Capital Allowances Act 2001

Chapter 19U.K. Giving effect to allowances and charges

TradesU.K.

247 TradesU.K.

[F1(1)]If the qualifying activity of a person who is entitled or liable to an allowance or charge for a chargeable period is a trade, the allowance or charge is to be given effect in calculating the profits of that person’s trade, by treating—

(a)the allowance as an expense of the trade, and

(b)the charge as a receipt of the trade.

[F2(1A)Subsection (1) is subject to section 6E (giving effect to allowances and charges: NI rate activity cases).]

[F3(2)See Chapter 16A for provision restricting in certain circumstances the ways in which effect may be given to an allowance by virtue of subsection (1)(a).]

Property businessesU.K.

248 Ordinary [F4UK] [F5property] businessesU.K.

If the qualifying activity of a person who is entitled or liable to an allowance or charge for a chargeable period is an ordinary [F6UK] [F7property] business, the allowance or charge is to be given effect in calculating the profits of that business, by treating—

(a)the allowance as an expense of that business, and

(b)the charge as a receipt of that business.

249 [F8UK furnished] holiday lettings businessesU.K.

(1)If the qualifying activity of a person who is entitled or liable to an allowance or charge for a chargeable period is a [F9UK furnished] holiday lettings business, the allowance or charge is to be given effect in calculating the profits of that business, by treating—

(a)the allowance as an expense of that business, and

(b)the charge as a receipt of that business.

(2)[F10Section 65 of CTA 2010] (letting of furnished holiday accommodation treated as trade for purposes of loss relief rules, etc.) applies to profits calculated in accordance with subsection (1).

250 [F11Ordinary overseas] property businessesU.K.

If the qualifying activity of a person who is entitled or liable to an allowance or charge for a chargeable period is an [F12ordinary overseas] property business, the allowance or charge is to be given effect in calculating the profits of that business, by treating—

(a)the allowance as an expense of that business, and

(b)the charge as a receipt of that business.

[F13250A EEA furnished holiday lettings businessesU.K.

(1)If the qualifying activity of a person who is entitled or liable to an allowance or charge for a chargeable period is an EEA furnished holiday lettings business, the allowance or charge is to be given effect in calculating the profits of that business by treating—

(a)the allowance as an expense of that business, and

(b)the charge as a receipt of that business.

(2)Section 67A of CTA 2010 (letting of EEA furnished holiday accommodation treated as trade for purposes of loss relief rules, etc) applies to profits calculated in accordance with subsection (1).]

Activities analogous to tradesU.K.

251 Professions and vocationsU.K.

If the qualifying activity of a person who is entitled or liable to an allowance or charge for a chargeable period is carrying on a profession or vocation, the allowance or charge is to be given effect in calculating the profits or gains of that person’s profession or vocation, by treating—

(a)the allowance as an expense of the profession or vocation, and

(b)the charge as a receipt of the profession or vocation.

252 Mines, transport undertakings etc.U.K.

If the qualifying activity of a person who is entitled or liable to an allowance or charge for a chargeable period is a concern listed in [F14section 12(4) of ITTOIA 2005 or] [F15section 39(4) of CTA 2009] (mines, transport undertakings etc.) the allowance or charge is to be given effect in calculating the profits of the concern under [F16Chapter 2 of Part 2 of ITTOIA 2005 or, as the case may be, under] Case I of Schedule D, by treating—

(a)the allowance as an expense of the concern, and

(b)the charge as a receipt of the concern.

[F17Companies with investment business]U.K.

253[F17Companies with investment business]U.K.

(1)This section applies if the qualifying activity of a person entitled to an allowance or liable to a charge for a chargeable period is [F18managing the investment business].

(2)The allowance is, as far as possible, to be given effect by deducting the amount of the allowance from any income for the period of the business; and [F19section 1233 of CTA 2009] (addition of allowances to company’s expenses of management) applies only in so far as it cannot be given effect in this way.

(3)The charge is to be given effect by treating the amount of the charge as income of the business.

