Finance Bill

House of Commons

Session 2007 - 08
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Other Bills before Parliament

Finance Bill

Finance Bill
Part 3 — Capital allowances
40

(7)
Subsection (8) applies in relation to an additional VAT liability incurred on or
after the day this section comes into force which under section 235 of CAA 2001
is treated as qualifying expenditure.
(8)
If the original expenditure (within the meaning of that section) was first-year
qualifying expenditure by virtue of a provision repealed by subsections (2) to
5
(4), Chapter 18 of Part 2 of that Act (additional VAT liabilities and rebates)
applies to the additional VAT liability as if that provision were not so repealed.
74
Cars with low carbon dioxide emissions
(1)
Section 45D of CAA 2001 (expenditure on cars with low carbon dioxide
emissions) is amended as follows.
10
(2)
In subsection (1)(a), for “2008” substitute “2013”.
(3)
In subsection (4), for “120” substitute “110”.
(4)
In consequence of the amendment made by subsection (2), in section 60(2)(b)
of FA 2002 (period for which section 578A(2A) and (2B) of ICTA have effect),
for “2008” (in both places) substitute “2013”.
15
(5)
The amendment made by subsection (3) has effect in relation to expenditure
incurred on or after 1 April 2008.
(6)
But in relation to expenditure incurred on the hiring of a car—
(a)
for a period of hire which begins on or before 31 March 2008, and
(b)
under a contract entered into on or before 31 March 2008,
20

section 578A of ICTA applies on and after 1 April 2008 as if the amendment
made by subsection (3) did not have effect.
75
Gas refuelling stations
(1)
Section 45E of CAA 2001 (expenditure on plant or machinery for gas refuelling
station) is amended as follows.
25
(2)
In subsection (1)(a), for “2008” substitute “2013”.
(3)
After “natural gas” (in each place) insert “, biogas”.
(4)
In subsection (4), before the definition of “gas refuelling station” insert—
““biogas” means gas produced by the anaerobic conversion of organic
matter and used for propelling vehicles;”.
30
(5)
The amendments made by subsections (3) and (4) have effect in relation to
expenditure incurred on or after 1 April 2008.
76
First-year tax credits
Schedule 25 contains provision about the payment of first-year tax credits to
companies in connection with certain first-year qualifying expenditure.
35

Finance Bill
Part 3 — Capital allowances
41

Plant and machinery: writing-down allowances and pools
77
Main rate of writing down allowance
(1)
Section 56 of CAA 2001 (amount of allowances and charges) is amended as
follows.
(2)
In subsection (1), for “25%” substitute “20%”.
5
(3)
After that subsection insert—
“(1A)
But in relation to qualifying expenditure incurred wholly for the
purposes of a ring fence trade in respect of which tax is chargeable
under section 501A of ICTA (supplementary charge in respect of ring
fence trades), the amount of the writing-down allowance to which a
10
person is entitled for a chargeable period is 25% of the amount by
which AQE exceeds TDR.”
(4)
In subsection (2), for “Subsection (1) is” substitute “Subsections (1) and (1A)
are”.
(5)
Part 10 of Schedule 22 to FA 2000 (companies within tonnage tax: capital
15
allowances in respect of ship leasing) is amended as follows.
(6)
In each of the following provisions, for “25%” substitute “20%”—
(a)
paragraph 94(3)(a) and (4),
(b)
paragraph 95(4),
(c)
paragraph 97(2) and (3),
20
(d)
paragraph 98(8), and
(e)
paragraph 99(2).
(7)
In paragraph 99—
(a)
in sub-paragraph (4), for “25%” substitute “the appropriate rate”, and
(b)
after that sub-paragraph insert—
25
    “(5)
The appropriate rate is 20%; but if for any part of the period
mentioned in sub-paragraph (4) the rate of writing-down
allowance to which the lessor would have been entitled
under section 56(1) of the Capital Allowances Act 2001 if
paragraph 94 had not applied was more than 20%, for that
30
part of the period that rate is the appropriate rate.”
(8)
The amendments made by this section have effect in relation to chargeable
periods—
(a)
beginning on or after the relevant date, and
(b)
beginning before, and ending on or after, the relevant date.
35
(9)
But in respect of a chargeable period within subsection (8)(b), they apply as if
in—
(a)
section 56(1) of CAA 2001,
(b)
the provisions listed in subsection (6), and
(c)
paragraph 99(5) of Schedule 22 to FA 2000,
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the references to 20% were to x%.

