Finance Bill

House of Commons

Session 2007 - 08
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Finance Bill

Finance Bill
Schedule 24 — Annual investment allowance
Part 1 — Amendments of CAA 2001
290

51C
Second restriction: groups of companies
(1)
This section applies in relation to—
(a)
a company which, in a financial year, is a parent undertaking
of one or more other companies, and
(b)
those other companies.
5
(2)
The companies are entitled to a single annual investment allowance
between them in respect of the relevant AIA qualifying expenditure.
(3)
The companies may allocate the annual investment allowance to the
relevant AIA qualifying expenditure as they think fit.
(4)
The relevant AIA qualifying expenditure is the AIA qualifying
10
expenditure incurred by the companies in chargeable periods ending
in the financial year mentioned in subsection (1).
(5)
A company (“P”) is a parent undertaking of another company (“C”)
in a financial year if P is a parent undertaking of C at the end of C’s
chargeable period ending in that financial year.
15
(6)
In this section “parent undertaking” has the same meaning as in
section 1162 of the Companies Act 2006.
(7)
This section is subject to section 51D.
51D
Third restriction: groups of companies under common control
(1)
Where in a financial year two or more groups of companies are—
20
(a)
controlled by the same person (see section 51F), and
(b)
related to one another (see section 51G),

this section applies in relation to the companies which are members
of those groups.
(2)
The companies are entitled to a single annual investment allowance
25
between them in respect of the relevant AIA qualifying expenditure.
(3)
The companies may allocate the annual investment allowance to the
relevant AIA qualifying expenditure as they think fit.
(4)
The relevant AIA qualifying expenditure is the AIA qualifying
expenditure incurred by the companies in chargeable periods ending
30
in the financial year mentioned in subsection (1).
(5)
In this section and in sections 51F and 51G, a group of companies
means—
(a)
a company which, in the financial year mentioned in
subsection (1), is a parent undertaking of one or more other
35
companies, and
(b)
those other companies,

(and the members of the group are the company which is the parent
undertaking and those other companies).
(6)
A company (“P”) is a parent undertaking of another company (“C”)
40
in a financial year if P is a parent undertaking of C at the end of C’s
chargeable period ending in that financial year.
(7)
In this section “parent undertaking” has the same meaning as in
section 1162 of the Companies Act 2006.

Finance Bill
Schedule 24 — Annual investment allowance
Part 1 — Amendments of CAA 2001
291

51E
Fourth restriction: other companies under common control
(1)
This section applies in relation to two or more companies which in a
financial year are—
(a)
controlled by the same person (see section 51F), and
(b)
related to one another (see section 51G),
5

and in relation to which to neither section 51C nor section 51D
applies.
(2)
The companies are entitled to a single annual investment allowance
between them in respect of the relevant AIA qualifying expenditure.
(3)
The companies may allocate the annual investment allowance to the
10
relevant AIA qualifying expenditure as they think fit.
(4)
The relevant AIA qualifying expenditure is the AIA qualifying
expenditure incurred by the companies in chargeable periods ending
in the financial year mentioned in subsection (1).
51F
Companies and groups: meaning of “control”
15
(1)
A company is controlled by a person in a financial year if it is
controlled by that person at the end of its chargeable period ending
in that financial year.
(2)
A group of companies is controlled by a person in a financial year if
the company which is the parent undertaking is controlled by that
20
person at the end of its chargeable period ending in that financial
year.
(3)
Section 574(2) defines “control” in relation to a company which is a
body corporate.
(4)
In relation to a company (“C”) which is not a body corporate, control
25
means the power of a person (“P”) to secure—
(a)
by means of the holding of shares or the possession of voting
power in relation to C or another body, or
(b)
as a result of any powers conferred by the constitution of C or
another body,
30

that the affairs of C are conducted in accordance with P’s wishes.
(5)
In subsection (4) “shares” has the meaning given by section 1161(2)
of the Companies Act 2006.
51G
Companies and groups: meaning of “related”
(1)
A company (“C1”) is related to another company (“C2”) in a financial
35
year if one or both of—
(a)
the shared premises condition, and
(b)
the similar activities condition,

are met in relation to the companies in that financial year.
(2)
Where C1 is related to C2 in a financial year, C1 is also related to any
40
other company to which C2 is related in that financial year.
(3)
A group of companies (“G1”) is related to another group of
companies (“G2”) in a financial year if in that financial year a

