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| Tax relief for expenditure on research and development. |
69. - (1) Schedule 20 to this Act (tax relief for expenditure on research and development) has effect for accounting periods ending on or after 1st April 2000.
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In that Schedule-
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Part I provides for entitlement to relief, |
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Part II provides for the manner of giving effect to the relief, and |
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Part III contains supplementary provisions. |
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(2) Schedule 21 to this Act (which contains consequential amendments) has effect accordingly.
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Capital allowances |
| First year allowances for small or medium-sized enterprises. |
70. - (1) In section 22(3D) of the Capital Allowances Act 1990 (expenditure qualifying for 40% first year allowances), for "in the period beginning with 2nd July 1998 and ending with 1st July 2000" substitute "on or after 2nd July 1998".
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(2) In that Act-
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(a) in section 22(3C)(a), (3CA)(a) and (3D)(a), for "a small company or a small business" substitute "a small or medium-sized enterprise"; |
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(i) in the sidenote, for "small company or small business",
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(ii) in subsection (1) for "a small company", and
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(iii) in subsection (2) for "a small business",
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substitute "small or medium-sized enterprise". |
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The amendments in this subsection are of nomenclature only.
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| First year allowances for ICT expenditure by small enterprises. |
71. - (1) In section 22 of the Capital Allowances Act 1990 (first-year allowances), after subsection (3D) insert-
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"(3E) This section applies to-
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(a) any expenditure on information and communications technology which, disregarding any effect of section 83(2) on the time at which it is to be treated as incurred, is incurred by a small enterprise in the period beginning with 1st April 2000 and ending with 31st March 2003; and |
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(b) any additional VAT liability incurred in respect of expenditure to which this section applies by virtue of paragraph (a) above. |
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(3F) For the purposes of subsection (3E) above expenditure on information and communications technology means expenditure on items within any of the classes set out in subsection (3G) below.
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(3G) The classes referred to in subsection (3F) above are as follows:
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This class covers-
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(b) peripheral devices designed to be used by being connected to or inserted in a computer, |
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(c) equipment (including cabling) for use primarily to provide a data connection- |
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(i) between one computer and another, or
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(ii) between a computer and a data communications network,
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(d) dedicated electrical systems for computers. |
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For this purpose "computer" does not include computerised control or management systems or other systems that are part of a larger system whose principal function is not processing or storing information.
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This class covers-
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(a) wireless application protocol telephones, |
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(b) third generation mobile telephones, |
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(c) devices designed to be used by being connected to a television set that are capable of receiving and transmitting information from and to data networks, and |
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(d) other devices substantially similar to those within paragraphs (a), (b) and (c) that are capable of receiving and transmitting information from and to data networks. |
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This is subject to any order under subsection (3H) below.
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This class covers the right to use or otherwise deal with software for the purposes of any equipment within Class A or B above.
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(3H) The Treasury may make provision by order-
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(a) further defining the descriptions of equipment within Class B in subsection (3G), or |
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(b) adding further descriptions of equipment to that class.". |
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(2) In sections 22(4), (6B) and (6C), 23(6), 42(9) and 50(3) and (4A) of that Act, for "and (3D)" substitute ", (3D) and (3E)".
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(3) In sections 43(5), 44(5), 46(8) and 48(7) of that Act, for "or (3D)" substitute ", (3D) or (3E)".
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(4) In section 39(2)(a) of that Act for "to (3D)" substitute "to (3E)".
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| Expenditure of a small enterprise. |
72. After section 22A of the Capital Allowances Act 1990, insert-
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| "Expenditure of a small enterprise. |
22AA. - (1) For the purposes of section 22 capital expenditure incurred by a company is capital expenditure incurred by a small enterprise if the company-
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(a) qualifies as small in relation to the financial year of the company in which the expenditure is incurred, and |
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(b) is not a member of a large or medium-sized group at the time when the expenditure is incurred. |
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(2) For the purposes of section 22, capital expenditure is capital expenditure incurred by a small enterprise if-
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(a) it is incurred by a business for the purposes of a trade (the "first trade") carried on by that business, and |
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(b) were the first trade carried on by a company (the "hypothetical company") in the circumstances set out in subsection (3) below, that company would qualify as small in relation to the financial year of that company in which the expenditure would be treated as incurred. |
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(3) Those circumstances are-
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(a) that every trade, profession or vocation carried on by the business concerned is carried on by the business as a part of the first trade, |
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(b) that the financial years of the hypothetical company coincide with the chargeable periods of the business concerned, and |
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(c) that accounts of the hypothetical company for any relevant chargeable period were prepared in accordance with the requirements of the Companies Act 1985 as if that period were a financial year of the company. |
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(4) Subject to subsection (5) below, a company is a member of a large or medium-sized group at the time when any expenditure is incurred if -
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(a) it is at that time the parent undertaking of a group which does not qualify as small in relation to the financial year of the parent company in which that time falls; or |
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(b) it is at that time a subsidiary undertaking in relation to the parent undertaking of such a group. |
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(5) If, at the time when any expenditure is incurred by any company any arrangements exist which are such that, had effect been given to them immediately before that time, the company or a successor of the company would, at that time, have been a member of a large or medium-sized group, this section shall have effect as if the company concerned was a member of a large or medium-sized group at that time.
