Finance Bill

House of Commons

Session 2007 - 08
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Finance Bill

Finance Bill (Volume I)
Part 3 — Capital allowances
37

(6)
In the heading, omit “industrial”.
(7)
In section 23(2) of CAA 2001 (expenditure unaffected by sections 21 and 22), in
the entry for section 28, omit “industrial”.
(8)
The amendments made by this section have effect—
(a)
for corporation tax purposes, in relation to expenditure incurred on or
5
after 1 April 2008, and
(b)
for income tax purposes, in relation to expenditure incurred on or after
6 April 2008.
70
Expenditure on required fire precautions
(1)
In CAA 2001, omit section 29 (expenditure on required fire precautions).
10
(2)
In section 23(2) of that Act, omit “section 29 (fire safety);”.
(3)
In consequence of the amendment made by subsection (1)—
(a)
in the Fire and Rescue Services Act 2004 (c. 21), omit paragraph 96 of
Schedule 1, and
(b)
in the Fire and Rescue Services (Northern Ireland) Order 2006 (S.I.
15
2006/1254 (N.I. 9)), omit paragraph 24 of Schedule 3 (and the entry
relating to CAA 2001 in Schedule 4).
(4)
The amendments made by subsections (1) and (2) have effect—
(a)
for corporation tax purposes, in relation to expenditure incurred on or
after 1 April 2008, and
20
(b)
for income tax purposes, in relation to expenditure incurred on or after
6 April 2008.
71
Integral features
(1)
In section 23 of CAA 2001 (expenditure unaffected by sections 21 and 22)—
(a)
in subsection (2), after the entry for section 33 insert—
25

“section 33A (integral features);”, and
(b)
in subsection (4), in List C—
(i)
in item 2, omit “Electrical systems (including lighting systems)
and cold water,”,
(ii)
omit item 3, and
30
(iii)
in item 6, for “Lifts, hoists, escalators and moving walkways.”
substitute “Hoists.”
(2)
After section 33 of that Act insert—
“Expenditure on integral features
33A
Expenditure on provision or replacement of integral features
35
(1)
This section applies where a person carrying on a qualifying activity
incurs expenditure on the provision or replacement of an integral
feature of a building or structure used by the person for the purposes
of the qualifying activity.
(2)
This Part (including in particular section 11(4)) applies as if—
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Finance Bill (Volume I)
Part 3 — Capital allowances
38

(a)
the expenditure were capital expenditure on the provision of
plant or machinery for the purposes of the qualifying activity,
and
(b)
the person who incurred the expenditure owned plant or
machinery as a result of incurring it.
5
(3)
If the expenditure is qualifying expenditure, it may not be deducted in
calculating the income from the qualifying activity.
(4)
If the expenditure is not qualifying expenditure, whether it may be so
deducted is to be determined without regard to this section.
(5)
For the purposes of this section each of the following is an integral
10
feature—
(a)
an electrical system (including a lighting system),
(b)
a cold water system,
(c)
a space or water heating system, a powered system of
ventilation, air cooling or air purification, and any floor or
15
ceiling comprised in such a system,
(d)
a lift, an escalator or a moving walkway,
(e)
external solar shading.
(6)
The items listed in subsection (5) do not include any asset whose
principal purpose is to insulate or enclose the interior of a building or
20
to provide an interior wall, floor or ceiling which (in each case) is
intended to remain permanently in place.
(7)
The Treasury may by order—
(a)
provide that subsection (5) does not include a feature of a
building or structure specifed in the order, expenditure on
25
which would (if not within subsection (5)) be qualifying
expenditure other than special rate expenditure, and
(b)
add to the list in subsection (5) a feature of a building or
structure expenditure on the provision of which would not
(apart from the order) be expenditure on the provision of plant
30
or machinery.
(8)
An order under subsection (7) may make such incidental,
supplemental, consequential and transitional provision as the Treasury
thinks fit.
33B
Meaning of “replacement” in section 33A
35
(1)
Expenditure to which this section applies is to be treated for the
purposes of section 33A as expenditure on the replacement of an
integral feature.
(2)
This section applies to expenditure incurred by a person on an integral
feature if the amount of the expenditure is more than 50% of the cost of
40
replacing the integral feature at the time the expenditure is incurred.
(3)
Subsection (4) applies where—
(a)
a person incurs expenditure (“initial expenditure”) on an
integral feature which is not more than 50% of the cost of
replacing the integral feature at the time it is incurred, but
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Finance Bill (Volume I)
Part 3 — Capital allowances
39

(b)
in the period of 12 months beginning with the initial
expenditure being incurred the person incurs further
expenditure on the integral feature.
(4)
If the aggregate of—
(a)
the amount of the initial expenditure, and
5
(b)
the amount (or the aggregate of the amounts) of the further
expenditure,

is more than 50% of the cost of replacing the integral feature at the time
the initial expenditure was incurred, this section applies to the initial
expenditure and the further expenditure.
10
(5)
Where section 33A applies because of subsection (4), all such
assessments and adjustments of assessments are to be made as are
necessary to give effect to that section.”
(3)
In section 74(1) of ICTA (general rules as to deductions not allowable), after
paragraph (d) insert—
15
“(da)
any expenditure to which section 33A(3) of the Capital
Allowances Act (expenditure on provision or replacement of
integral features) applies;”.
(4)
In Chapter 4 of Part 2 of ITTOIA 2005 (rules restricting deductions from trade
profits), after section 55 insert—
20
“Integral features
55A
Expenditure on integral features
Section 33A(3) of CAA 2001 provides that no deduction is allowed in
respect of certain expenditure on an integral feature of a building or
structure (within the meaning of that section).”
25
(5)
In the table in section 272(2) of ITTOIA 2005 (provisions of Part 2 applicable to
profits of property business), after the entry relating to section 55 insert—

