Finance (No. 4) Bill (HC Bill 325)

(m) no disqualifying arrangements (see section 299A).”

Relaxation of maximum qualifying investment requirement

5 (1) Section 287 (maximum qualifying investment requirement) is amended as follows.

(2) In subsection (1), after “that” insert “, if the condition in subsection (1A) is met,”.

(3) After that subsection insert—

“(1A) The condition is that—

(a) at the time of the issue of the relevant holding the relevant company or any of its qualifying subsidiaries was a member of a partnership or a party to a joint venture,

(b) the trade which meets the requirement of section 291 was at that time being carried on, or to be carried on, by those partners in partnership or by the parties to the joint venture, and

(c) the other partners or parties to the joint venture include at least one other company.”

(4) In subsection (2)—

(a) for “Subject to subsection (7), the” substitute “The”, and

(b) after “exceeds” insert “the relevant fraction of”.

(5) After that subsection insert—

“(2A) The relevant fraction is—

where “N” is the number of companies (including the relevant company) which, at the time when the relevant holding was issued were members of the partnership or, as the case may be, parties to the joint venture.”

(6) Omit subsections (6) and (7).

Increase in the maximum amount permitted to be raised annually

6 (1) Section 292A (the maximum amount raised annually through risk capital schemes requirement) is amended as follows.

(2) In subsection (1) for “£2 million” substitute “£5 million”.

(3) In subsection (3)—

(a) in paragraph (b), omit sub-paragraph (ii), and

(b) after that paragraph insert “, or

(c) any other investment is made in the company which is aid received by it pursuant to a measure approved by the European Commission as compatible with Article 107 of the Treaty on the Functioning of the European Union in accordance with the principles laid down in the Community Guidelines on Risk Capital Investments in Small and Medium-sized Enterprises (as those guidelines may be amended or replaced from time to time).”

(4) In subsection (5) omit “or paragraph 42 of Schedule 15 to FA 2000”.

Acquisition of shares

7 In section 293 (the use of the money raised requirement), after subsection (5) insert—

“(5A) Employing money on the acquisition of shares in a company does not of itself amount to employing the money for the purposes of a relevant qualifying activity.”

Increase in the gross assets limits

8 In section 297 (the gross assets requirement)—

(a) in subsections (1)(a) and (2)(a), for “£7 million” substitute “£15 million”, and

(b) in subsections (1)(b) and (2)(b), for “£8 million” substitute “£16 million”.

Relaxation of restriction on number of employees

9 In section 297A (the number of employees requirement), in subsections (1) and (2), for “50” substitute “250”.

No disqualifying arrangements requirement

299A The no disqualifying arrangements requirement

(1) The relevant holding must not have been issued in consequence of, or otherwise in connection with, disqualifying arrangements.

(2) Arrangements are “disqualifying arrangements” if—

(a) the main purpose, or one of the main purposes, of any person (“P”) in being a party to them is to secure—

(i) that the relevant company, or a qualifying 90% subsidiary of that company, carries on a business which consists of or includes the relevant qualifying activity, and

(ii) that shares or securities issued by the relevant company may be comprised in any company’s qualifying holdings or that one or more persons may obtain relevant tax relief in respect of such shares

which raise money for the purposes of that activity, and

(b) one or both of conditions A and B are met.

(3) Condition A is that, as a (direct or indirect) result of the money raised by the issue of the relevant holding being employed as required by section 293(1)(b), an amount representing the whole or the majority of the amount raised is paid to or for the benefit of a party to the arrangements or a person connected with such a party,

(4) Condition B is that, in the absence of the arrangements, it would have been reasonable to expect that the component activities of the relevant qualifying business activity would have been carried on as part of another business by a person who is a party to the arrangements or a person connected with such a party.

(5) For the purposes of this section it is immaterial whether the relevant company is a party to the arrangements.