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(6) In this section the following expressions have the same meaning as in section 22A above: "arrangements", "business", "company", "financial year", "group", "parent undertaking" and "subsidiary undertaking".
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(7) References in this section, in relation to a company, to its qualifying as small-
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(a) except in the case of a company formed and registered in Northern Ireland, are references to its so qualifying, or being treated as so qualifying, for the purposes of section 247 of the Companies Act 1985; and |
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(b) in the case of a company so formed and registered, are references to a company so qualifying, or being treated as so qualifying, for the purposes of Article 255 of the Companies (Northern Ireland) Order 1986. |
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(8) In relation to a company with respect to which the question arises whether it is or would be a member of a large or medium-sized group, references to a group's qualifying as small-
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(a) except in the case of a company formed and registered in Northern Ireland, are references to its so qualifying, or being treated as so qualifying, for the purposes of section 249 of the Companies Act 1985; and |
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(b) in the case of a company so formed and registered, are references to its so qualifying, or being treated as so qualifying, for the purposes of Article 257 of the Companies (Northern Ireland) Order 1986; |
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but for the purposes of this section each of those provisions shall be construed as if references, in relation to a group, to the parent company were references to the parent undertaking.
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(9) For the purposes of this section a company is the successor of another if-
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(a) it carries on a trade which, in whole or in part, the other company has ceased to carry on, and |
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(b) the circumstances are such that section 343 of the principal Act applies in relation to the two companies as the predecessor and the successor within the meaning of that section.". |
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| Repeal of notification requirements. |
73. - (1) In section 118 of the Finance Act 1994 (notification requirements)-
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(a) subsections (1) to (5) and (7) to (9) shall cease to have effect; and |
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(b) in subsection (6), for "the provisions mentioned in subsection (2) above" there shall be substituted- |
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"(a) section 25(1) of the Capital Allowances Act 1990 (meaning of qualifying expenditure for the purposes of writing-down allowances for expenditure on machinery or plant); and |
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(b) section 44(4) of the Finance Act 1971 (provision corresponding to section 25(1) applicable to earlier chargeable periods),". |
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(2) This section has effect for chargeable periods as respects which the period specified in subsection (3A) of that section ends on or after 1st April 2000.
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| Pool for certain leased assets and inexpensive cars. |
74. - (1) In section 41 of the Capital Allowances Act 1990 (writing-down allowances etc for leased assets and inexpensive cars)-
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(a) in subsection (1), paragraphs (b) and (c) and the word "or" at the end of paragraph (a); and |
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(b) in subsection (4), paragraph (a) and, in paragraph (b), the words from "or within (1)(b) or (c)" to "subsection (1)(c)" and the words "or subsection (1)(b) or (c)", |
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shall cease to have effect for chargeable periods ending on or after the relevant date.
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(2) Subsection (3) below applies where-
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(a) immediately before the end of the relevant chargeable period, a person was treated for the purposes of sections 24, 25 and 26 of the Capital Allowances Act 1990 as having incurred expenditure on the provision of machinery or plant wholly and exclusively for the purposes of a separate trade carried on by him; |
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(b) the expenditure fell within subsection (1)(b) or (c) of section 41 of that Act; and |
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(c) qualifying expenditure in respect of the separate trade for the relevant chargeable period exceeded any disposal value brought into account in respect of that trade for that period. |
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(3) The balance of the excess (after the deduction of any writing-down allowances made by reference to it) shall be treated for the purposes of sections 24, 25 and 26 of the Capital Allowances Act 1990 as capital expenditure which-
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(a) was incurred by that person in the relevant chargeable period on the provision of the machinery or plant for the purposes of the trade which is the actual trade for the purposes of section 41 of that Act; and |
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(b) does not form part of his qualifying expenditure for that period. |
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(4) In this section-
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"the relevant chargeable period" means the chargeable period immediately preceding that which begins on or before and ends on or after the relevant date; |
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"the relevant date" means, subject to subsection (5) below, 6th April 2000 for the purposes of income tax and 1st April 2000 for the purposes of corporation tax. |
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(5) A person may, by a notice given to an officer of the Board, elect that this section shall have effect in relation to any trade carried on by him as if the relevant date were 6th April 2001 or, as the case may be, 1st April 2001.
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