|
Capital Allowances |
5 |
(b) £450; (c) £1,200. In (a) there is a balancing charge of £100; in (b) there is a balancing allowance of £50; and in (c) there is a balancing charge of £500 the remaining £200 being left to CGT. |
The current rates of allowance are set out in the table, over. |
24A.1.5 Incurring Capital Expenditure |
Capital expenditure is defined by exclusion and is any sum spent on the acquisition of the asset etc provided the sum is not allowable as a deduction in computing the profits or gains of the qualifying activity carried on, which may be a trade, profession or vocation, property business or employment carried on by the person incurring the expense.12 Sums falling within TA 1988, sections 348 and 349(1) are also generally excluded.13 As the material in chapter 22 on the distinction between capita and revenue shows, these boundaries are not precise.14 In general allowances can not be claimed for sums met directly or indirectly by others; however an allowance can be claimed if the other person is not a public body and is not eligible for tax relief in respect of the payment.15 In relation to public bodies there is special exemption for certain grants for Northern Ireland under the Industrial Development Act 1982.16 Provision is, however, made for allowances for contributions to the capital expenditure of others.17 |
Further rules exclude double relief claims.18 |
24A.1.5.1 Not Finance |
The capital expenditure must have been incurred on the provision of the Plant and Machinery or the construction of the building;19 it follows that sums spent merely on the provision of finance do not qualify. In Ben-Odeco Ltd v Powlson20 the taxpayer was going to carry on a trade of hiring out an oil rig. In order to finance the construction of the rig, it had to borrow money, and for this had to pay commitment fees (£59,002) and interest (£435,988). These sums were charged to capital (correctly) in the company’s accounts. However, the House of Lords held that the sums did not qualify for capital allowance treatement; they had not been spent not the provision of Plant and Machinery but on the provision of money. This case was distinguished in Van Arkadie v Sterling Coated Materials Ltd 21 where the extra (sterling) cost of a price to be paid by instalments but in foreign currency was treated as allowable expenditure. It was critical in this case that the contract provided for payment to be made by instalments; a different conclusion would have been reached if the contract had provided for a single payment which had been made with the aid of a loan from a bank which the purchaser then paid off in instalments. |