Finance Bill
Schedule 24 — Annual investment allowance
Part 1 — Amendments of CAA 2001
292

company which is a member of G1 is related to a company which is
a member of G2.
(4)
Where G1 is related to G2 in a financial year, G1 is also related to any
other group of companies to which G2 is related in that financial
year.
5
(5)
The shared premises condition is met in relation to two companies in
a financial year if, at the end of the relevant chargeable period of one
or both of the companies, the companies carry on qualifying
activities from the same premises.
(6)
The similar activities condition is met in relation to two companies in
10
a financial year if—
(a)
more than 50% of the turnover of one company for the
relevant chargeable period is derived from qualifying
activities within a particular NACE classification, and
(b)
more than 50% of the turnover of the other company for the
15
relevant chargeable period is derived from qualifying
activities within that NACE classification.
(7)
In this section—
“NACE classification” means the first level of the common
statistical classification of economic activities in the European
20
Union established by Regulation (EC) No 1893/2006 of the
European Parliament and the Council of 20 December 2006
(as that Regulation has effect from time to time), and
“relevant chargeable period”, in relation to a company and a
financial year, means the chargeable period of the company
25
ending in that financial year.
51H
Fifth restriction: qualifying activities under common control
(1)
This section applies in relation to two or more qualifying activities
which, in a tax year—
(a)
are carried on by a qualifying person other than a company,
30
(b)
are controlled by the same person (see section 51I), and
(c)
are related to one another (see section 51J).
(2)
A qualifying activity is carried on by a qualifying person in a tax year
if it is carried on by the person at the end of the chargeable period for
the activity ending in the tax year.
35
(3)
Where all the qualifying activities are carried on by one qualifying
person, that person is entitled to a single annual investment
allowance in respect of the relevant AIA qualifying expenditure.
(4)
Where the qualifying activities are carried on by more than one
qualifying person, those persons are entitled to a single annual
40
investment allowance between them in respect of the relevant AIA
qualifying expenditure.
(5)
The person or persons carrying on the qualifying activities may
allocate the annual investment allowance to the relevant AIA
qualifying expenditure as the person or persons think fit.
45
(6)
The relevant AIA qualifying expenditure is the AIA qualifying
expenditure incurred for the purposes of the qualifying activities in

Finance Bill
Schedule 24 — Annual investment allowance
Part 1 — Amendments of CAA 2001
293

the chargeable periods for those activities ending in the tax year
mentioned in subsection (1).
51I
Qualifying activities: meaning of control
(1)
A qualifying activity is controlled by a person in a tax year if it is
controlled by the person at the end of the chargeable period for that
5
activity which ends in that tax year.
(2)
A qualifying activity carried on by an individual is controlled by the
individual who carries it on.
(3)
A qualifying activity carried on by a partnership is controlled by the
person (if any) who controls the partnership.
10
(4)
Section 574(3) defines “control” in relation to a partnership.
(5)
Where partners who between them control one partnership also
between them control another partnership, the qualifying activities
carried on by the partnerships are to be treated as controlled by the
same person.
15
51J
Qualifying activity: meaning of “related”
(1)
A qualifying activity (“A1”) is related to another qualifying activity
(“A2”) in a tax year if one or both of—
(a)
the shared premises condition, and
(b)
the similar activities condition,
20

are met in relation to the activities in the tax year.
(2)
Where A1 is related to A2 in a tax year, A1 is also related to any other
qualifying activity to which A2 is related in that tax year.
(3)
The shared premises condition is met in relation to two qualifying
activities in a tax year if, at the end of the relevant chargeable period
25
for one or both of the activities, the activities are carried on from the
same premises.
(4)
The similar activities condition is met in relation to two qualifying
activities in a tax year if, at the end of the relevant chargeable period
for one or both of the activities, the activities are within the same
30
NACE classification.
(5)
In this section—
“NACE classification” has the same meaning as in section 51G,
and
“relevant chargeable period”, in relation to a qualifying activity
35
and a tax year, means the chargeable period for that activity
ending in that tax year.
51K
Operation of annual investment allowance where restrictions apply
(1)
This section applies where because of section 51B, 51C, 51D, 51E or
51H a person is (or persons between them are) entitled to a single
40
annual investment allowance in respect of relevant AIA qualifying
expenditure.
(2)
If the relevant AIA qualifying expenditure is less than or equal to the
maximum allowance, the person is (or the persons between them