(6) In this section—

• “component activities” means—

  (a)

  if the relevant qualifying activity is within section 291(2), the carrying on of a qualifying trade which constitutes that activity, and

  (b)

  if the relevant qualifying activity is within section 291(3), the preparations to carry on a qualifying trade which constitute that activity;

• “arrangements” includes any scheme, agreement, understanding, transaction or series of transactions (whether or not legally enforceable);

• “relevant qualifying activity” means the relevant qualifying activity by reference to which the requirement in section 293(1)(b) (money raised to be employed within two years for relevant qualifying activity) is met in relation to the relevant holding;

• “relevant tax relief”, in respect of shares, means one or more of the following—

  (a)

  relief under Chapter 6 of Part 4 (losses on disposal of shares) in respect of the shares;

  (b)

  EIS relief (within the meaning of Part 5) in respect of the shares;

  (c)

  SEIS relief (within the meaning of Part 5A) in respect of the shares;

  (d)

  relief under section 150A or 150E of TCGA 1992 (enterprise investment scheme and seed enterprise investment scheme) in respect of the shares;

  (e)

  relief under Schedule 5B to that Act in consequence of which deferral relief is attributable to the shares;

  (f)

  relief under Schedule 5BB to that Act (seed enterprise investment scheme: re-investment) in consequence of which SEIS re-investment relief is attributable to the shares (see paragraph 4 of that Schedule).”

Subsidised generation or export of electricity

11 (1) Section 303 (meaning of “excluded activities”) is amended as follows.

(2) In subsection (1), omit “and” at the end of paragraph (k) and after that paragraph insert—

“(ka) the subsidised generation or export of electricity, and”.

(3) In subsection (2), omit the “and” at the end of paragraph (e) and after paragraph (f) insert “, and

(g) section 309A (subsidised generation or export of electricity).”

12 After section 309 insert—

“309A Excluded activities: subsidised generation or export of electricity

(1) This section supplements section 303(1)(ka).

(2) Electricity is exported if it is exported onto a distribution system or transmission system (within the meaning of section 4 of the Electricity Act 1989).

(3) The generation of electricity is “subsidised” if a person receives a FIT subsidy in respect of the electricity generated.

(4) The export of electricity is “subsidised” if a person receives a FIT subsidy in respect of the electricity exported.

(5) But the generation or export of electricity is not to be taken to fall within section 303(1)(ka) if Condition A, B or C is met.

(6) Condition A is that the generation or export is carried on by—

(a) a community interest company,

(b) a co-operative society,

(c) a community benefit society, or

(d) a NI industrial and provident society.

(7) Condition B is that the plant used to generate the electricity relies wholly or mainly on anaerobic digestion.

(8) Condition C is that the electricity is hydroelectric power.

(9) For the purposes of this section—

• “anaerobic digestion” means the bacterial fermentation of organic material in the absence of free oxygen (excluding anaerobic digestion of sewage or material in a landfill);

• “community benefit society” means—

  (a)

  a society registered under the Co-operative and Community Benefit Societies and Credit Unions Act 1965 as a community benefit society, or

  (b)

  a pre-2010 Act society (as defined at section 4A(1) of that Act) which meets the condition in section 1(3) of that Act;

• “co-operative society” means—

  (a)

  a society registered under the Co-operative and Community Benefit Societies and Credit Unions Act 1965 as a co-operative society, or

  (b)

  a pre-2010 Act society (as defined at section 4A(1) of that Act) which meets the condition in section 1(2) of that Act;

• “FIT subsidy” means—

  (a)

  a financial incentive under a scheme established by virtue of section 41 of the Energy Act 2008 (powers to amend licence conditions etc: feed-in tariffs) to encourage small-scale low-carbon generation of electricity, or

  (b)

  a financial incentive under a similar scheme established in a territory outside the United Kingdom to encourage small-scale low-carbon generation of electricity;

• “NI industrial and provident society” means a society registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 (c. 24 (N.I.));

• “small-scale low-carbon generation” has the meaning given by section 41(4) of the Energy Act 2008.”

13 In section 310 (excluded activities: provision of services or facilities for another business), in subsection (1)(a), for “(k)” substitute “(ka)”.

Powers to amend

14 In section 311 (power to amend Chapter by Treasury order), the existing provision becomes subsection (1) and after that subsection insert—

“(2) An order under this section may—

(a) make different provision for different cases or purposes, or

(b) include such transitional provision as the Treasury consider appropriate.”

