Finance Bill

House of Commons

Session 2008 - 09
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Finance Bill

Finance Bill
Schedule 10 — Sale of lessor companies etc: reforms
107

      (3)
For sub-paragraph (9) substitute—
    “(9)
Paragraph (b) of sub-paragraph (8) above applies if—
(a)
the relevant day falls on or after 22 March 2006,
(b)
the plant or machinery was acquired directly or indirectly
from a person who was connected with the company when
5
the acquisition took place, and
(c)
either the acquisition took place on or after 5 December
2005 or the person from whom the plant or machinery was
so acquired was also connected with the company on that
date.”
10
Paragraph 13A
3
After paragraph 13 insert—
       “No qualifying change of ownership where principal company’s interest in
consortium company unchanged
13A   (1)
This paragraph applies if—
15
(a)
a company (“company A”) is owned by a consortium, and
(b)
a relevant change in the relationship between company A
and a principal company of company A occurs on any day,

but the principal company’s interest in company A remains
unchanged.
20
      (2)
For the purposes of this Schedule, there is no qualifying change of
ownership in relation to company A on that day as a result of that
change in that relationship.
      (3)
For the purposes of this paragraph the principal company’s
interest in company A remains unchanged if the percentage of the
25
ordinary share capital of company A that is beneficially owned
directly or indirectly by the principal company is the same at the
beginning and end of that day.
      (4)
Section 838(2) and (4) to (10) of ICTA apply for construing sub-
paragraph (3).”
30
Paragraph 17
4     (1)
Paragraph 17 (meaning of “PM” in paragraph 16) is amended as follows.
      (2)
In sub-paragraph (7)(b), for “acquires any plant or machinery directly or
indirectly from a person who is connected with the company” substitute
“acquired any plant or machinery in circumstances in which this paragraph
35
applies”.
      (3)
For sub-paragraph (8) substitute—
    “(8)
Paragraph (b) of sub-paragraph (7) above applies if—
(a)
the relevant day falls on or after 22 March 2006,
(b)
the plant or machinery was acquired directly or indirectly
40
from a person who was connected with the company when
the acquisition took place, and

Finance Bill
Schedule 10 — Sale of lessor companies etc: reforms
108

(c)
either the acquisition took place on or after 5 December
2005 or the person from whom the plant or machinery was
so acquired was also connected with the company on that
date.”
Paragraph 23
5
5
In paragraph 23 (leasing business carried on by company in partnership:
change in company’s interest in business), for sub-paragraph (6)
substitute—
    “(6)
This paragraph is subject to paragraph 23A and is supplemented
by paragraph 24.”
10
Paragraph 23A
6
After that paragraph insert—
“23A  (1)
Paragraph 23 does not apply where conditions A, B and C are met.
      (2)
Condition A is that at the end of the relevant day none of the
companies by which the business was carried on any longer have
15
any share in the profits or loss of the business.
      (3)
Condition B is that, in consequence of what happens on the
relevant day, the disposal value of all of the plant and machinery
which was used for the purposes of the business and in respect of
which capital allowances have been claimed is to be brought into
20
account under section 61 of CAA 2001.
      (4)
Condition C is that the disposal value to be brought into account
in relation to all of the plant or machinery is the price which the
plant or machinery would fetch in the open market on that day.”
Paragraph 32
25
7     (1)
Paragraph 32 (leasing business carried on by a company in partnership:
amount of expense) is amended as follows.
      (2)
In sub-paragraph (1)—
(a)
in sub-paragraph (c), for “increases at any time on” substitute “is
greater at the end of that day than at the start of”, and
30
(b)
in sub-paragraph (d), omit “at that time” (in both places).
      (3)
For sub-paragraph (3) substitute—
    “(3)
The appropriate percentage is—

where—
OCI is the increase in the other company’s percentage share
35
in the profits or losses of the business which is wholly
attributable to the change in the partner company’s
interest in the business, and
PCD is the decrease in the partner company’s percentage
share in the profits or losses of the business.”
40

