Finance Act 1993

6After section 127 there shall be inserted the following section—

“127A Purchases of buildings and structures: cases involving initial allowances.

“127A(1)This section shall apply (subject to subsection (2) below) where—

(a)there is expenditure on the construction of any building, fence or other works (“the actual expenditure”) which—

(i)is expenditure falling within section 123; and

(ii)is not expenditure which would fall to be disregarded for the purposes of writing-down allowances by virtue of section 124(1);

(b)some or all of the actual expenditure is expenditure to which section 124A applies or would be such expenditure if it were capital expenditure; and

(c)before the building, fence or other works comes to be used, the relevant interest is sold.

(2)In relation to any case in which the relevant interest is sold in pursuance of a contract entered into in the period beginning with 1st November 1992 and ending with 31st October 1993 by a person who—

(a)carries on a trade which consists, in whole or in part, in the construction of buildings or structures with a view to their sale; and

(b)has been entitled to that interest since before 1st November 1992,

section 124A(2) above shall have effect for the purposes of subsection (1)(b) above and subsection (6) below as if for the words from “contract which” onwards there were substituted “contract entered into either before 1st November 1993 or for the purpose of securing that obligations under a contract entered into before that date are complied with.”

(3)Where this section applies—

(a)the actual expenditure shall be left out of account for the purposes of this Part and, accordingly—

(i)any initial allowance or writing-down allowance made in respect of the actual expenditure shall be withdrawn; and

(ii)all such assessments and adjustments of assessments shall be made as may be necessary to give effect to that withdrawal;

(b)section 126 shall not apply;

(c)the person who buys the relevant interest shall be treated for the purposes of this Part as having incurred, on the date when the purchase price becomes payable, expenditure falling within section 123 on the construction of the building, fence or other works (“the deemed expenditure”); and

(d)the deemed expenditure shall be treated (without prejudice to section 124(2) and 124A(5)) as incurred for the purposes of husbandry on the agricultural land in question.

(4)The deemed expenditure—

(a)shall be whichever is the lesser of the net price paid by the person concerned for the purchase of the relevant interest and the actual expenditure; and

(b)shall be regarded as comprising a section 124A element and a residual element.

(5)The section 124A element of the deemed expenditure shall be calculated in accordance with the formula—

(6)In subsection (5) above—

• A is the deemed expenditure;

• B is so much of the actual expenditure as is expenditure to which section 124A applies or expenditure that would be such expenditure if it were capital expenditure; and

• C is the actual expenditure.

(7)The residual element of the deemed expenditure shall be so much (if any) of the deemed expenditure as does not comprise the section 124A element.

(8)Notwithstanding the provisions of subsection (3)(c) above—

(a)the section 124A element of the deemed expenditure shall be treated for the purpose only of determining entitlement to allowances as expenditure to which that section applies; and

(b)the residual element of the deemed expenditure shall be treated for that purpose as expenditure which is not expenditure to which that section applies.

(9)Where the relevant interest is sold more than once before the building, fence or other works is used, subsections (2) and (3)(c) and (d) above shall have effect only in relation to the last of those sales.”