Information

15 After section 312 insert—

“312A Power to require information relating to disqualifying arrangements

(1) Subsection (2) applies if an officer of Revenue and Customs has reason to believe that the relevant company has issued the relevant holding to the investing company in consequence of or, or otherwise in connection with, disqualifying arrangements (within the meaning of section 299A(2)).

(2) The officer may by notice require any person concerned to supply the officer within such time as may be specified in the notice with—

(a) a declaration in writing stating whether or not, according to the information which that person has or can reasonably obtain, such arrangements exist or have existed, and

(b) such other information as the officer may reasonably require for the purposes of section 299A and as that person has or can reasonably obtain.

(3) The period specified in a notice under subsection (2) must be at least 60 days.

(4) A “person concerned” means—

(a) the relevant company,

(b) the investing company,

(c) any person connected with either of those companies, and

(d) any person whom the officer has reason to believe is or was a party to the arrangements in question.”

16 In section 313 (interpretation of Chapter 4), in subsection (5), after “Chapter” insert “(other than section 312A)”.

Consequential amendment

17 In section 98 of TMA 1970 (special returns, etc), in the first column of the Table, before the entry for “regulations under Chapter 5 of Part 6 of ITA 2007” insert—

• “section 312A of ITA 2007;”.

Commencement and transitional provision

18 (1) The amendments made by paragraphs 2 and 3 have effect in relation to investments made on or after 6 April 2012.

(2) But nothing in sub-paragraph (1) prevents investments made before that date constituting a “relevant investment” for the purposes of section 280B of ITA 2007 (as inserted by paragraph 3) for the purposes of determining whether the investment limits condition in section 274 of that Act is breached by an investment made on or after that date.

19 (1) The amendments made by paragraphs 4, 5, 6(1) and (3), 10, 15 and 16 have effect for the purpose of determining whether shares or securities issued on or after 6 April 2012 are to be regarded as comprised in a company’s qualifying holdings.

(2) But for the purposes of paragraphs 4, 10, 15 and 16 it does not matter whether the disqualifying arrangements were entered into before or on or after 6 April 2012.

20 (1) The amendments made by paragraphs 6(2), 8 and 9 come into force on such such day as the Treasury may by order appoint.

(2) Those amendments have effect in relation to shares issued on or after 6 April 2012.

21 (1) Paragraph 7 is to be treated as having come into force on 6 April 2012.

(2) The amendments made by that paragraph do not have effect in relation to an investment made by a VCT of protected money.

(3) “Protected money” means—

(a) money raised by the issue before 6 April 2012 of shares in or securities of the VCT, and

(b) money derived from the investment of such money.

22 (1) Subject to sub-paragraph (2), the amendments made by paragraphs 11 to 13have effect in relation to a relevant holding issued on or after 23 March 2011.

(2) Those amendments do not have effect in relation to any relevant holding issued before 6 April 2012 if the relevant company, or a qualifying 90%

subsidiary of that company, first began to carry on activities of the kind mentioned in section 303(1)(ka) of ITA 2007 before that day.

(3) Until such time as section 1 of the Co-operative and Community Benefit Societies and Credit Unions Act 2010 comes into force, section 309A(6) of ITA 2007 (as inserted by paragraph 10 of this Schedule) has effect as if for paragraphs (b) and (c) there were substituted—

“(b) a society registered under the Industrial and Provident Societies Act 1965,”.

Section 42

SCHEDULE 9 Capital allowances for plant and machinery: anti-avoidance

Transactions to obtain allowances

1 For section 215 of CAA 2001 substitute—

“215 Transactions to obtain tax advantages

(1) Allowances under this Part are restricted under the applicable sections if B enters into a relevant transaction with S that either—

(a) has an avoidance purpose, or

(b) is part of, or occurs as a result of, a scheme or arrangement that has an avoidance purpose.

(2) Subsection (1)(b) may be satisfied—

(a) whether the scheme or arrangement was made before or after the relevant transaction was entered into, and

(b) whether or not the scheme or arrangement is legally enforceable.

