Capital Allowances Act 2001

[F1Part 3U.K.Clawback of first-year tax credit

Circumstances in which first-year tax credit clawed backU.K.

24(1)This paragraph applies where—U.K.

(a)a company to which a first-year tax credit is paid for a chargeable period disposes of an item of tax-relieved plant or machinery before the end of the clawback period in relation to that item, and

(b)after the disposal the amount (or the aggregate of the amounts) of the original expenditure on the retained tax-relieved plant and machinery is less than the amount of loss surrendered under this Schedule in the chargeable period for which the first-year tax credit was paid.

(2)The appropriate part (“the restored loss”) of the loss surrendered under this Schedule in that chargeable period is to be treated as if it were not a surrenderable loss in that chargeable period.

(3)The amount of the restored loss is to be calculated in accordance with paragraph 26.

(4)The amount of first-year tax credit paid to the company in respect of the restored loss is to be treated as if it ought never to have been paid.

(5)The amount of first-year tax credit paid to the company in respect of the restored loss is the relevant percentage of the restored loss.

(6)“Relevant percentage” means the percentage specified in paragraph 2(1)(a) for the chargeable period for which the first-year tax credit is paid.

(7)This Part of this Schedule applies to an amount of first-year tax credit which is payable for a chargeable period but not yet paid, as it applies to an amount of first-year tax credit which is paid.

InterpretationU.K.

25(1)This paragraph applies for the interpretation of this Part of this Schedule.U.K.

(2)References to a first-year tax credit being paid include the case where an amount payable in respect of first-year tax credit is applied in discharging any liability of the company's to pay corporation tax.

(3)An item of plant or machinery is tax-relieved if any expenditure on the item was relevant first-year expenditure in respect of which a first-year allowance was made for the chargeable period for which the first-year tax credit was paid.

(4)The original expenditure on the item is the amount of the relevant first-year expenditure on the item.

(5)A company disposes of an item of tax-relieved plant or machinery if—

(a)an event listed in section 61(1) occurs in relation to the item, or

(b)there is a change in the ownership of the item in relation to which a continuity of business provision applies.

(6)The disposal value of the item is the disposal value required to be brought into account by the company in respect of the item.

(7)But where—

(a)the company disposes of the item to a person connected with the company for less than its market value, or

(b)there is a change in the ownership of the item in relation to which a continuity of business provision applies,

the disposal value of the item is its market value (whether or not the company is required to bring that value into account).

(8)A “continuity of business provision” is an enactment under which anything done to or by the company which ceases to be the owner of the item is treated, for the purpose of making allowances and charges under this Act, as having been done to or by the person who becomes the owner of the item.

(9)The retained tax-relieved plant and machinery is the tax-relieved plant and machinery which the company has not disposed of.

(10)The clawback period, in relation to an item of tax-relieved plant and machinery—

(a)begins when the relevant first-year expenditure on the item is incurred, and

(b)ends 4 years after the end of the chargeable period for which the tax credit was paid.

Amount of restored lossU.K.

26(1)The amount of the restored loss is—U.K.

but where the amount given by that formula is less than nil, the amount of the restored loss is nil.

(2)In sub-paragraph (1)—

• LS is the amount of loss surrendered under this Schedule in the chargeable period for which the first-year tax credit was paid,

• OERPM is the amount (or the aggregate of the amounts) of the original expenditure on the retained tax-relieved plant and machinery after the item is disposed of,

• OE is the aggregate of the amount of the original expenditure on the item disposed of, and the amounts of the original expenditure on any items of tax-relieved plant and machinery which the company has previously disposed of,

• DV is the aggregate of the disposal value of the item disposed of, and the disposal values of any items of tax-relieved plant and machinery which the company has previously disposed of, and

• ARL is the amount of the restored loss (or the aggregate of the amounts of the restored loss) on any previous application of this paragraph.

Clawback of first-year tax credits: administrative provisionU.K.

27(1)Where paragraph 24 applies, all such assessments and adjustments of assessments are to be made as are necessary.U.K.

(2)If a company which has made a tax return becomes aware that, as a result of that paragraph applying after the return was made, the return has become incorrect, it must give notice to HMRC specifying how the return needs to be amended.

(3)The notice must be given within 3 months beginning with the day on which the company became aware that anything in the tax return had become incorrect because of paragraph 24.]