(4)Except as provided by subsections (2) and (3), the Corporation Tax Acts apply in relation to the allowance or charge as if they were required to be given effect in calculating the profits of that person’s trade for the purposes of [F20Part 3 of CTA 2009].

(5)Corresponding allowances or charges in the case of the same plant or machinery are not to be made under this Part both under this section and in another way.

(6)Expenditure to which this section applies is not to be taken into account otherwise than under this Part or as provided by [F21section 1233 [F22or 1244A] of CTA 2009].

(7)This section is subject to [F23sections 682(3) and 699(3) of CTA 2010].

[F24Long-term] businessU.K.

254 IntroductoryU.K.

(1)Sections 255 and 256 apply if a company which is carrying on any [F25long-term business] is entitled or liable to any allowances or charges for a chargeable period in respect of plant or machinery consisting of a management asset.

(2)In this Chapter “management asset” has the same meaning as in Chapter 1 of Part 12 (life assurance business).

[F26255[F26Apportionment of allowances and charges]U.K.

(1)This section applies if the long-term business of the company consists of—

(a)basic life assurance and general annuity business, and

(b)non-BLAGAB long-term business.

(2)In that case—

(a)any allowance to which the company is entitled for a chargeable period in respect of a management asset, and

(b)any charge to which it is liable for a chargeable period in respect of a management asset,

must be apportioned between the businesses in accordance with Chapter 7 of Part 2 of FA 2012.]

256 Different giving effect rules for [F27BLAGAB] U.K.

(1)Subsection (2) applies if a company—

(a)carries on basic life assurance and general annuity business, and

[F28(b)is charged to tax [F29in accordance with the I - E rules] in respect of [F30that business].]

(2)If this subsection applies—

(a)any allowances (or parts of allowances) to which the company is entitled in respect of the basic life assurance and general annuity business are to be given effect by treating them [F31for the purposes of section 76 of FA 2012 as deemed BLAGAB management expenses for the chargeable period in question], and

(b)any charges (or parts of charges) to which the company is liable in respect of that business are to be given effect by treating the [F32company as receiving for the chargeable period in question an amount which is equal to the amount of the charges (or parts of charges) and to which the charge to corporation tax on income applies].

F33(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F34(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

257 SupplementaryU.K.

(1)Allowances and charges to which sections 255 and 256 apply are not to be given effect otherwise than in accordance with those sections.

(2)Subsection (1) does not prevent any allowance which is to be given effect under those sections from being taken into account in any calculation for the purposes of—

[F35(a)section 93(5) of FA 2012 (minimum profits test), or

(b)section 103 of FA 2012 (rules for determining policyholders' share of I - E profit).

F36(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Special leasing of plant or machineryU.K.

258 Special leasing: income taxU.K.

(1)This section applies for income tax purposes if the qualifying activity of a person entitled or liable to an allowance or charge for a chargeable period (“the current tax year”) is special leasing of plant or machinery.

(2)Subject to subsection (3), the allowance is to be given effect by deducting it from the person’s income for the current tax year from any qualifying activity the person has of special leasing of plant or machinery.

(3)If the plant or machinery leased under the special leasing was not used for the whole or any part of the current tax year for the purposes of a qualifying activity carried on by the lessee—

(a)the allowance, or

(b)a proportionate part of it,

is to be given effect by deducting the allowance, or the part of the allowance, from the person’s income for the current tax year from that special leasing only.

[F37(3A)The allowance or (as the case may be) the proportionate part of the allowance is given effect at Step 2 of the calculation in section 23 of ITA 2007.]

(4)Any charge is to be given effect by treating the charge as income to be [F38assessed to income tax].

(5)If the amount to be deducted from a description of income specified in subsection (2) or (3) exceeds the person’s income of that description for the current tax year, the excess must be deducted from the person’s income of the same description for the next tax year, and so on for subsequent tax years.

(6)For the purposes of this section, income from special leasing of plant or machinery includes any charge treated as income under subsection (4).

(7)In this section, references to deducting an allowance (or a part of an allowance) from income include setting it off against income.