(3) A transaction, scheme or arrangement has an “avoidance purpose” if the main purpose, or one of the main purposes, of a party in entering into the transaction, scheme or arrangement is to enable a person to obtain a tax advantage under this Part that would not otherwise be obtained.

(4) The reference in subsection (3) to obtaining a tax advantage that would not otherwise be obtained includes obtaining an allowance that is in any way more favourable to a person than the one that would otherwise be obtained.

(5) If the tax advantage is of a kind described in subsection (7), “the applicable sections” are sections 217 and 218ZA(5).

(6) Otherwise, “the applicable sections” are sections 217 and 218ZA(1) or, as the case may be, 218ZA(3).

(7) The kinds of tax advantage are—

(a) that an allowance to which B is entitled for a chargeable period is calculated using a percentage rate that is higher than the one that would otherwise be used, or

(b) that B is entitled to an allowance in respect of an amount of capital expenditure sooner than B would otherwise be entitled to it.

(8) If a transaction, scheme or arrangement involves—

(a) a tax advantage of a kind described in subsection (7), and

(b) a tax advantage not of such a kind,

subsections (5) and (6) have effect separately in relation to each tax advantage.”

Restrictions on writing-down allowances

2 In section 57(3) of CAA 2001 (available qualifying expenditure), after “section 218(1),” insert “218ZA(1) or (3),”.

3 In section 214 of that Act (connected persons), after “218” insert “(or, as the case may be, 218ZA(3))”.

4 In section 216 of that Act (sale and leaseback, etc), in subsection (1), after “218” insert “(or, as the case may be, 218ZA(3))”.

5 (1) Section 218 of that Act (restriction on B’s qualifying expenditure) is amended as follows.

(2) In subsection (1), for “section 214, 215 or 216” substitute “section 214 or 216”.

(3) At the end insert—

“(5) This section is subject to section 218ZA(3).”

(4) Accordingly, in the heading of that section, insert at the end “: section 214 or 216”.

6 After section 218 of that Act insert—

“218ZA Restrictions on writing-down allowances: section 215

(1) If this subsection applies as a result of section 215, all or part of B’s expenditure under the relevant transaction is to be left out of account in determining B’s available qualifying expenditure.

(2) The amount of expenditure to be left out of account is—

(a) such amount as would or would in effect cancel out the tax advantage mentioned in section 215 (whether that advantage is obtained by B or another person and whether it relates to the relevant transaction or something else), or

(b) if the amount found under paragraph (a) exceeds the whole of B’s expenditure under the relevant transaction, the whole of that expenditure.

(3) But if subsection (1) applies as a result of section 215 and—

(a) section 218 also applies as a result of section 214 or 216, or

(b) section 228 also applies by virtue of an election under section 70I(11) or 227,

the amount of expenditure to be left out of account is the greater of X and Y.

(4) For the purposes of subsection (3)—

• “X” is the amount found under subsection (2), and

• “Y” is the amount by which B’s expenditure under the relevant transaction exceeds D (as defined in section 218 or, as the case may be, section 228).

(5) If this subsection applies as a result of section 215—

(a) the allowance mentioned in subsection (7)(a) of that section is to be calculated using the rate that would be used without the tax advantage, or (as the case may be)

(b) the entitlement mentioned in subsection (7)(b) of that section is to be available as and when it would be available without the tax advantage.

(6) Subsection (5) applies whether or not section 218 also applies as a result of section 214 or 216, or section 228 also applies by virtue of an election under section 70I(11) or 227.”

Restriction of exception for manufacturers and suppliers

7 (1) Section 230 of CAA 2001 (exception for manufacturers and suppliers), as amended by section 41 of this Act, is amended as follows.

(2) For subsection (1) substitute—

“(1) The restrictions in sections 217 and 218 do not apply in relation to any plant or machinery if—

(a) the relevant transaction is within section 213(1)(a) or (b),

(b) the case does not fall within section 215, and

(c) the conditions in subsection (3) are met.”

(3) Omit subsection (2).

Relevant transactions

8 After section 268D of CAA 2001 insert—

“268E Meaning of “assigns”

(1) For the purposes of this Part—

(a) a person (“A”) is taken to assign the benefit of a contract, or rights under a contract, to another person (“B”) whenever B becomes entitled, and A ceases to be entitled, to the benefit or rights (whether by assignment, novation, variation or replacement of the contract, by operation of law or otherwise), and

(b) references to an assignment are to be read accordingly.