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Part 3 — Capital allowances
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(10)
For the purposes of subsection (9)—

Where x would be a figure with more than 2 decimal places, it is to be rounded
up to the nearest second decimal place.
(11)
In subsection (10)—
BRD is the number of days in the chargeable period before the relevant
5
date,
ARD is the number of days in the chargeable period on and after the
relevant date, and
CP is the number of days in the chargeable period.
(12)
The relevant date is—
10
(a)
for corporation tax purposes, 1 April 2008, and
(b)
for income tax purposes, 6 April 2008.
78
Small pools
(1)
CAA 2001 is amended as follows.
(2)
In section 56(2) (amount of allowances and charges), before paragraph (a)
15
insert—
“(za)
section 56A (small main pools and special rate pools),”.
(3)
After section 56 insert—
“56A
Writing-down allowances for small pools
(1)
This section applies in relation to the main pool and the special rate
20
pool.
(2)
Where the amount by which AQE exceeds TDR is less than or equal to
the small pool limit, the amount of the writing-down allowance to
which a person is entitled for a chargeable period is the amount by
which AQE exceeds TDR.
25
(3)
The small pool limit is £1,000, except that—
(a)
if the chargeable period is more or less than a year, it is
proportionately increased or reduced, and
(b)
if the qualifying activity has been carried on for part only of the
chargeable period, it is proportionately reduced.
30
(4)
A person claiming a writing-down allowance under this section may
require the allowance to be reduced to a specified amount.”
(4)
In section 59(1) (definition of unrelieved qualifying expenditure)—
(a)
after “that period” insert “(a)”, and
(b)
after “TDR” insert “, and
35
(b)
where section 56A(2) applies, the person does not claim
a writing-down allowance of the amount by which AQE
exceeds TDR.”
(5)
The amendments made by this section have effect—
(a)
for corporation tax purposes, in relation to chargeable periods
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beginning on or after 1 April 2008, and

Finance Bill
Part 3 — Capital allowances
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(b)
for income tax purposes, in relation to chargeable periods beginning on
or after 6 April 2008.
79
Special rate expenditure and the special rate pool
Schedule 26 contains provision about special rate expenditure and the special
rate pool.
5
80
Existing long-life asset expenditure treated as special rate expenditure
(1)
This section applies in relation to long-life asset expenditure—
(a)
incurred before the relevant date, and
(b)
allocated to a pool in a chargeable period beginning before the relevant
date.
10
(2)
In relation to a transitional chargeable period, section 102 of CAA 2001 applies
as if the percentage figure specified in subsection (1) of that section were x%,
where—

Where x would be a figure with more than 2 decimal places, it is to be rounded
up to the nearest second decimal place.
15
(3)
In subsection (2)—
BRD is the number of days in the chargeable period before the relevant
date,
ARD is the number of days in the chargeable period on and after the
relevant date, and
20
CP is the number of days in the chargeable period.
(4)
Any unrelieved qualifying expenditure in a long-life asset pool at the end of—
(a)
a transitional chargeable period, or
(b)
a chargeable period which ends immediately before the relevant date,

is to be carried forward to the special rate pool.
25
(5)
In subsequent chargeable periods, expenditure so carried forward is to be
treated for the purposes of CAA 2001 as if it were special rate expenditure
carried forward in the special rate pool from the chargeable period mentioned
in subsection (4).
(6)
Any unrelieved qualifying expenditure in a single asset pool at the end of—
30
(a)
a transitional chargeable period, or
(b)
a chargeable period which ends immediately before the relevant date,

is in subsequent chargeable periods to be treated for the purposes of CAA 2001
as if it were special rate expenditure carried forward in the single asset pool
from that chargeable period.
35
(7)
Where expenditure is treated as special rate expenditure because of this
section, for the purposes of section 104E of CAA 2001—
(a)
the reference in subsection (1)(a) of that section to section 104D of CAA
2001 includes a reference to section 102 of that Act (writing-down
allowances in respect of long-life asset expenditure), and
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(b)
the allowances that could have been made to the taxpayer in respect of
the expenditure include allowances that could have been made under

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Part 3 — Capital allowances
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section 102 of that Act for chargeable periods before that in which the
expenditure was first treated as special rate expenditure.
(8)
A “transitional chargeable period” is one which begins before, and ends on or
after, the relevant date.
(9)
“The relevant date” means—
5
(a)
for corporation tax purposes, 1 April 2008, and
(b)
for income tax purposes, 6 April 2008.
(10)
Expressions used in this section and in CAA 2001 have the same meaning in
this section as in that Act.
Industrial and agricultural buildings allowances
10
81
Abolition of allowances from 2011
(1)
Parts 3 and 4 of CAA 2001 (industrial buildings allowances and agricultural
buildings allowances) do not apply in relation to expenditure incurred on or
after the relevant date.
(2)
Omit those Parts of that Act.
15
(3)
The amendment made by subsection (2) has effect in relation to chargeable
periods beginning on or after the relevant date.
(4)
The relevant date is—
(a)
for corporation tax purposes, 1 April 2011, and
(b)
for income tax purposes, 6 April 2011.
20
(5)
Schedule 27 contains amendments and savings related to this section.
82
Phasing out of allowances before abolition
(1)
For a chargeable period to which this section applies (“a transitional chargeable
period”), a person’s entitlement to a writing-down allowance under Part 3 or 4
of CAA 2001 in respect of qualifying expenditure is to be determined in
25
accordance with this section.
(2)
This section does not apply to a writing-down allowance in respect of
qualifying enterprise zone expenditure.
(3)
If the whole of a transitional chargeable period falls within a financial year
listed in column 1 of the table (for corporation tax purposes) or a tax year listed
30
in column 2 of the table (for income tax purposes), the writing-down allowance
to which the person is entitled for that chargeable period is—