Finance Bill
Schedule 24 — Annual investment allowance
Part 1 — Amendments of CAA 2001
294

are) entitled to an annual investment allowance in respect of all the
relevant AIA qualifying expenditure.
(3)
If the relevant AIA qualifying expenditure is more than the
maximum allowance, the person is (or the persons between them
are) entitled to an annual investment allowance in respect of so much
5
of the relevant AIA qualifying expenditure as does not exceed the
maximum allowance.
(4)
The maximum allowance is the amount for the time being specified
in section 51A(5); but this is subject to sections 51M and 51N (which
provide that in certain cases an additional amount of annual
10
investment allowance may be available).
(5)
The person or persons may claim an annual investment allowance in
respect of all the relevant AIA qualifying expenditure in respect of
which the person is (or the persons between them are) entitled to an
allowance, or in respect of only some of it.
15
(6)
The amount of the annual investment allowance allocated to relevant
AIA qualifying expenditure incurred in a chargeable period must
not exceed the amount of the annual investment allowance to which
a person would be entitled in respect of that expenditure under
section 51A(5) and (6) if section 51B, 51C, 51D, 51E or 51H did not
20
apply.
51L
Special provision for short chargeable periods
(1)
This section applies where—
(a)
more than one chargeable period of a company ends in a
financial year, or
25
(b)
more than one chargeable period for a qualifying activity
ends in a tax year.
(2)
Whether section 51C, 51D or 51E applies in relation to the company,
or section 51H applies in relation to the qualifying activity, is to be
determined in relation to each chargeable period ending in that year
30
as if it were the only chargeable period ending in that year.
(3)
AIA qualifying expenditure incurred in a chargeable period in
relation to which the section in question does not apply is not
relevant AIA qualifying expenditure for the purposes of that section.
51M
Special provision for long chargeable periods
35
(1)
This section applies where—
(a)
section 51H applies in relation to two or more qualifying
activities controlled by a person (“P”) in a tax year, and
(b)
the relevant chargeable period for one of those qualifying
activities (“A1”) is longer than a year.
40
(2)
An additional amount of annual investment allowance may be
allocated to relevant AIA qualifying expenditure incurred for the
purposes of A1.
(3)
That additional amount is the amount, or the aggregate of the
amounts, of any relevant unused allowance for each tax year (a
45
“previous tax year”)—

Finance Bill
Schedule 24 — Annual investment allowance
Part 1 — Amendments of CAA 2001
295

(a)
which falls before the tax year mentioned in subsection (1)(a),
and
(b)
in which part of A1’s relevant chargeable period falls.
(4)
The amount of the relevant unused allowance for a previous tax year
is (subject to subsections (7) and(8))—
5

but where the amount given by that formula is less than nil, the
amount of the relevant unused allowance for the previous tax year is
nil.
(5)
In subsection (4)—
MA is the amount specified in section 51A(5) in relation to the
10
previous tax year, and
AM is the amount of any annual investment allowance made
under section 51A or 51K in respect of AIA qualifying
expenditure incurred for the purposes of a relevant
qualifying activity in the chargeable period for that activity
15
ending in the previous tax year.
(6)
“Relevant qualifying activity” means—
(a)
any qualifying activity carried on by a qualifying person
other than a company which was controlled by P in the
previous tax year (see section 51I) and related to A1 in that
20
tax year (see section 51J), and
(b)
if A1 was controlled by P in the previous tax year (see section
51I), A1.
(7)
Where any part of the amount calculated under subsection (4) has,
on a previous application of this section, been allocated to AIA
25
qualifying expenditure incurred for the purposes of a qualifying
activity controlled by P in a tax year before that mentioned in
subsection (1)(a), the amount of the relevant unused allowance is
reduced accordingly.
(8)
Where the amount of the relevant unused allowance for a previous
30
tax year would (apart from this subsection) exceed—

the amount of the relevant unused allowance for that tax year is
limited to the amount given by that formula.
(9)
In subsection (8)—
DCPY is the number of days in A1’s relevant chargeable period
35
falling in the previous tax year,
DY is the number of days in that tax year, and
MA has the meaning given by subsection (5).
(10)
Nothing in this section prevents section 51K(6) applying in relation
to relevant AIA qualifying expenditure incurred for the purposes of
40
A1.
(11)
In this section references to a relevant chargeable period, in relation
to a qualifying activity, are to the chargeable period for that activity
ending in the tax year mentioned in subsection (1)(a).