Finance Bill

House of Commons

Session 2009 - 10
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Finance Bill

Finance Bill
Schedule 5 — Capital allowance buying
81

Relevant excess of allowances
212J
Relevant excess of allowances
(1)
C or P has a relevant excess of allowances in relation to the relevant
trade if—
(2)
Section 212K defines RTWDV and section 212L defines BSV.
5
(3)
References in this Chapter to plant and machinery do not include
excluded plant and machinery.
(4)
Plant and machinery is “excluded plant and machinery” if—
(a)
expenditure incurred on the provision of it is not, as a result
of section 34A, qualifying expenditure for the purposes of
10
this Part, or
(b)
it is, as a result of section 67, treated for the purposes of this
Part as owned otherwise than by C or P.
212K
Relevant tax written-down value
(1)
RTWDV is the relevant tax written-down value and is to be found by
15
adding together amounts 1 and 2.
(2)
Amount 1 is the total amount of any unrelieved qualifying
expenditure in respect of plant and machinery contained in—
(a)
single asset pools,
(b)
class pools, or
20
(c)
the main pool,

which is available to be carried forward (in accordance with section
59) from the old period and used in calculating the profits of the
relevant trade.
(3)
Amount 2 is the total of any qualifying expenditure incurred on the
25
provision of a ship for the purposes of the relevant trade which, at
the end of the old period, is unrelieved by virtue of notice having
been given under section 130.
(4)
For the purposes of this Part the amount of unrelieved qualifying
expenditure contained in any pool which is available to be carried
30
forward (in accordance with section 59) from the old period and used
in calculating the profits of the relevant trade is to be calculated on
the assumptions—
(a)
that any qualifying expenditure that could have been (but
was not) allocated to the pool before the end of the old period
35
had been so allocated at the end of the old period,
(b)
that any qualifying expenditure prevented from being
allocated to the pool by section 58(5) had been so allocated at
the end of the old period, and
(c)
that any transaction taking place on the relevant day that has
40
the effect of reducing the amount of unrelieved qualifying
expenditure in the pool had not taken place.
(5)
Where condition C in section 212C is met—
(a)
references in subsection (2) to any unrelieved qualifying
expenditure in respect of plant and machinery contained in a
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Finance Bill
Schedule 5 — Capital allowance buying
82

pool which is available to be carried forward (in accordance
with section 59) from the old period and used in calculating
the profits of the relevant trade, and
(b)
the reference in subsection (3) to any qualifying expenditure
incurred on the provision of a ship for the purposes of the
5
relevant trade which, at the end of the old period, is
unrelieved by virtue of notice having been given under
section 130,

are to what it would have been but for the qualifying change.
(6)
In this section “the old period” means the period which is the old
10
period for the purposes of section 212O (or would be if this Chapter
applied): see section 212N(3).
(7)
The plant and machinery in respect of which there is unrelieved
qualifying expenditure such as is mentioned in subsection (2), or
qualifying expenditure such as is mentioned in subsection (3), is
15
referred to in the following provisions as “the relevant plant and
machinery”.
212L
Balance sheet value
(1)
BSV is the balance sheet value of the relevant plant and machinery
and is to be found by adding together the amounts (if any) which
20
would be shown in respect of it in the appropriate balance sheet of C
or P.
(2)
For this purpose the amounts shown in the appropriate balance sheet
in respect of the relevant plant or machinery are—
(a)
the amounts shown in that balance sheet as the net book
25
value (or carrying amount) in respect of it, and
(b)
the amounts shown in that balance sheet as the net
investment in respect of finance leases of it.
(3)
If—
(a)
any of the relevant plant or machinery is a fixture in any land,
30
and
(b)
the amount which falls (or would fall) to be shown in the
appropriate balance sheet as the net book value (or carrying
amount) of the land would include an amount in respect of
the fixture,
35

the amount of the net book value (or carrying amount) in respect of
the fixture is determined on a just and reasonable basis.
(4)
If—
(a)
any of the relevant plant or machinery is subject to a finance
lease, and
40
(b)
any land or asset which is not plant or machinery is subject to
that lease,

the amount of the net investment in respect of the finance lease of
that plant or machinery is determined on a just and reasonable basis.
(5)
In this section any reference to any amount shown in the appropriate
45
balance sheet of C or P is the amount which, assuming that a balance
sheet of C or P were drawn up in accordance with subsection (6),
would fall to be shown in that balance sheet.