where—

WDA is the writing-down allowance to which the person would be
entitled for the chargeable period apart from this section, and
35

P is the percentage specified in relation to that year in column 3 of the
table.
(4)
If subsection (3) does not apply in relation to a transitional chargeable period,
the writing-down allowance to which the person is entitled for that chargeable
period is to be determined by—
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Part 3 — Capital allowances
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(a)
calculating the apportioned writing-down allowance for each financial
year (for corporation tax purposes) or tax year (for income tax
purposes) in which part of the chargeable period falls, and
(b)
adding the amounts of the apportioned writing-down allowance for
each of those years.
5
(5)
For the purposes of Part 3 of CAA 2001 (industrial buildings), the apportioned
writing-down allowance for a financial year or tax year in which part of a
transitional chargeable period falls is—

where—

DCPY is the number of days in the chargeable period which fall in that
10
  year,

DCP is the number of days in the chargeable period,

WDA is the writing-down allowance to which the person would be
  entitled for the chargeable period apart from this section, and

P is the percentage specified in relation to that year in column 3 of the
15
  table.
(6)
For the purposes of Part 4 of CAA 2001 (agricultural buildings), the
apportioned writing-down allowance for a financial year or tax year in which
part of a transitional chargeable period falls is—

where—
20

RDCPY is the number of relevant days in the chargeable period which
fall in that year,

RDCP is the number of relevant days in the chargeable period,

WDA is the writing-down allowance to which the person would be
entitled for the chargeable period apart from this section, and
25

P is the percentage specified in relation to that year in column 3 of the
table.
(7)
The relevant days in the chargeable period are the days in that period for which
the person was entitled to the relevant interest in relation to the qualifying
expenditure (within the meaning of Part 4 of CAA 2001).
30
(8)
For the purposes of CAA 2001, the residue of the qualifying expenditure at any
time is to be calculated as if the writing-down allowance made to a person
under Part 3 or 4 of that Act in respect of the qualifying expenditure for any
transitional chargeable period were the writing-down allowance which would
have been made apart from this section.
35
(9)
This section applies—
(a)
for corporation tax purposes, to chargeable periods which begin before
the relevant date and end on or after 1 April 2008, and
(b)
for income tax purposes, to chargeable periods which begin before the
relevant date and end on or after 6 April 2008.
40
(10)
In this section references to the table are to the following table—

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Part 3 — Capital allowances
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Column 1
Column 2
Column 3

Financial year beginning
Tax year 2007-08 and
100%

1 April 2007 and earlier
earlier tax years

financial years

Financial year beginning
Tax year 2008-09
75%

5

1 April 2008

Financial year beginning
Tax year 2009-10
50%

1 April 2009

Financial year beginning
Tax year 2010-11
25%

1 April 2010

10

Financial year beginning
Tax year 2011-12 and
0%.

1 April 2011 and later
later tax years

financial years

(11)
In this section—
“the relevant date” has the same meaning as in section 81, and
15
“qualifying expenditure”, in relation to a writing-down allowance under
Part 3 or 4 of CAA 2001, means the qualifying expenditure in respect of
which the allowance is made.
83
Qualifying enterprise zone expenditure: transitional provision
(1)
For a chargeable period which begins before, and ends on or after, the relevant
20
date, a person’s entitlement to a writing-down allowance under Part 3 of CAA
2001 in respect of qualifying enterprise zone expenditure is to be determined
in accordance with subsection (2).
(2)
The writing-down allowance to which the person is entitled is—

where—
25

DCPB is the number of days in the chargeable period which fall before
the relevant date,

DCP is the number of days in the chargeable period, and

WDA is the writing-down allowance to which the person would be
entitled for the chargeable period apart from this section.
30
(3)
In this section “the relevant date” has the same meaning as in section 81.
84
Phasing out of industrial buildings allowance: anti-avoidance
(1)
In CAA 2001, after section 313 insert—
“313A
Calculation of allowance after sale of relevant interest: anti-avoidance
(1)
This section applies where—
35
(a)
there is a sale of the relevant interest in the building which is a
balancing event to which section 314 applies,
(b)
the buyer and seller have different chargeable periods,
(c)
the control test (within the meaning of section 567) is met, and