhances the capacity or productivity
of the qualifying activity in question,

so much of the expenditure as is attributable to the additional
30
function is not to be regarded as replacement expenditure.
(13)
The part of the expenditure attributable to the additional function is
to be determined on a just and reasonable basis.
(14)
In this section—
“assisted area” means—
35
(a)
an area specified as a development area under section
1 of the Industrial Development Act 1982, or
(b)
Northern Ireland;
“enterprise zone” means an area recognised by the Treasury as
an area in respect of which there is a special focus on
40
economic development and identified on a map published by
the Treasury for the purposes of this section;
“the responsible authority”, for an area, means—
(a)
if the area is in England, a local authority for all or
part of the area or two or more such local authorities,
45
(b)
if the area is in Scotland, the Scottish Ministers,
(c)
if the area is in Wales, the Welsh Ministers, and

Finance (No. 4) Bill
Schedule 11 — Expenditure on plant and machinery for use in designated assisted areas
287

(d)
if the area is in Northern Ireland, the Department of
Enterprise, Trade and Investment in Northern
Ireland.
(15)
The Treasury may by order amend the definition of “assisted area”
in subsection (14) in consequence of any changes made to the areas
5
in the United Kingdom granted assisted area status by virtue of
Article 107(3) of the Treaty on the Functioning of the European
Union.
(16)
This section is subject to—
section 45L (plant or machinery partly for use outside
10
designated assisted areas),
section 45M (exclusions from section 45K allowances),
section 45N (effect of plant or machinery subsequently being
primarily used in an area other than a designated assisted
area), and
15
section 46 (general exclusions).
45L
Exclusion of plant or machinery partly for use outside designated
assisted areas
(1)
Expenditure on plant or machinery is not first-year qualifying
expenditure under section 45K if—
20
(a)
at the time when it is incurred, the company incurring it
intends the plant or machinery to be used partly in a non-
designated area, and
(b)
the main purpose, or one of the main purposes, for which any
person is a party to the relevant arrangements is the
25
obtaining of a first-year allowance, or a greater first-year
allowance, in respect of the part of the expenditure that is
attributable to that intended use in a non-designated area.
(2)
For the purposes of subsection (1)(b), the part of the expenditure that
is attributable to that intended use in a non-designated area is to be
30
determined on a just and reasonable basis.
(3)
In this section—
“non-designated area” means an area which is not a designated
assisted area within the meaning of section 45K;
“the relevant arrangements” means—
35
(a)
the transaction under which the expenditure is
incurred, and
(b)
any scheme or arrangements of which that
transaction forms part.
45M
Exclusions from allowances under section 45K
40
(1)
Expenditure incurred by a person is not first-year qualifying
expenditure under section 45K if it is within subsection (2), (4), (6) or
(7).
(2)
Expenditure is within this subsection if, at the time a claim is made
under section 3 for a section 45K allowance in respect of the
45
expenditure, the person who incurred the expenditure is, or forms
part of, an undertaking within subsection (3).

Finance (No. 4) Bill
Schedule 11 — Expenditure on plant and machinery for use in designated assisted areas
288

(3)
An undertaking is within this subsection if one or both of the
following conditions are met—
(a)
it is reasonable to assume that the undertaking would be
regarded as a firm in difficulty for the purposes of the
Community Guidelines on State Aid for Rescuing and
5
Restructuring Firms in Difficulty (2004/C 244/02);
(b)
the undertaking is subject to an outstanding recovery order
made by virtue of Article 108(2) of the Treaty on the
Functioning of the European Union (Commission Decision
declaring aid illegal and incompatible with the common
10
market).
(4)
Expenditure is within this subsection if it is incurred for the purposes
of a qualifying activity—
(a)
in the fishery or aquaculture sector, as covered by Council
Regulation (EC) No 104/2000,
15
(b)
in the coal sector, steel sector, shipbuilding sector or synthetic
fibres sector,
(c)
relating to the management of waste of undertakings, or
(d)
relating to—
(i)
the primary production of agricultural products,
20
(ii)
on-farm activities necessary for preparing an animal
or plant product for the first sale, or
(iii)
the first sale of agricultural products by a primary
producer to wholesalers, retailers or processors, in
circumstances where that sale does not take place on
25
separate premises reserved for that purpose.
(5)
In subsection (4)(c) the reference to waste of undertakings does not
include waste of the person who incurred the expenditure or of any
other person forming part of the same undertaking as that person.
(6)
Expenditure is within this subsection if it is incurred on a means of
30
transport or transport equipment for the purposes of a qualifying
activity in the road freight sector or the air transport sector.
(7)
Expenditure is within this subsection if a relevant grant or relevant
payment is made towards—
(a)
that expenditure, or
35
(b)
any other expenditure which is incurred by any person in
respect of the same designated assisted area, and on the same
single investment project, as that expenditure.
(8)
A section 45K allowance made in respect of first-year qualifying
expenditure is to be withdrawn if—
40
(a)
after it is made, a relevant grant or relevant payment is made
towards that expenditure, or
(b)
within the period of 3 years beginning when that expenditure
was incurred, a relevant grant or relevant payment is made
towards any other expenditure which is incurred by any
45
person in respect of the same designated assisted area, and on
the same single investment project, as that expenditure.
(9)
All such assessments and adjustments of assessments are to be made
as are necessary to give effect to subsection (8).

Finance (No. 4) Bill
Schedule 11 — Expenditure on plant and machinery for use in designated assisted areas
289

(10)
If a person who has made a return becomes aware that, after making
it, anything in it has become incorrect because of the operation of this
section, that person must give notice to an officer of Revenue and
Customs specifying how the return needs to be amended.
(11)
The notice must be given within 3 months beginning with the day on
5
which the person first became aware that anything in the return had
become incorrect because of the operation of this section.
(12)
In this section—
“agricultural product”, “coal sector”, “steel sector”,
“shipbuilding sector” and “synthetic fibres sector” have the
10
same meaning as in the General Block Exemption Regulation;
“General Block Exemption Regulation” means Commission
Regulation (EC) No 800/2008 (General block exemption
Regulation);
“management” and “waste” have the meaning given by Article
15
1 of Directive 2006/12/EC of the European Parliament and of
the Council;
“relevant grant or relevant payment” means a grant or payment
which is—
(a)
a State aid, other than an allowance under this Part, or
20
(b)
a grant or subsidy, other than a State aid, which the
Treasury by order declares to be relevant for the
purposes of the witholding of a section 45K
allowance;
“section 45K allowance” means a first-year allowance in respect
25
of expenditure that is first-year qualifying expenditure under
section 45K;
“single investment project” has the same meaning as in the
General Block Exemption Regulation;
“undertaking” means—
30
(a)
an autonomous enterprise, or
(b)
an enterprise (not within paragraph (a)) and its
partner enterprises (if any) and its linked enterprises
(if any),
and for this purpose “enterprise”, “autonomous enterprise”,
35
“partner enterprises” and “linked enterprises” have the
meaning given by Annex 1 to the General Block Exemption
Regulation.
(13)
Nothing in this section limits references to “State aid” to State aid
which is required to be notified to and approved by the European
40
Commission.
(14)
For the purposes of this section references to expenditure incurred in
respect of a designated assisted area includes expenditure incurred
on the provision of things for use primarily in that area or on services
to be provided primarily in that area.
45
(15)
The Treasury may by order make such provision amending this
section as appears to them appropriate for the purpose of giving
effect to any future amendments of or instruments replacing—
(a)
the General Block Exemption Regulation,