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Schedule 5 — Capital allowance buying
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(6)
A balance sheet is drawn up in accordance with this subsection if it
is drawn up in accordance with generally accepted accounting
practice so as to reflect the position as at the beginning of the relevant
day but adjusted to reflect the disposal of any of the relevant plant or
machinery which is disposed of on the relevant day.
5
(7)
In this section—
“finance lease” means a lease which, in accordance with
generally accepted accounting practice, falls (or would fall) to
be treated as a finance lease or loan in accounts of C or P;
“fixture”—
10
(a)
means any plant or machinery that is so installed or
otherwise fixed in or to a building or other
description of land as to become, in law, part of that
building or other land, and
(b)
includes any boiler or water-filled radiator installed
15
in a building as part of a space or water heating
system.
Unallowable purpose
212M
Unallowable purpose
(1)
The qualifying change has an unallowable purpose if the main
20
purpose, or one of the main purposes, of change arrangements is to
obtain a relevant tax advantage (for any person).
(2)
“Change arrangements” means any arrangements made to bring
about, or otherwise connected with, the qualifying change; and
“arrangements” includes any agreement, understanding, scheme,
25
transaction or series of transactions (whether or not legally
enforceable).
(3)
“Obtain a relevant tax advantage” means become entitled to a
reduction in profits, or an increase in losses, for the purposes of
corporation tax in consequence of a claim to allowances in respect of
30
qualifying expenditure in respect of the relevant plant and
machinery or qualifying expenditure within section 212K(3).
What happens when Chapter applies
212N
Old and new accounting periods
(1)
The accounting period of C which is current on the relevant day ends
35
with that day and a new accounting period of C begins with the
following day (but subject to subsection (2)).
(2)
In a case in which condition A, B or D in section 212C is met and the
relevant trade was, at the beginning of the relevant day, carried on
by C in partnership with another company or other companies
40
subsection (1) does not apply but—
(a)
the period which, for the purposes of Part 17 of CTA 2009, is
the accounting period of the partnership current on the
relevant day ends with that day, and
(b)
there begins with the following day a new accounting
45
period—

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Schedule 5 — Capital allowance buying
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(i)
of the partnership, or
(ii)
where condition D is met and C’s relevant percentage
share in the relevant trade is nil after the qualifying
change, of the company or partnership by which the
relevant trade is carried on after the relevant change.
5
(3)
For the purposes of section 212O “the old period” means the
accounting period of C or the partnership in which C carries on the
relevant trade which ends with the relevant day.
(4)
For the purposes of section 212P “the new period” means the
accounting period—
10
(a)
of C or that partnership, or
(b)
where condition D is met and C’s relevant percentage share
in the relevant trade is nil after the qualifying change, of the
company or partnership by which the relevant trade is
carried on after the relevant change,
15

which begins with the following day.
212O
When there is excess of allowances in pool: amount of excess
(1)
Section 212P has effect where C or P has an excess of allowances in
any single asset pool, any class pool or the main pool at the end of the
old period; and a pool in the case of which there is an excess of
20
allowances is referred to in this section and section 212P as a
“relevant pool”.
(2)
For the purposes of this section C or P has an excess of allowances in
a pool if—
(3)
In this section and section 212Q—
25
PA, in relation to a pool, is the amount specified in section
212K(2) in relation to the pool, and
BSVP, in relation to a pool, is so much of BSV as, on a just and
reasonable apportionment, it is appropriate to attribute to the
pool.
30
(4)
For the purposes of section 212P the amount of the excess of
allowances in relation to any relevant pool (“the relevant pool in
question”) is the difference between PA and BSVP.
(5)
what would otherwise be the amount of the excess of allowances in relation
35
to the relevant pool in question for the purposes of section 212P is
reduced by so much of the difference between BSVP and PA as is not
taken into account under this subsection in relation to another
relevant pool or under section 212Q(8).
212P
Effect of excess of allowances on pools
40
(1)
The unrelieved qualifying expenditure in each relevant pool is to be
taken to be reduced at the beginning of the new period by the
amount of the excess of allowances in relation to the pool.

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Schedule 5 — Capital allowance buying
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(2)
The amount of the excess of allowances is to be treated from the
beginning of the new period as if it were qualifying expenditure in a
new pool of the same description as the relevant pool (and so subject
to the same provisions of this Part, other than this Chapter).
(3)
Where, following the qualifying change, a person ceases to carry on
5
a trade (or part of a trade) and C begins to carry on (whether or not
in partnership) the activities of that trade (or part of a trade) as part
of its trade, for the purposes of claiming any allowance in respect of
qualifying expenditure in the new pool the carrying on of those
activities by C is to be regarded as the carrying on of a separate trade.
10
(4)
A loss attributable to an allowance claimed in respect of qualifying
expenditure in the new pool may not be set off under section 37 of
CTA 2010 (trade loss relief against total profits of same or earlier
accounting period) otherwise than against the profits of a qualifying
activity carried on by C, or any company that is a member of P, at the
15
beginning of the relevant day.
(5)
And the amount of such a loss which may be so set off by any person
is not to exceed the amount of the loss which would have been
available for such set off by the person but for the qualifying change.
(6)
A loss attributable to an allowance claimed in respect of qualifying
20
expenditure in the new pool may not be set off by way of group relief
in accordance with Part 5 of CTA 2010 (surrender of losses by way of
group relief) by a company (“the claimant company”) unless it
would have been available for such set off but for the qualifying
change.
25
(7)
And the amount of such a loss which is available for such set off by
the claimant company is not to exceed the amount of the loss which
would have been available for such set off by the claimant company
but for the qualifying change.
(8)
Where any activity not carried on by C, or a company that is a
30
member of P, at the beginning of the relevant day would otherwise
be regarded for the purposes of corporation tax as forming part of a
qualifying activity carried on by C or the member of P at that time it
is not to be so regarded for the purposes of subsection (4).
(9)
In a case in which condition C in section 212C is met, the references
35
in subsections (1) and (2) to the beginning of the new period are to
the time of the qualifying change (and section 948 of CTA 2010 has
effect subject to this section).
212Q
When there are postponed capital allowances
(1)
This section has effect where C or P has relevant postponed capital
40
allowances.
(2)
C or P has relevant postponed capital allowances if amount 2 in
section 212K(3) is an amount other than nil.
(3)
Where, following the qualifying change, a person ceases to carry on
a trade (or part of a trade) and C begins to carry on (whether or not
45
in partnership) the activities of that trade (or part of a trade) as part
of its trade, for the purposes of claiming any allowance in respect of
qualifying expenditure such as is mentioned in section 212K(3) the

