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| Machinery and plant allowances for non-residents etc. |
75. - (1) In section 83 of the Capital Allowances Act 1990 (interpretation of Part II), after subsection (2) there shall be inserted-
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"(2A) In this Part (except in Chapter V and sections 64A and 75 to 78), references-
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(b) to activities falling in accordance with section 28A, 29 or 61 to be treated as a trade, |
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shall be construed as if activities were capable of being comprised in a trade, or of being treated as a trade, to the extent only that they are activities the profits or gains from which are, or (if there were any) would be, chargeable to income tax or corporation tax.".
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(2) After section 79 of that Act there shall be inserted-
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| "Reduction in qualifying use. |
79A. - (1) This section applies where-
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(a) any expenditure falls, for the purposes of making allowances or charges, to be treated in accordance with section 79 as incurred on the provision of machinery or plant for the purposes of a notional trade; |
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(b) there is such a change of circumstances as would make it appropriate for any reduction falling to be made under subsection (5) of that section- |
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(i) for the chargeable period in which the change takes place ("the relevant chargeable period"), or
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(ii) for any subsequent chargeable period,
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to represent a larger proportion of the amount reduced than would have been appropriate apart from the change; |
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(c) no disposal value in respect of the machinery or plant would, apart from this section, fall to be brought into account for the relevant chargeable period; and |
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(d) the open market value of the machinery or plant at the end of the relevant chargeable period exceeds the qualifying expenditure in respect of the notional trade for that period by more than £1 million. |
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(2) It shall be assumed that the notional trade is permanently discontinued immediately before the end of the relevant chargeable period.
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(3) Section 79(3) shall have effect as if immediately after the beginning of the following chargeable period expenditure had been incurred on the provision of the machinery or plant of an amount equal to the disposal value brought into account by virtue of subsection (2) above.
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(4) In this section "open market value" has the same meaning as in section 76.".
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(3) In section 81 of that Act (effect of bringing an asset into use for the purposes of a trade after it has been used for a purpose that does not attract capital allowances), after subsection (2) there shall be inserted-
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"(2AA) Where-
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(a) a person is treated by virtue of subsection (1)(a) above as having incurred capital expenditure on the provision of machinery or plant, and |
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(b) the sum which (apart from this subsection) would be taken to be the amount of that expenditure is more than the amount of capital expenditure actually incurred by that person on the provision of the machinery or plant, |
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the amount of the capital expenditure treated by virtue of subsection (1)(a) above as incurred on the provision of the machinery or plant shall be deemed (subject to subsection (2AB) below) to be equal to the amount actually so incurred by that person.
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(2AB) Where any of the amount of capital expenditure actually incurred on the provision of the machinery or plant by the person in question would have fallen by virtue of section 75, 76 or 76A to be disregarded for the purposes of sections 24, 25 and 26 had it been in consequence of that expenditure that the machinery or plant was provided for the purposes of a trade, the references in subsection (2AA) above to that amount shall be construed as references to only so much of that expenditure as would not have fallen to be so disregarded.".
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(4) In Schedule 19AC to the Taxes Act 1988 (overseas life insurance companies), in paragraph 10B (modifications of section 440), after sub-paragraph (2) there shall be inserted-
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"(2A) The following subsection shall be treated as inserted after subsection (4)-
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| "(4AA) Section 81 of the 1990 Act (as it has effect by virtue of section 83(2A) of that Act) shall apply in relation to any case in which an asset or part of an asset held by an overseas life insurance company-
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(a) ceases to be within the category set out in paragraph (h) of subsection (4) above; and |
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(b) at the same time comes within another of the categories set out in that subsection.".". |
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(5) In section 53 of the Capital Allowances Act 1990-
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(a) in subsection (1), paragraph (bb) (which, for the purposes of making allowances in respect of machinery or plant subject to equipment leasing, requires the equipment lessee to be within the charge to tax) shall cease to have effect; and |
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(b) in subsection (1B)(b), for "paragraphs (bb) and" there shall be substituted "paragraph". |
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(6) In this section-
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(a) subsections (1), (4) and (5) have effect for chargeable periods ending on or after 21st March 2000; |
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(b) subsection (2) has effect where the change of circumstances occurs on or after that date; and |
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(c) subsection (3) has effect where the condition mentioned in section 81(1)(a) of that Act is fulfilled on or after that date. |
| Production animals. |
76. - (1) Section 82 of the Capital Allowances Act 1990 (capital expenditure to which Part II does not apply) shall be renumbered as subsection (1) of that section; and after that provision as so renumbered there shall be inserted-
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"(2) This Part shall not apply to capital expenditure-
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(a) on animals or other creatures to which Schedule 5 to the principal Act (treatment of farm animals etc for purposes of Case I of Schedule D) applies; or |
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(b) on shares in such animals or creatures.". |
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(2) In paragraph 9(4) of Schedule 5 to the Taxes Act 1988 (treatment of farm animals etc for purposes of Case I of Schedule D), for the words from "in relation to animals" to the end there shall be substituted-
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"(a) in relation to animals or other creatures kept singly as they apply in relation to herds; and |
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(b) in relation to shares in animals or other creatures as they apply in relation to animals or other creatures themselves.". |
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(3) The enactments amended by subsections (1) and (2) above shall be deemed always to have had effect with the amendments made by those subsections.