(2) Any reference in this Part to the benefit of a contract or to rights under a contract includes a reference to part of the benefit of a contract or to part of the rights under a contract.”

Commencement

9 (1) The amendments made by paragraphs 1 to 7 of this Schedule have effect in relation to expenditure of B’s that is incurred on or after the start date (regardless of when the relevant transaction was entered into).

(2) The amendment made by paragraph 8 of this Schedule has effect in relation to expenditure that is incurred on or after the start date.

(3) The start date is—

(a) 1 April 2012, for corporation tax purposes, and

(b) 6 April 2012, for income tax purposes.

Section 43

SCHEDULE 10 Plant and machinery allowances: fixtures

Introductory

1 CAA 2001 is amended as follows.

Changes in ownership

2 After section 187 insert—

“187A Effect of changes in ownership of a fixture

(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 for the purposes of a qualifying activity carried on by the current owner,

(b) the plant or machinery is treated as having been owned at a relevant earlier time by a person as a result of incurring other capital expenditure (“historic expenditure”) on its provision for the purposes of a qualifying activity carried on by that person,

(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) a person mentioned in paragraph (b) was entitled to claim an allowance under this Part in respect of the historic expenditure.

(2) In this section—

• “the past owner” means—

  (a)

  the person mentioned in paragraph (d) of subsection (1), or

  (b)

  if there is more than one amount of historic expenditure in respect of which a person was entitled to claim as mentioned in that paragraph, the person by whom expenditure was incurred most recently;

• “relevant earlier time” has the meaning given by section 187B(4) and (5).

(3) In determining the current owner’s qualifying expenditure, the new expenditure is to be treated as nil if—

(a) the pooling requirement is not satisfied,

(b) the fixed value requirement applies but is not satisfied, or

(c) the disposal value statement requirement applies but is not satisfied,

in relation to the past owner.

(4) The pooling requirement is that—

(a) the historic expenditure has been allocated to a pool in a chargeable period beginning on or before the day on which the past owner ceases to be treated as the owner of the fixture, or

(b) a first-year allowance has been claimed in respect of that expenditure (or any part of it).

(5) The fixed value requirement applies if the past owner is or has been required (as a result of having made a claim in respect of the historic expenditure) to bring the disposal value of the plant or machinery into account in accordance with item 1, 5 or 9 of the Table in section 196.

(6) The fixed value requirement is that either—

(a) a relevant apportionment of the apportionable sum has been made, or

(b) the current owner has obtained the statements mentioned in subsection (8), or copies of them, (directly or indirectly) from the persons who made them and the case is one where the purchaser from the past owner or, as the case may be, lessee was not entitled to claim an allowance under this Part in respect of capital expenditure incurred on the fixture.

(7) For the purposes of subsection (6)(a) a relevant apportionment of the apportionable sum is made if—

(a) the tribunal determines the part of the apportionable sum that constitutes the disposal value, on an application made by one of the affected parties before the end of the relevant 2 year period, or

(b) an election is made, in respect of the apportionable sum, by the affected parties jointly—

(i) before the end of the relevant 2 year period, or

(ii) if an application is made as mentioned in paragraph (a) and not determined or withdrawn by the end of that period, before that application is determined or withdrawn.

(8) The statements referred to in subsection (6)(b) are—

(a) a written statement made by the purchaser from the past owner or, as the case may be, lessee, that the requirement of subsection (6)(a) has not been met and is no longer capable of being met, and

(b) a written statement made by the past owner of the amount of the disposal value that the past owner has in fact brought into account.

(9) In subsections (6) to (8)—

(a) in a case falling within item 1 or 9 of the Table in section 196—

• “affected parties” means the past owner and the purchaser from the past owner;

• “apportionable sum” means the sale price;

• “election” means an election under section 198;

• “relevant 2 year period” means the period of 2 years beginning with the date when the purchaser from the past owner acquires the qualifying interest;

(b) in a case falling within item 5 of that Table—

• “affected parties” means the past owner and the lessee;

• “apportionable sum” means the capital sum given by the lessee for the lease;

• “election” means an election under section 199;

• “relevant 2 year period” means the period of 2 years beginning with the date when the lessee is granted the lease.