“section 55A
expenditure on integral features”

(6)
The amendments made by this section have effect—
(a)
for corporation tax purposes, in relation to expenditure incurred on or
30
after 1 April 2008, and
(b)
for income tax purposes, in relation to expenditure incurred on or after
6 April 2008.
Plant and machinery: annual investment allowance
72
Annual investment allowance
35
Schedule 24 contains provision about an annual investment allowance in
respect of certain qualifying expenditure on plant or machinery.

Finance Bill (Volume I)
Part 3 — Capital allowances
40

Plant and machinery: first-year allowances
73
First-year allowance for small and medium-sized enterprises discontinued
(1)
CAA 2001 is amended as follows.
(2)
Omit section 44 (expenditure incurred by small or medium-sized enterprises).
(3)
In consequence of the repeal made by subsection (2)—
5
(a)
in the list in section 39 (provisions under which first-year allowances
available), omit the entry relating to section 44,
(b)
in the list in section 46(1) (provisions subject to general exclusions),
omit the entry relating to section 44,
(c)
omit sections 47 to 49 (definition of small and medium-sized
10
enterprises), and
(d)
in section 52(3) (first-year allowances) omit—
(i)
in the table, the entry relating to expenditure qualifying under
section 44, and
(ii)
the words from “In the case” to the end.
15
(4)
Omit the following provisions (which relate to provisions repealed by
subsection (3))—
(a)
section 142 of FA 2004 (increase in first-year allowance under section 44
for 2004),
(b)
section 30 of FA 2006 (increase in first-year allowance under section 44
20
for 2006), and
(c)
section 37 of FA 2007 (increase in first-year allowance under section 44
for 2007).
(5)
The repeals made by subsections (2) and (3) have effect in relation to
expenditure incurred on or after the relevant date.
25
(6)
But subsection (7) applies in relation to an additional VAT liability incurred on
or after the relevant date which under section 235 of CAA 2001 is treated as
qualifying expenditure.
(7)
If the original expenditure (within the meaning of that section) was first-year
qualifying expenditure by virtue of section 44 of CAA 2001, Chapter 18 of Part
30
2 of that Act (additional VAT liabilities and rebates) applies to the additional
VAT liability as if the provisions repealed by this section were not so repealed.
(8)
The relevant date is—
(a)
for corporation tax purposes, 1 April 2008, and
(b)
for income tax purposes, 6 April 2008.
35
74
Repeal of spent first-year allowances
(1)
CAA 2001 is amended as follows.
(2)
Omit sections 40 to 43 (first-year allowance for Northern Ireland expenditure
incurred on or before 11 May 2002).
(3)
Omit section 45 (first-year allowance for ICT expenditure incurred on or before
40
31 March 2004).

Finance Bill (Volume I)
Part 3 — Capital allowances
41

(4)
In Schedule 3 (transitionals and savings), omit paragraphs 46 to 51 (first-year
allowance for additional VAT liabilities).
(5)
In consequence of the amendments made by subsections (2) to (4), omit the
following provisions—
(a)
in the list in section 39 (provisions under which first-year allowances
5
available), the entries relating to section 40 and section 45,
(b)
in section 46 (general exclusions)—
(i)
in the list in subsection (1), the entries relating to section 40 and
section 45, and
(ii)
in the heading, from “applying” to “45”,
10
(c)
section 51 (disclosure of information between HMRC and Northern
Ireland department),
(d)
in the table in section 52(3) (first-year allowances), the entries relating
to expenditure qualifying under section 40 and expenditure qualifying
under section 45,
15
(e)
section 237(2) (exception to section 236 where section 43 applies), and
(f)
in Schedule 3 (transitionals and savings), paragraph 14 (application of
section 45).
(6)
In consequence of the amendments made by this section, omit—
(a)
in section 98 of TMA 1970, in the second column of the table, in the
20
entry relating to requirements imposed by CAA 2001 “43(5) and (6),”,
(b)
sections 165 and 166 of FA 2003, and
(c)
paragraph 84 of Schedule 4 to CRCA 2005.
(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
25
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
(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.
30
75
Cars with low carbon dioxide emissions
(1)
Section 45D of CAA 2001 (expenditure on cars with low carbon dioxide
emissions) is amended as follows.
(2)
In subsection (1)(a), for “2008” substitute “2013”.
(3)
In subsection (4), for “120” substitute “110”.
35
(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”.
(5)
The amendment made by subsection (3) has effect in relation to expenditure
incurred on or after 1 April 2008.
40
(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,

section 578A of ICTA applies on and after 1 April 2008 as if the amendment
made by subsection (3) did not have effect.
45