Capital Allowances Act 2001

Chapter 2U.K. Contribution allowances

Contribution allowances under [F1Parts 2[F2, 2A], 3, 4 and 5] U.K.

537Conditions for contribution allowances under [F3Parts 2[F4, 2A] F5... and 5]U.K.

(1)This section gives general conditions for making contribution allowances under [F3Parts 2[F6, 2A] F7... and 5].

(2)The general conditions are that—

(a)a person (“C”) has contributed a capital sum to expenditure on the provision of an asset,

(b)the expenditure would (ignoring section 532(1))—

(i)have been regarded as wholly incurred by another person (“R”), and

(ii)if R is not a public body, have entitled R to allowances under Part 2[F8, 2A] F9... or 5 or to allocate the expenditure to a pool under Part 2, and

(c)C and R are not connected persons.

(3)In this section “public body” means the Crown or any public or local authority in the United Kingdom.

(4)In this Chapter “relevant activity” has the meaning given by section 536(5).

538 Plant and machineryU.K.

(1)This section is about contribution allowances under Part 2 and applies if—

(a)the general conditions for contribution allowances are met, F10...

[F11(aa)C's contribution is to expenditure on the provision of plant or machinery, and]

(b)C’s contribution is made for the purposes of a trade or relevant activity carried on, or to be carried on, by C.

(2)C is to be treated for the purposes of allowances under Part 2 as if—

(a)the contribution were expenditure incurred by C on the provision, for the purposes of C’s trade or relevant activity, of the [F12plant or machinery],

(b)C owned the [F13plant or machinery] as a result of incurring that expenditure at any time when R owns it or is treated under Part 2 as owning it, and

(c)the [F14plant or machinery] were at all material times [F15plant or machinery] in use for the purposes of C’s trade or relevant activity.

(3)Expenditure treated as incurred under subsection (2)(a), if allocated to any pool, must be allocated to a single asset pool.

(4)Subsections (5) and (6) apply for the purposes of contribution allowances under Part 2 if the whole or a part of the trade or relevant activity for the purposes of which C’s contribution was made is transferred.

(5)If the whole of the trade or relevant activity is transferred, writing-down allowances for chargeable periods ending after the date of the transfer are to be made to the transferee instead of to the transferor.

(6)If a part of the trade or relevant activity is transferred, writing-down allowances for chargeable periods ending after the date of the transfer are to be made to the transferee instead of to the transferor to the extent that they are properly referable to the part transferred.

[F16538ABuildings and structuresU.K.

(1)For the purposes of contribution allowances under Part 2A, the references in section 537(2) to expenditure on the provision of an asset are to be treated as references to expenditure which is qualifying expenditure for the purposes of Part 2A.

(2)This section applies if—

(a)the general conditions for contribution allowances are met,

(b)C’s contribution is to expenditure which is qualifying expenditure for the purposes of Part 2A, and

(c)C’s contribution is made for the purposes of a qualifying activity (within the meaning of Part 2A) which is—

(i)if R is a public body, an activity carried on, or to be carried on, by C or by a tenant of land in which C has an interest, or

(ii)if R is not a public body, an activity carried on, or to be carried on, by a tenant of land in which C has an interest.

(3)C is to be treated for the purposes of allowances under Part 2A as if—

(a)the contribution were expenditure incurred by C on the construction or acquisition of the building or structure,

[F17(b)the building or structure were brought into qualifying use, for the purposes of the allowance in relation to the contribution, on—

(i)the day on which R first brought the building or structure into qualifying use, or

(ii)if R is a public body, the earlier of the day mentioned in sub-paragraph (i) and the day on which R first brought the building or structure into non-residential use],

(c)for the purposes of section 270AA(2)(b), the day on which the qualifying expenditure is incurred were the day on which C made the contribution.

[F18(4)If, at any time in the period beginning with the day on which C made the contribution and ending with the day on which R first brought the building or structure into non-residential use, C did not have a relevant interest in the building or structure—

(a)C is to be treated for the purposes of allowances under Part 2A as having had a relevant interest in the building or structure when that period begins, and

(b)C is not to be treated for those purposes as ceasing to have that interest on any subsequent sale of R’s relevant interest in the building or structure.]

(5)For the purposes of this section, the provisions of Part 2A relating to the relevant interest apply (with any necessary modifications) in relation to the contribution as they apply in relation to expenditure incurred on the construction or acquisition of a building or structure.

(6)In subsection (2), “public body” means the Crown or any government or public or local authority (whether in the United Kingdom or elsewhere).]

[F19(7)In determining, for the purposes of this section, the day on which R first brings a building or structure into non-residential use, ignore any use of the building or structure which is insignificant.]

F20539 Industrial buildingsU.K.

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F21540 Agricultural buildingsU.K.

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541 Mineral extractionU.K.

(1)This section is about contribution allowances under Part 5 and applies if—

(a)the general conditions for contribution allowances are met, and

(b)C’s contribution is made for the purposes of a trade carried on, or to be carried on, by C.

(2)C is to be treated for the purposes of allowances under Part 5 as if—

(a)the contribution were expenditure incurred by C on the provision, for the purposes of C’s trade, of an asset similar to that provided by means of C’s contribution, and

(b)the asset were at all material times in use for the purposes of C’s trade.

Effect of transfers of C’s trade on contribution allowances under Parts 3, 4 and 5U.K.

542 Transfer of C’s trade F22...U.K.

(1)Subsections (2) and (3) apply for the purposes of contribution allowances under [F23Part 5] if—

(a)C’s contribution was made for the purposes of C’s trade F22..., and

(b)the whole or a part of the trade F22... is subsequently transferred.

(2)If the whole of the trade F22... is transferred, writing-down allowances for chargeable periods ending after the date of the transfer are to be made to the transferee instead of to the transferor.

(3)If a part of the trade F22... is transferred, writing-down allowances for chargeable periods ending after the date of the transfer are to be made to the transferee instead of to the transferor to the extent that they are properly referable to the part transferred.

Contribution allowances under Part 9U.K.

543 Contribution allowances under Part 9U.K.

A person who contributes a capital sum to expenditure incurred by another person on dredging is to be regarded for the purposes of Part 9 as incurring capital expenditure on that dredging.