(10) The disposal value statement requirement applies if the past owner is or has been required (as a result of having made a claim in respect of the historic expenditure) to bring the disposal value of the plant or machinery into account in accordance with item 2 or 3 of the Table in section 196 or in accordance with item 7 of the Table in section 61.

(11) The disposal value statement requirement is—

(a) that the past owner has, no later than 2 years after the date when the past owner ceased to own the plant or machinery, made a written statement of the amount of the disposal value that the past owner is or has been required to bring into account, and

(b) the current owner has obtained that statement or a copy of it (directly or indirectly) from the past owner.

187B Section 187A: supplementary provision

(1) It is for the current owner to show—

(a) whether the fixed value requirement applies and, if so, is satisfied, and

(b) whether the disposal value statement requirement applies and, if so, is satisfied,

and, for this purpose, to provide an officer of Revenue and Customs, on request, with a copy of any tribunal decision, election or statement by reason of which a requirement mentioned in paragraph (a) or (b) is satisfied.

(2) Where—

(a) the fixed value requirement applies and is met by reason of section 187A(7)(b) being satisfied, or

(b) the disposal value requirement applies,

subsections (2) and (4) of section 200 apply in relation to the making of a statement within section 187A(8)(b) or (11)(a) and an amount specified in such a statement, as they apply in relation to an election and an amount specified in an election.

(3) For the purposes of section 187A, the current owner and the past owner may be the same person.

(4) In that section “relevant earlier time” means (subject to subsection (5)) any time which falls before the earliest time when the current

owner is treated as owning the plant or machinery as a result of incurring the new expenditure.

(5) 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.

(6) Nothing in section 187A(3) affects the disposal value (if any) which falls to be brought into account by the past owner (as a result of having made a claim in respect of the historic expenditure).

(7) Expressions used in this section have the same meaning as in section 187A.”

3 In section 198 (election to apportion sale price on sale of qualifying interest)—

(a) in subsection (1), after “item 1” insert “or 9”, and

(b) in subsection (2)(a), after “item 1” insert “or (as the case may be) 9”.

4 (1) Section 201 (elections under sections 198 and 199: procedure) is amended as follows.

(2) In subsection (1), at the end insert—

• “But this is subject to subsection (1A).”

(3) After that subsection insert—

“(1A) Where—

(a) the requirement of subsection (6) of section 187A (effect of changes in ownership of fixture: fixed value requirement) applies, or may in future apply by reason of a person being required to bring the disposal value of plant and machinery into account in accordance with item 1, 5 or 9 of the Table in section 196,

(b) an application is made to the tribunal for the purposes of section 187A(7)(a), and

(c) that application is not determined before the end of the period mentioned in subsection (1) of this section,

subsection (1) does not apply and an election within section 187A(7)(b) may be made by notice to an officer of Revenue and Customs at any time before the tribunal determines the application or the application is withdrawn.”

(4) For subsection (3)(f) substitute—

“(f) in relation to each of the persons making the election—

(i) that person’s Unique Taxpayer Reference, or

(ii) that the person does not have a Unique Taxpayer Reference.”

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—

“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 (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 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—

(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.

(3) If the proceeds from the balancing event mentioned in subsection (1)(b) exceed R, the maximum allowance amount is—

where—

(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—

(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.

(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 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)”.

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 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—

“(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

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.

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.

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.

(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.

(3) “The commencement date” means—

(a) for income tax purposes, 6 April 2012, and

(b) for corporation tax purposes, 1 April 2012.

Section 44

SCHEDULE 11 Expenditure on plant and machinery for use in designated assisted areas

1 CAA 2001 is amended as follows.

2 In section 39 (first-year allowances available for certain types of qualifying expenditure only), at the appropriate place in the list insert—

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 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.

(c)(c)Conditions A to E are met.

(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—

(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 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 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.

(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—

(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, 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 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 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 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 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.