259 Special leasing: corporation tax (general)U.K.

(1)This section applies for corporation tax purposes if the qualifying activity of a company entitled or liable to an allowance or charge for a chargeable period (“the current accounting period”) is special leasing of plant or machinery.

(2)Subject to subsection (3), the allowance is to be given effect by deducting it from the company’s income for the current accounting period from any qualifying activity it has of special leasing of plant or machinery.

(3)If the plant or machinery leased under the special leasing was not used for the whole or any part of the current accounting period for the purposes of a qualifying activity carried on by the lessee—

(a)the allowance, or

(b)a proportionate part of it,

is to be given effect by deducting the allowance, or the part of the allowance, from the company’s income for the current accounting period from that special leasing only.

(4)Any charge is to be given effect by treating the charge as income from special leasing of plant or machinery.

260 Special leasing: corporation tax (excess allowance)U.K.

(1)This section applies if the amount to be deducted from a description of income specified in section 259(2) or (3) exceeds the company’s income of that description for the current accounting period.

(2)Subject to subsections (3) to (6), the excess must (if the company remains within the charge to tax) be deducted from the company’s income of the same description for the next accounting period (and so on for subsequent accounting periods).

(3)The company may, on making a claim, require the excess to be deducted from any profits—

(a)of the current accounting period, and

(b)if the company was then within the charge to tax, of any previous accounting period ending within the carry-back period.

(4)The carry-back period is a period which—

(a)is of the same length as the current accounting period, and

(b)ends at the start of the current accounting period.

(5)If the preceding accounting period began before the start of the carry-back period, the total amount of deductions that may be made from the profits of the preceding accounting period under—

(a)subsection (3), and

(b)any corresponding provision of the Corporation Tax Acts relating to losses,

must not exceed a part of those profits proportionate to the part of the period falling within the carry-back period.

(6)A claim under subsection (3) must be made no later than 2 years after the end of the current accounting period.

(7)If the deduction of the allowance (or of part of it) was subject to the restriction in section 259(3)—

(a)subsections (3) to (6), and

(b)[F39sections 99 and 113 of CTA 2010] (group relief),

do not apply in relation to the allowance (or part of it).

(8)In this section “profits” has the same meaning as in [F40Part 2 of CTA 2009 (see section 2(2) of that Act)].

261 Special leasing: [F41long-term business] U.K.

In the case of a company which is carrying on any [F42long-term business]—

(a)subsections (3) to (6) of section 260, and

(b)[F43sections 99 and 113 of CTA 2010] (group relief),

do not apply in relation to an allowance to which the company is entitled under section 19 (special leasing of plant or machinery).

[F44261ASpecial leasing: leasing partnershipsU.K.

(1)This section applies for corporation tax purposes if—

(a)a company carries on a business in partnership with other persons in a chargeable period of the partnership,

(b)the business (“the leasing business”) is, on any day in that period, a business of leasing plant or machinery,

(c)the company is entitled to an allowance under section 19 (special leasing of plant or machinery) for any chargeable period comprised (wholly or partly) in the chargeable period of the partnership, and

(d)the interest of the company in the leasing business during the chargeable period of the partnership is not determined on an allowable basis.

(2)Subsections (3) to (6) of section 260 do not apply in relation to the allowance.

(3)For the purposes of this section—

(a)“business of leasing plant or machinery” has the same meaning as in [F45Chapter 4 of Part 9 of CTA 2010 (sales of lessors: leasing business carried on by a company in partnership)], and

(b)[F46section 887 of CTA 2010] applies for determining whether the interest of the company in the leasing business during the chargeable period of the partnership is determined on an allowable basis.]

Employments and officesU.K.

262 Employments and officesU.K.

If the qualifying activity of a person who is entitled or liable to an allowance or charge for a chargeable period is an employment or office, the allowance or charge is to be given effect, by treating—

(a)the allowance as [F47a deduction from the taxable earnings from] the employment or office, and

(b)the charge as [F48earnings] of the employment or office.

[F49First-year tax credits]U.K.

F50262AFirst-year tax creditsU.K.

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