Finance Bill
Schedule 10 — Sale of lessor companies etc: reforms
109

Paragraph 39
8     (1)
Paragraph 39 (relief for expense otherwise giving rise to carried forward
loss) is amended as follows.
      (2)
In sub-paragraph (1)—
(a)
in paragraph (c), insert at the end “or a later accounting period,”,
5
(b)
in paragraph (d), after “company” insert “after the accounting period
in which the loss is made”, and
(c)
in paragraph (e), for “12 months beginning with” substitute “5 years
beginning immediately after”.
      (3)
In subsection (1A)—
10
(a)
in paragraph (b), for “, and” substitute “or a later accounting
period,”,
(b)
in paragraph (c), after “company” insert “after the accounting period
in which the loss is made”, and
(c)
after that paragraph insert “and
15
(d)
the subsequent accounting period starts within the period of
5 years beginning with the day that is the relevant day within
the meaning of paragraph 23(1) and does not start as a result
of paragraph 3 or 33.”
      (4)
In sub-paragraph (2)—
20
(a)
after “33” insert “or this sub-paragraph”, and
(b)
for “an expense” substitute “giving rise to an expense of the relevant
amount”.
      (5)
After that sub-paragraph insert—
   “(2A)
The relevant amount is the amount of the loss treated as an
25
expense increased by

where—
D is the number of days in the accounting period in which the
loss is made, and
R is the percentage rate applicable to section 826 of ICTA
30
under section 178 of FA 1989.”
      (6)
In sub-paragraph (3), after “The” insert “amount of the”.
      (7)
In sub-paragraph (4)—
(a)
after “33” insert “or this paragraph”, and
(b)
for “the expense under that paragraph” substitute “that expense”.
35
Commencement
9     (1)
The amendments made by paragraph 8 have effect in relation to losses
incurred in accounting periods ending on or after 22 April 2009.
      (2)
The other amendments made by this Schedule have effect where the
relevant day is on or after that date.
40

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
110

Schedule 11
Section 30

Tax relief for business expenditure on cars and motor cycles
Part 1
Capital allowances
Plant and machinery allowances for cars and motor cycles
5
1
Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.
2
In section 38B (general exclusions from AIA qualifying expenditure), in
general exclusion 2, for “81” substitute “268A”.
3
In section 46(2) (general exclusions from first year allowances), in general
exclusion 2, for “81” substitute “268A”.
10
4
Omit sections 74 to 79 (cars above the cost threshold).
5
Omit section 81 (extended meaning of “car”) and section 82 (qualifying hire
cars).
6
In section 84 (cases in which short-life asset treatment is ruled out), in the
Table, in item 3, in the first column, for “81” substitute “268A”.
15
7     (1)
Section 104A (special rate expenditure) is amended as follows.
      (2)
In subsection (1)—
(a)
in paragraph (a), after “the” insert “first”,
(b)
omit “and” at the end of paragraph (c), and
(c)
insert at the end “, and
20
(e)
expenditure incurred on or after the second relevant
date on the provision of a car that is not a main rate
car.”
      (3)
In subsection (2), after “The” insert “first”.
      (4)
After that subsection insert—
25
“(3)
The second relevant date is—
(a)
for corporation tax purposes, 1 April 2009, and
(b)
for income tax purposes, 6 April 2009.
(4)
In this section—
“car” has the meaning given in section 268A;
30
“main rate car” has the meaning given in section 104AA.”
8
After that section insert—
“104AA
Meaning of “main rate car”
(1)
“Main rate car” means—
(a)
a car that is first registered before 1 March 2001,
35
(b)
a car that has low CO2 emissions, or
(c)
a car that is electrically-propelled.

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
111

(2)
For the purposes of this section a car has low CO2 emissions if it
meets conditions A and B.
(3)
Condition A is that, when the car is first registered, it is so registered
on the basis of a qualifying emissions certificate.
(4)
Condition B is that the applicable CO2 emissions figure in relation to
5
the car does not exceed 160 grams per kilometre driven.
(5)
The Treasury may by order amend the amount from time to time
specified in subsection (4).
(6)
An order under subsection (5) may contain transitional provision
and savings.
10
(7)
In this section—
“applicable CO2 emissions figure” and “qualifying emissions
certificate” have the meanings given in section 268C;
“car” has the meaning given in section 268A;
“electrically-propelled” has the meaning given in section 268B.”
15
9
After section 104E insert—
“104F
Special rate cars: discontinued activity continued by relevant
company
(1)
This section applies if—
(a)
a company (“the taxpayer”) has incurred special rate
20
expenditure within section 104A(1)(e) (expenditure on a car
other than a main rate car) to which section 104C applies
(allocation to special rate pool),
(b)
the qualifying activity carried on by the taxpayer is
permanently discontinued, and
25
(c)
conditions A, B and C are met.
(2)
Condition A is that the qualifying activity carried on by the taxpayer
consisted of or included (other than incidentally) making cars
available to other persons.
(3)
Condition B is that, at any time in the 6 months after the taxpayer’s
30
qualifying activity is permanently discontinued, the qualifying
activity of a group relief company consists of or includes (other than
incidentally) making cars available to other persons.
(4)
Condition C is that the balancing allowance (“SBA”) to which the
taxpayer would be entitled (but for this section) in respect of the
35
special rate pool is greater than—

where—
BC is the total of the balancing charges (if any) to which the
taxpayer is liable for the final chargeable period in respect of
any pool, and
40
OBA is the total of the balancing allowances to which the
taxpayer is entitled for that period in respect of any pool
other than the special rate pool.

