Capital Allowances Act 2001

Chapter 2Contribution allowances

Contribution allowances under Parts 2 to 5

537Conditions for contribution allowances under Parts 2 to 5

(1)This section gives general conditions for making contribution allowances under Parts 2 to 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, 3, 4 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).

538Plant and machinery

(1)This section is about contribution allowances under Part 2 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 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 asset provided by means of C’s contribution,

(b)C owned the asset 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 asset were at all material times 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.

539Industrial buildings

(1)This section is about contribution allowances under Part 3 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 or relevant activity carried on, or to be carried on—

(i)by C, or

(ii)by a tenant of land in which C has an interest.

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

(a)the contribution were expenditure incurred by C on the provision, for the purposes of the trade or relevant activity, 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 the trade or relevant activity.

(3)Subsection (4) applies if—

(a)C’s contribution was made for the purposes of a trade or relevant activity carried on, or to be carried on, by a tenant of land in which C had an interest, and

(b)C was entitled to allowances as a result of subsection (2).

(4)A person is entitled to a writing-down allowance for a chargeable period if at the end of the period the person is entitled to the interest held by C when the contribution was made.

(5)For the purposes of subsection (4), the provisions of Part 3 relating to the relevant interest apply (with any necessary modifications) in relation to the contribution made for the purposes of the trade or relevant activity carried on, or to be carried on, by the tenant as they apply in relation to expenditure incurred on the construction of an industrial building.

(6)Section 311 (calculation of writing-down allowance after sale of relevant interest) does not apply in relation to writing-down allowances to be made in respect of contributions.

540Agricultural buildings

(1)This section is about contribution allowances under Part 4 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 or relevant activity carried on, or to be carried on—

(i)by C, or

(ii)by a tenant of land in which C has a interest.

(2)C is to be treated for the purposes of allowances under Part 4 as if—

(a)the contribution were expenditure incurred by C on the provision, for the purposes of the trade or relevant activity, 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 the trade or relevant activity.

(3)Subsection (4) applies if—

(a)C’s contribution was made for the purposes of a trade or relevant activity carried on, or to be carried on, by a tenant of land in which C had an interest, and

(b)C was entitled to allowances as a result of subsection (2).

(4)A person is entitled to a writing-down allowance for a chargeable period if at the end of the period the person is entitled to the interest held by C when the contribution was made.

(5)For the purposes of subsection (4), the provisions of Part 4 relating to the relevant interest apply (with any necessary modifications) in relation to the contribution made for the purposes of the trade or relevant activity carried on, or to be carried on, by the tenant as they apply in relation to expenditure incurred on the construction of an agricultural building.

541Mineral extraction

(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 5

542Transfer of C’s trade or relevant activity

(1)Subsections (2) and (3) apply for the purposes of contribution allowances under Parts 3 to 5 if—

(a)C’s contribution was made for the purposes of C’s trade or relevant activity, and

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

(2)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.

(3)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.

Contribution allowances under Part 9

543Contribution allowances under Part 9

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.