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| Sale and leaseback. |
77. - (1) After section 76A of the Capital Allowances Act 1990 insert-
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| "Special provision for sale and leaseback cases. |
76B. - (1) This section applies where-
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(a) subsection (1), (2) or (3) of section 75 applies by virtue of paragraph (b) (and not by virtue of paragraph (a) or (c)) of that subsection, or is treated (under one or both of sections 76(1) and 76A(1)) as so applying; |
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(b) the conditions set out in subsection (2) below are fulfilled; and |
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(c) the seller and the buyer elect that this section should apply. |
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(2) The conditions are-
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(a) that the seller incurred capital expenditure on the provision of the machinery or plant; |
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(b) that the machinery or plant was new at or after the time when it was acquired by the seller; |
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(c) that the machinery or plant was acquired by the seller otherwise than as a result of a transaction to which section 75(1), (2) or (3) applies, or is treated (under one or both of sections 76(1) and 76A(1)) as applying; |
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(d) that the sale is effected not more than four months after the first occasion on which the machinery or plant is brought into use by any person for any purpose; |
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(e) that the seller has not- |
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(i) made a claim for an allowance in respect of capital expenditure incurred on the provision of the machinery or plant;
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(ii) made a return in which such expenditure is taken into account in determining his qualifying expenditure for the purposes of section 24; or
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(iii) given notice of any such amendment of a return as provides for such expenditure to be so taken into account.
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(3) In a case where this section applies-
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(a) no allowance shall be made to the seller under this Act in respect of the capital expenditure incurred on the provision of the machinery or plant, or any additional VAT liability incurred in respect of it; |
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(b) the whole amount of that expenditure, and any such liability, shall be left out of account in determining the amount for any period of the seller's qualifying expenditure under section 25; |
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(c) section 76(2) shall have effect as if paragraph (a) were omitted; and |
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(d) section 76A shall have effect as if subsection (5) were omitted. |
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(4) An election under this section shall be made by notice to an officer of the Board not more than two years after the time of the sale.
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(5) An election under this section shall be irrevocable once made; and nothing in-
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(a) section 42 of, or Schedule 1A to, the Taxes Management Act 1970 (claims and elections for income tax purposes); or |
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(b) paragraphs 54 to 60 of Schedule 18 to the Finance Act 1998 (claims and elections for corporation tax purposes), |
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shall apply to such an election.
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(6) In this section, in a case where section 75(2) applies or is treated as applying, "the seller" means the owner of the machinery or plant, "the buyer" means the person entering into the contract and "the sale" means the making of the contract.
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(7) In this section, in a case where section 75(3) applies or is treated as applying-
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(a) "the seller" means the assignor, "the buyer" means the assignee and "the sale" means the assignment; and |
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(b) references to the machinery or plant being acquired by the seller shall be construed as references to the contract being entered into by the assignor. |
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(8) In this section "return" means any return required to be made under the Taxes Management Act 1970 for income tax or corporation tax purposes.".
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(2) In subsections (1), (2) and (3) of section 75 of that Act, after "76A" there shall be inserted ", 76B".
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