Capital Allowances Act 2001

Qualifying purposesU.K.

121 Meaning of “short-term leasing”U.K.

(1)Leasing of plant or machinery is short-term leasing if—

(a)the number of consecutive days for which it is leased to the same person will normally be less than 30, and

(b)the total number of days for which it is leased to that person in any period of 12 months will normally be less than 90.

(2)Leasing of plant or machinery is also short-term leasing if—

(a)the number of consecutive days for which the plant or machinery is leased to the same person will not normally exceed 365, and

(b)the total length of the periods for which it is leased in any consecutive period of 4 years within the designated period to lessees in circumstances not falling within section 125(4) (other qualifying purposes: non-leasing use) will not exceed 2 years.

(3)If any plant or machinery is leased as a number of items which—

(a)form part of a group of items of the same or a similar description, and

(b)are not separately identifiable,

all items in the group may be treated as used for short-term leasing if substantially the whole of the items in the group are so used.

(4)For the purposes of subsections (1) and (2) persons who are connected with each other are to be treated as the same person.

122 Short-term leasing by buyer, lessee, etc.U.K.

(1)Plant or machinery is used for a qualifying purpose at any time when any of the persons listed in subsection (2) uses it for short-term leasing (as defined by section 121).

(2)The persons are—

(a)the person (“X”) who incurred expenditure on the provision of the plant or machinery;

(b)a person who is connected with X;

[F1(c)a person who acquired the plant or machinery from X as a result of a disposal on the occasion of which, or two or more disposals [F2on the occasion of each of which there was a change in the persons carrying on the qualifying activity in relation to which Condition A or B was met.]]

(d)a person to whom the plant or machinery is leased and who is resident in the United Kingdom;

(e)a person to whom the plant or machinery is leased, who is carrying on a qualifying activity in the United Kingdom and who uses the plant or machinery for the short-term leasing in the course of that activity.

[F3(2A)Condition A is that—

(a)at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and

(b)at least one person who carried on the qualifying activity before the change continued to carry it on after the change.

(2B)Condition B is that—

(a)the qualifying activity was carried on in partnership both immediately before and immediately after the change,

(b)a company that was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and

(c)at least one company which carried the activity on before the change continued to carry it on after the change.]

F4(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

123 Ships and aircraftU.K.

(1)A ship is used for a qualifying purpose at any time when it is let on charter in the course of a trade which consists of or includes operating ships by a person who is—

(a)resident in the United Kingdom or carries on the trade there, and

(b)responsible for navigating and managing the ship throughout the period of the charter and for defraying—

(i)all expenses in connection with the ship throughout that period, or

(ii)substantially all such expenses other than those directly incidental to a particular voyage or to the employment of the ship during that period.

(2)Subsection (1) applies, with the necessary modifications, in relation to aircraft as it applies in relation to ships.

(3)For the purposes of subsection (1)(b) a person is responsible for something if he—

(a)is responsible as principal, or

(b)appoints another person to be responsible in his place.

(4)Subsections (1) and (2) do not apply if the main object, or one of the main objects—

(a)of the letting of the ship or aircraft on charter,

(b)of a series of transactions of which the letting of the ship or aircraft on charter was one, or

(c)of any of the transactions in such a series,

was to obtain a writing-down allowance determined without regard to section 109 (writing-down allowances at 10%) in respect of expenditure incurred by any person on the provision of the ship or aircraft.

124 Transport containersU.K.

(1)A transport container is used for a qualifying purpose at any time when it is leased in the course of a trade which is carried on by a person who—

(a)is resident in the United Kingdom, or

(b)carries on the trade there,

and either of the conditions given below is met.

(2)The first condition is that—

(a)the person’s trade consists of or includes the operation of ships or aircraft, and

(b)the container is at other times used by that person in connection with the operation of the ships or aircraft.

(3)The second condition is that the container is leased under a succession of leases to different persons who are not, or most of whom are not, connected with each other.

125 Other qualifying purposesU.K.

(1)Plant or machinery is used for a qualifying purpose at any time when subsection (2) or (4) applies.

(2)This subsection applies if any of the persons listed in subsection (3) uses the plant or machinery for the purpose of a qualifying activity without leasing it.

(3)The persons are—

(a)the person (“X”) who incurred expenditure on the provision of the plant or machinery;

(b)a person who is connected with X;

[F5(c)a person who acquired the plant or machinery from X as a result of a disposal on the occasion of which, or two or more disposals [F6on the occasion of each of which there was a change in the persons carrying on the qualifying activity in relation to which Condition A or B was met.]]

[F7(3A)Condition A is that—

(a)at least one person who carried on the qualifying activity immediately before or immediately after the change was within the charge to income tax in respect of that activity, and

(b)at least one person who carried on the qualifying activity before the change continued to carry it on after the change.

(3B)Condition B is that—

(a)the qualifying activity was carried on in partnership both immediately before and immediately after the change,

(b)a company which was within the charge to corporation tax in respect of the activity carried it on immediately before or immediately after the change, and

(c)at least one company which carried the activity on before the change continued to carry it on after the change.]

(4)This subsection applies if—

(a)a lessee uses the plant or machinery for the purposes of a qualifying activity without leasing it, and

(b)if he had incurred expenditure on the provision of the plant or machinery at that time, the expenditure would have fallen to be included, in whole or in part, in his available qualifying expenditure for a chargeable period.

F8(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .