|
Capital Allowances |
31 |
as T is entitled to the benefit of the contract. Capital expenditure to be incurred by T under the contract after the plant or machinery has been brought into use in the trade is treated as incurred at that time. T is thus treated as incurring the full capital cost at that time. Special provisions apply where the option under the contract is not exercised.282 The actual words of this provision go wider than merely hire purchase. The Revenue has pointed out that the words of the provision are apt to cover situations in which capital expenditure is incurred on goods which are never owned, eg a deposit paid for goods which are then not supplied.283 |
Where this rule deems the asset to belong to X but the special rules for fixtures deemed it to belong to Y, the fixtures rule prevails;284 although this was introduced by FA 2000 it is deemed always to have had effect. Where the hire purchase rule deems the asset to be X’s and it then becomes a fixture and so as belonging to Y, X is treated as selling the asset to Y. This rule is not retroactive and does not apply to assets becoming fixtures before Royal Assent (28 July 2000); FA 2000 does not specify the price at which the sale is treated as taking place. |
| 24A.2.12 Leasing—Special Rules |
24A.2.12.1 Trade of Leasing Qualifies |
| If T leases out an asset in the course of a trade, capital allowances will be available in the usual way. The uses to which the lessee puts the asset is not relevant in determining the lessor’s rights. T is entitled, as owner of the goods leased, to the allowances, whether these are first year or writing down allowances. However, in relation to first year allowances for expenditure in 1992–93, it was expressly provided that these were available only if it appeared that the plant or machinery was to be used for a qualifying purpose in the requisite period and would at no time in that period be used for a non-qualifying purpose.285 There may be difficulties in showing that the asset ‘belongs to’ T if the lessee has been given an option to purchase the asset but this issue remains unexplored.286 |
| 24A.2.12.2 Not in Course of Trade—Separate Qualifying Activity |
| Where T leases out an asset otherwise than in the course of trade, CAA 2001 directs that it is to be treated as the separate qualifying activity of special leasing.287 Any charge is treated as arising under schedule D, case VI.288 Capital allowances may still be available but cannot be set against general income of the lessor but only against other income from special leasing;289 However, if the asset is not used for the purpose of a qualifying activity carried on by the lessee the lessor may |