Capital Allowances Act 1990

25Qualifying expenditure

(1)Subject to subsections (2) to (9) below, for the purposes of section 24, a person’s qualifying expenditure for a chargeable period is the aggregate of the following amounts—

(a)the balance remaining after deducting any first-year allowances made in respect thereof of any capital expenditure incurred by him on the provision for the purposes of the trade of machinery or plant being expenditure incurred in the chargeable period in question or its basis period or at any previous time, and not being—

(i)expenditure which, or any part of which, has formed part of his qualifying expenditure for any previous chargeable period, or

(ii)expenditure in respect of which a first-year allowance is or could (assuming a claim therefor in the case of a person other than a company, and disregarding any notice of disclaimer in the case of a company) be made for the chargeable period in question; and

(b)if for the chargeable period immediately preceding the chargeable period in question there was an excess of qualifying expenditure over disposal value, the balance of that excess after deducting any writing-down allowance made by reference thereto.

(2)In any case where—

(a)a company carrying on a trade incurs capital expenditure on the provision of machinery or plant for the purposes of the trade, and

(b)apart from any disclaimer of the allowance a first-year allowance would fall to be made for any chargeable period in respect of that expenditure, and

(c)the company disclaims the allowance by notice under section 22(7) or, in the case of ships, 30(1)(a),

then, for the purposes of section 24, that expenditure shall not, by virtue of subsection (1)(a)(ii) above, be excluded from the capital expenditure referred to in subsection (1)(a) above.

(3)In any case where—

(a)a person carrying on a trade, but not being a company, incurs capital expenditure on the provision of machinery or plant for the purposes of the trade, and

(b)if a claim were made in that behalf, a first-year allowance would fall to be made in respect of that expenditure for the chargeable period related to the incurring of it, and

(c)no claim is made but by notice given to the inspector not later than two years after the end of that chargeable period, the person concerned elects that this subsection shall apply,

then, for the purposes of section 24, that expenditure shall not, by virtue of subsection (1)(a)(ii) above, be excluded from the capital expenditure referred to in subsection (1)(a) above.

(4)In any case where—

(a)a person (whether a company or not) carrying on a trade has incurred capital expenditure on the provision of machinery or plant for the purposes of the trade, and

(b)a first-year allowance falls to be made to that person in respect of that expenditure (and, in the case of a person other than a company, a claim is made for that allowance), and

(c)for the chargeable period related to the incurring of that expenditure, the amount of that first-year allowance or, as the case may be, the aggregate amount of that and other first-year allowances which fall to be made to that person is required to be reduced by virtue of section 22(7) or, in the case of ships, 30(1)(b),

then, for the purposes of section 24, an amount equal to the relevant portion of the expenditure giving rise to the first-year allowance or allowances referred to in paragraph (c) above shall be treated as expenditure in respect of which no first-year allowance is or could be made for the chargeable period in question.

(5)Subject to subsection (6) below, where—

(a)a first-year allowance is made in respect of capital expenditure on the provision of machinery or plant, and

(b)in the chargeable period related to the incurring of that expenditure, the disposal value of that machinery or plant falls to be brought into account in accordance with section 24(6),

that expenditure shall not be virtue of subsection (1)(a)(ii) above be excluded from the capital expenditure referred to in subsection (1)(a) above.

(6)Where the event by reason of which disposal value falls to be brought into account as mentioned in subsection (5) above is the assignment of the benefit of a contract, subsection (1) above, as modified by subsection (5) above, shall have effect as if any reference in paragraph (a) to capital expenditure incurred were a reference to the total capital expenditure which the person in question would have incurred in respect of the machinery or plant if he had wholly performed the contract.

(7)Where an allowance is or has been made under any provision of Part V except section 122 in respect of any capital expenditure, none of that expenditure shall be taken into account in determining qualifying expenditure for the purpose of any allowance or charge under section 24.

This subsection shall not have effect in relation to any chargeable period or its basis period ending after 26th July 1989.

(8)All such assessments and adjustments of assessments shall be made as may be necessary to give effect to subsections (5) and (6) above.

(9)In subsection (4) above “the relevant portion” of expenditure giving rise to a first-year allowance or allowances is that which bears to the whole of that expenditure the same proportion as the amount of the reduction mentioned in subsection (4)(c) above bears to what the amount of the allowance or allowances would have been apart from that reduction.