For the purposes of this section, if BC — OBA is a negative amount,
it is to be treated as if it were nil.
45

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
112

(5)
The balancing allowance to which the taxpayer is entitled in respect
of the special rate pool is reduced to an amount equal to BC — OBA.
(6)
The relevant company is to be treated as having incurred qualifying
expenditure within section 104A(1)(e) (“notional expenditure”),
whether or not the relevant company owns cars previously owned
5
by the taxpayer.
(7)
The amount of the notional expenditure is an amount equal to the
amount by which SBA exceeds BC — OBA.
(8)
The relevant company is to be treated as having incurred the
notional expenditure on the day after the end of the taxpayer’s final
10
chargeable period.
(9)
If part of the chargeable period in which the relevant company is
treated as incurring expenditure under this section (“the acquisition
period”) overlaps with the taxpayer’s penultimate chargeable
period—
15
(a)
the part of the expenditure which is proportional to that part
of the acquisition period is not to be taken into account in
determining the relevant company’s available qualifying
expenditure for the acquisition period, but
(b)
this does not prevent that part of the expenditure being taken
20
into account in determining the relevant company’s available
qualifying expenditure for any subsequent chargeable
period.
(10)
In this section—
“car” has the meaning given in section 268A;
25
“company” means any body corporate;
“group relief company” means—
(a)
a company to which group relief under Chapter 4 of
Part 10 of ICTA would be available (on the making of
a claim) in respect of balancing allowances
30
surrendered by the taxpayer in the taxpayer’s final
chargeable period, and
(b)
a company to which such relief would be available
(on the making of a claim) in respect of balancing
allowances surrendered by a company within
35
paragraph (a);
“main rate car” has the meaning given in section 104AA;
“penultimate chargeable period” means the chargeable period
preceding the final chargeable period;
“the relevant company” means the group relief company
40
mentioned in subsection (3) or, if there is more than one, the
one—
(a)
nominated by the taxpayer not more than 6 months
after the end of the taxpayer’s final chargeable period,
or
45
(b)
in the absence of such a nomination, nominated by
Her Majesty’s Revenue and Customs.”

Finance Bill
Schedule 11 — Tax relief for business expenditure on cars and motor cycles
Part 1 — Capital allowances
113

10
After section 208 insert—
“208A
Cars: disposal value in avoidance cases
(1)
This section applies if—
(a)
a disposal value is required to be brought into account under
section 61,
5
(b)
the disposal event is that the person ceases to own a section
206 car because of a sale or the performance of a contract, and
(c)
allowances under this Part in respect of the person’s
expenditure under that transaction are restricted under
section 217 or 218 (anti-avoidance).
10
(2)
A car is a section 206 car if expenditure on the provision of the car is
required to be allocated to a single asset pool under that section.
(3)
The disposal value to be brought into account is—
(a)
the market value of the car at the time of the disposal event,
or
15
(b)
if less, the capital expenditure incurred, or treated as
incurred, on the provision of the car by the person disposing
of it.
(4)
The person acquiring the car is to be treated as having incurred
capital expenditure on its provision of an amount equal to the
20
disposal value required to be brought into account under subsection
(3).
(5)
In this section “car” has the meaning given in section 268A.”
11
After section 268 insert—
“Cars etc
25
268A
Meaning of “car” and “motor cycle”
(1)
In this Part “car” means a mechanically propelled road vehicle other
than—
(a)
a motor cycle,
(b)
a vehicle of a construction primarily suited for the
30
conveyance of goods or burden of any description, or
(c)
a vehicle of a type not commonly used as a private vehicle
and unsuitable for such use.
(2)
In this Part “motor cycle” has the meaning given by section 185(1) of
the Road Traffic Act 1988.
35
268B
Electrically-propelled vehicles
For the purposes of this Part a vehicle is electrically-propelled only
if—
(a)
it is propelled solely by electrical power, and
(b)
that power is derived from—
40
(i)
a source external to the vehicle, or
(ii)
an electrical storage battery which is not connected to
any source of power when the vehicle is in motion.