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Schedule 5 — Capital allowance buying
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carrying on of those activities by C is to be regarded as the carrying
on of a separate trade.
(4)
A loss attributable to an allowance claimed in respect of qualifying
expenditure such as is mentioned in section 212K(3) may not be set
off under section 37 of CTA 2010 otherwise than against the profits
5
of a qualifying activity carried on by C, or any company that is a
member of P, at the beginning of the relevant day.
(5)
And the amount of such a loss which may be so set off by any person
is not to exceed the amount of the loss which would have been
available for such set off by the person but for the qualifying change.
10
(6)
A loss attributable to an allowance claimed in respect of qualifying
expenditure such as is mentioned in section 212K(3) may not be set
off by way of group relief in accordance with Part 5 of CTA 2010 by
a company (“the claimant company”) unless it would have been
available for such set off but for the qualifying change.
15
(7)
And the amount of such a loss which is available for such set off by
the claimant company is not to exceed the amount of the loss which
would have been available for such set off by the claimant company
but for the qualifying change.
(8)
20
  what would otherwise be the amount of qualifying expenditure such as is
mentioned in section 212K(3) is to be treated for the purposes of this
section as reduced by so much of the difference between BSVP and
PA in relation to the pool as is not taken into account under section
212O(5) in relation to a relevant pool.
25
(9)
Where any activity not carried on by C, or a company that is a
member of P, at the beginning of the relevant day would otherwise
be regarded for the purposes of corporation tax as forming part of a
qualifying activity carried on by C or the member of P at that time it
is not to be so regarded for the purposes of subsection (4).
30
212R
Apportionment of proceeds of disposal of relevant plant and
machinery
Any amount required to be brought into account in connection with
a disposal event in respect of any relevant plant and machinery is to
be apportioned between the new pool and the relevant pool
35
concerned on a just and reasonable basis.
212S
Transactions on relevant day
(1)
This section applies if any plant and machinery is transferred on the
relevant day and (apart from subsection (4)(c) of section 212K) the
transfer would have the effect of reducing RTWDV (as determined
40
in accordance with that section).
(2)
No person other than C or P is entitled to claim an allowance in
respect of the plant or machinery after the transfer.”
3
For the heading of Chapter 17 substitute “Other anti-avoidance”.
4
Section 247 (giving effect to allowances and charges: trades) is renumbered
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Finance Bill
Schedule 6 — Leased assets
87

as subsection (1) of that section; and after that subsection insert—
“(2)
See Chapter 16A for provision restricting in certain circumstances
the ways in which effect may be given to an allowance by virtue of
subsection (1)(a).”
5
The amendments made by this Schedule have effect where the relevant day
5
is on or after 21 July 2009.
6
But in relation to cases where the relevant day is before 9 December 2009 the
amendment made by paragraph 2 has effect—
(a)
with the omission of section 212C(2)(b),
(b)
as if in section 212K(1) “which is amount 1” were substituted for “and
10
is to be found by adding together amounts 1 and 2”,
(c)
with the omission of section 212K(3) and (4)(c),
(d)
with the omission from section 212O(5) of the words “or under
section 212Q(8)”,
(e)
with the omission of section 212Q, and
15
(f)
with the omission of section 212S.
Schedule 6
Leased assets
Restriction of qualifying expenditure
1     (1)
In Chapter 17 of Part 2 of CAA 2001 (plant and machinery: anti-avoidance),
20
after section 228M insert—
“Restriction of qualifying expenditure in case of certain leased assets
228MA
Restriction of qualifying expenditure
(1)
This section applies where capital expenditure is incurred on the
provision of plant or machinery (“the asset”) and at the time the
25
expenditure is incurred—
(a)
the asset is leased or arrangements exist under which it is to
be leased, and
(b)
arrangements have been entered into in relation to payments
under the lease that have the effect of reducing the value of
30
the asset to the lessor (“V”).
(2)
For the purposes of capital allowances the lessor’s qualifying
expenditure on the asset is restricted to V.
(3)
The value of the asset to the lessor is given by—
V = VI + VR
35

where—
VI is the present value of the lessor’s income from the asset, and
VR is the present value of the residual value of the asset reduced
by the amount of any rental rebate.